THERE is no better example than that of the Bharat Sanchar Nigam Ltd (BSNL), a fully government owned telecom company, of to how a profitable public sector undertaking (PSU) can be made unviable and gradually killed. Of course, nobody can forget the case of Air India-Indian Airlines which is in a bailout process today.
CHANGE IN ATTITUDE
One may recall that soon after independence, the government of India under Pt Jawaharlal Nehru realised the extreme importance of the PSUs for developing and expanding the core industries as also for preparing the basic infrastructure. The private sector neither had the finance and technology needed for this huge task nor the inclination to invest in such fields. The PSUs were then the answer. Accordingly, many PSUs were established within a few years of independence.
Apart from this process, some of the PSUs came into existence during the 1950s and 1960s through the nationalisation of loss making private companies. These included many private textile companies which were transformed into the National Textile Corporation (NTC). Many private banks, which were mismanaged, were also nationalised. The ESSO and Burma Shell were nationalised, forming the HPCL and BPCL. This ensured better and transparent functioning of the nationalised companies.
But the neo-liberal policy of globalisation and privatisation, initiated by the central government in the early 1990s, involved a complete change in the government’s attitude towards the PSUs. Private sector became the priority. “Business is not the business of the government” became its watchword. Certain government departments were targeted for privatisation. However, since it was very difficult to accomplish this task in one stroke, the government started converting departmental services into corporations, which could later be privatised.
In this scenario, telecom was one of the fast developing sectors which the government wanted to hand over to private hands. Accordingly, overseas communications was converted into a PSU called the Videsh Sanchar Nigam Ltd (VSNL), telecom services in Delhi and Bombay were converted into the Mahanagar Telecom Nigam Limited (MTNL) and, lastly, the DTS, DOT and DTO were converted into the Bharat Sanchar Nigam Limited (BSNL).
FORMATION OF THE BSNL
The unions in the sector protested and went on a strike against this corporatisation, but at last an agreement was reached and the Bharat Sanchar Nigam Limited was formed on October 1, 2000.
The government assured that to ensure the financial viability of the BSNL, reimbursement of licence fee, payment of access deficit charges (ADC) collected from private companies, as also the grant from Universal Service Obligation Fund towards providing services in the loss making rural and remote areas, but as a part of the social commitment of government for universal service, will be granted to the BSNL. These assurances were honoured for a few years but are were either stopped or drastically reduced later, in violation of the government’s commitment.
Favouritism to private companies started even before the BSNL’s formation. These companies were granted licences to provide mobile services in 1995, but it was denied to both DoT and MTNL. The BSNL and MTNL were granted mobile licences only in 2002, 6 to 7 years after they were given to private telecom companies (telcos). This gave the latter an undue advantage to capture the booming market.
Conditions were liberalised one after another for private telcos on the pressure of the big business and multinationals. Licences for mobiles were granted first for a fixed amount, which could fetch for the government a total of more than Rs 55,000 crore. But the policy was changed to revenue sharing, which drastically reduced the amount to be paid, causing huge losses to the government.
While there are so many rules and regulations for the BSNL as a PSU to procure equipments, private telcos have no such restrictions. Procurement by the BSNL was unduly delayed and even stopped by the government, resulting in capacity crunch and inability to provide mobile lines. While BSNL was barred from purchasing equipments from Chinese vendors in the name of national security, private telcos were freely allowed to use Chinese equipments, which are comparatively cheap.
As a PSU, the BSNL has the responsibility to implement the social commitments of the government like providing services in rural and remote areas, while private companies are allowed to bypass even their limited commitments. After approaching the TDSAT (Telecom Disputes Settlement & Appellate Tribunal), private companies got relaxation to pay less licence fee on the basis of a share of adjusted gross revenue (AGR) earned through operations only. But the BSNL is compelled to pay a share of the total revenue. Also, it was not allowed to approach the TDSAT for a similar relaxation.
