Included in this bailout package would be a scheme to reduce the staff strength by offering attractive severance benefits.

Government plans to infuse Rs 74000 crore for BSNL MTNL bailout
Money Funds Thursday, July 04, 2019 - 11:08

The two public sector telecom companies, Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telecom Nigam Limited (MTNL) have been draining the government exchequer for several years now. The opening up of the telecommunications sector left these two companies in deep trouble almost like what happened with Indian Airlines after privatisation of the aviation sector. Public sector units rarely display the alacrity and agility in managing the businesses particularly in a highly competitive environment. Quick decisions have to be made and customers expect the highest levels of efficiency which these state-run firms fail to measure up to.

The NDA government is now said to be planning on infusing funds to the extent of Rs 74,000 crore in these two state-owned telecommunications companies in order to bail them out of the present crisis. Included in this bailout package would be a scheme to reduce the staff strength by offering attractive severance benefits. Apart from the usual VRS (voluntary retirement scheme) terms in force, an additional 5% compensation may be offered to encourage more staff in BSNL and MTNL to opt for the package.

The fund allocation would also include amounts needed by the companies to pay for 4G spectrum and other capital expenditure. The breakup could be Rs 40,000 crore for the VRS packages and Rs 20,000 crore for the 4G spectrum. The two telecom companies will foot the expenditure involved in rolling out the services.

As mentioned, BSNL and MTNL are sitting on mounting losses of Rs 13,804 crore and Rs 3,398 crore respectively. The government may want to be sure that this outgo of Rs 74,000 crore does not become a case of throwing good money after bad money. The outcomes of the overall plan will be weighed and the roadmap clearly spelt out before the funds are made available to the companies.

The logic being advanced for making this allocation of Rs 74,000 crore now is is that if the government decides to shut down these companies, then the loss to the exchequer could be in the region of well over Rs 1 lakh crore. These companies won’t fetch much by way of disinvestment either. The government’s thinking would be that by cutting down on the staff strength and making better use of the resources, BSNL and MTNL can be prevented from bleeding further.

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