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Friday, December 03, 2021

A package for BSNL

Government needs to do a cost-benefit analysis, ask itself the tough questions about propping up loss-making enterprises

By: Editorial |
Updated: September 14, 2019 12:32:51 am
BSNL, Arjun Ram Meghwal, Narendra Modi, BSNL paskage, BSNL blames the fierce price war, as well as the lack of 4G spectrum, for its dire financial situation.

Union minister Arjun Ram Meghwal has announced that the government is planning a financial package for cash-strapped BSNL. But it is unlikely that a cash infusion, or any other manner of assistance, can facilitate a sustainable turnaround in the fortunes of the beleaguered telco. Coming at a time when its own revenues are under pressure, the government must undertake a careful cost-benefit analysis to examine whether the money it spends to prop up these loss-making firms is better spent in areas with more pressing needs.

BSNL blames the fierce price war, as well as the lack of 4G spectrum, for its dire financial situation. But there is more to the story. Its expenditure on salaries — it has around 1.8 lakh employees — touched 75 per cent of revenues in 2018-19. For private telcos, it is a fraction of this amount. Stringent procurement guidelines have led to delays in purchasing equipment, hampering operations. Losses have surged, rising to Rs 14,202 crore in 2018-19. And though the non-availability of spectrum may have hurt its operations, revenue from data increasingly accounts for a greater share of total revenue, even if BSNL is allocated the 4G spectrum it desires, it will still need additional funds to ensure a smooth roll-out of services. The telco hopes to monetise assets such as land. It also expects to cut costs by cajoling 60,000 to 70,000 employees to opt for a voluntary retirement scheme. Even if a significant portion of its workforce opts for VRS, however, it will still have over 1 lakh employees. While part of the funds from asset monetisation can be used to finance the VRS package, it is debatable whether the balance will be enough to fund its 4G operations. In a hyper competitive sector, where incumbents are bleeding, it is questionable whether BSNL has the continued ability to pump in money to challenge other telcos.

Prime Minister Narendra Modi has often underlined that government has no business being in business. Yet his government has still not framed a concrete strategy to shut down loss-making enterprises. The cost of keeping these firms alive is increasing, and it comes at the expense of investment in other sectors such as infrastructure, health and education.

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