In the same way, private companies are allowed to pay only the initially fixed spectrum charges, but the BSNL is forced to pay an increased share of the spectrum charges, fixed by the Telecom Regulatory Authority of India (TRAI). In all these issues, BSNL is discriminated without any justification. In contrast, private companies were always able to get preferential treatment and more benefits. For the government, their interest was more important than its own companies’ interests.
UNKINDEST OF THE CUTS
Despite the fact that mobile licences were granted to the BSNL 6-7 years after they were given to private companies, BSNL through hectic efforts became number two in mobile services and was competing for the first position by 2006. An ambitious tender for 45.5 million mobile equipments was floated and after disposing of a court case filed by Motorola against disqualification, the purchase order was about to be issued. But at this very crucial juncture the government intervened and got the tender cancelled. It was only due to the one-day successful strike by employees on July 11, 2007 that about half of the tender was saved. But unfortunately, only about a quarter of the tender was purchased, resulting in a dire capacity crunch and inability to provide mobile lines to the people. The downfall started at this stage. See Table I given below.
| TABLE I No. of Telephone Connections Provided by Different Companies in India from March 2005 to March 2010 (Figures in Lakh Lines) |
| Company | Fixed | Mobile | Total | Market Share% | Fixed | Mobile | Total | Market Share% |
| 31.03.2005 | 31.03.2006 |
| BSNL | 357.3 | 101.6 | 458.9 | 47.5 | 367.8 | 184.5 | 552.3 | 39.3 |
| MTNL | 40.8 | 9.7 | 50.5 | 5.2 | 38.2 | 19.9 | 58.1 | 4.1 |
| Bharti | 8.6 | 109.8 | 118.4 | 12.3 | 13.5 | 195.8 | 209.3 | 14.9 |
| Reliance | 13.1 | 104.5 | 117.6 | 12.2 | 31.3 | 173.1 | 204.4 | 14.6 |
| Hutch | 0 | 91.4 | 91.4 | 9.5 | 0 | 153.6 | 153.6 | 10.9 |
| Tata | 18.3 | 10.9 | 29.2 | 3.0 | 40.2 | 48.5 | 88.7 | 6.3 |
| Idea | 0 | 50.7 | 50.7 | 5.3 | 0 | 73.7 | 73.7 | 5.2 |
| Total | 441.6 | 523.7 | 965.3 | | 495.3 | 908.8 | 1404.1 | |
| | 31.03.2007 | 31.03.2008 |
| BSNL | 337.4 | 309.8 | 647.2 | 31.3 | 315.52 | 407.90 | 723.42 | 24.07 |
| MTNL | 37.2 | 29.5 | 66.7 | 3.2 | 36.78 | 35.34 | 72.12 | 2.40 |
| Bharti | 18.7 | 371.4 | 390.1 | 18.9 | 22.83 | 619.85 | 642.68 | 21.39 |
| Reliance | 5.7 | 289.7 | 295.4 | 14.3 | 8.74 | 457.94 | 466.68 | 15.53 |
| Hutch | 0 | 264.4 | 264.4 | 12.8 | | 441.26 | 441.26 | 14.68 |
| Tata | 5.3 | 160.2 | 165.5 | 8.0 | 7.23 | 243.30 | 250.53 | 8.34 |
| Idea | 0 | 140.1 | 140.1 | 6.8 | | 240.02 | 240.02 | 7.99 |
| Total | 407.7 | 1660.5 | 2068.2 | | 394.15 | 2610.83 | 3004.98 | |
| | 31.03.2009 | 31.03.2010 |
| BSNL | 293.46 | 521.44 | 814.90 | 18.96 | 278.31 | 694.50 | 972.81 | 15.66 |
| MTNL | 35.73 | 44.83 | 80.56 | 1.87 | 34.97 | 50.94 | 85.91 | 1.38 |
| Bharti | 27.26 | 939.23 | 966.49 | 22.49 | 30.67 | 1276.19 | 1306.86 | 21.03 |
| Reliance | 11.09 | 726.66 | 737.75 | 17.17 | 11.77 | 1024.22 | 1035.99 | 16.68 |
| Vodafone | | 687.69 | 687.69 | 16.00 | | 1008.58 | 1008.58 | 16.23 |
| Tata | 9.19 | 351.22 | 360.41 | 8.39 | 11.62 | 659.42 | 671.04 | 10.80 |
| Idea | | 388.89 | 388.89 | 9.05 | | 638.24 | 638.24 | 10.27 |
| Total | 379.64 | 3917.59 | 4297.23 | | 369.56 | 5843.22 | 6212.78 | 100.00 |
NB: Only the first seven companies are mentioned above.
Also, it was assured by the government and management to the workers that another mega tender of 95 million lines will be floated and equipments purchased. But this tender also met the same fate after the Sam Pitroda committee recommended cancellation. As per an agreement on April 20, 2010, at least 30 million lines were to be made available, but this assurance was also dishonoured, adding to the severe capacity crunch.
From the very start, the government was trying to extract maximum amount from the BSNL by any means in order to bleed it. At the time of corporatisation, an imaginary amount of Rs 7,500 crore was shown as loan to the BSNL; this was neither required for BSNL at that time nor actually paid. Interest was calculated at a higher rate and in order to extract more and more interest the BSNL was not allowed to repay the loan for a long period.
During the period 2000-01 to 2008-09, the company has paid about Rs 40,000 crore towards the dividend, licence fee, taxes etc. In addition, sales tax and other taxes were paid to the state governments. The BSNL is also paying the pension contribution of the serving employees, which responsibility was thrust upon it by the government.
The above reasons, as also the stiff competition in telecom sector, resulted in reduction of the BSNL’s revenue and profit since 2007. Thus in 2009-10, for the first time, it posted a loss of Rs 1,822 crore. See Table II given below:
TABLE II
Analysis of Financial Results of BSNL
From October 1, 2000 to March 31, 2010
| Financial Year | Income from Services | Income from Other Sources including Interest | Total Income | Employees' Remunerations & Benefits [Including Pension Contribution to DoT] | Administrative & Operating Expenses | License Fee, Spectrum Charges, Depreciation, Tax & Other Expenses [Including Prior Period Adjustments] | Net Profit / Loss | Total Amount Paid to Central Government on a/c of Spectrum, License, Tax, Dividend etc. [Excluding Pension Contribution] |
| 10/2000- 03/2001 | 11596.66 | 102.82 | 11699.48 | 2070.07 | 2893.73 | 5988.63 | 747.05 | 1856.25 |
| 2001-02 | 24299.89 | 2681.80 | 26981.69 | 3848.45 | 3995.79 | 12825.28 | 6312.17 | 3943.13 |
| 2002-03 | 25293.15 | 599.45 | 25892.60 | 6266.03 | 5465.50 | 12716.62 | 1444.45 | 4895.04 |
| 2003-04 | 31399.34 | 2519.25 | 33918.59 | 6376.63 | 7111.83 | 14453.61 | 5976.52 | 7050.72 |
| 2004-05 | 33450.04 | 2640.01 | 36090.05 | 8393.02 | 8051.96 | 9461.78 | 10183.29 | 2377.03 |
| 2005-06 | 36138.94 | 4037.64 | 40176.58 | 7420.63 | 10496.89 | 13319.37 | 8939.69 | 4370.13 |
| 2006-07 | 34616.21 | 5098.90 | 39715.11 | 7308.97 | 10916.28 | 13683.99 | 7805.87 | 5019.47 |
| 2007-08 | 32842.30 | 5204.53 | 38046.83 | 8808.91 | 11110.18 | 15118.35 | 3009.39 | 6349.22 |
| 2008-09 | 30169.42 | 5642.50 | 35811.92 | 11363.23 | 11377.97 | 12495.87 | 574.85 | 3343.13 |
| 2009-10 | 27913.44 | 4131.97 | 32045.41 | 13455.04 | 10199.05 | 10213.97 | -1822.65 | 500.72 |
| TOTAL | 287719.39 | 32658.87 | 320378.26 | 75310.98 | 81619.18 | 120277.47 | 43170.63 | 39704.84 |
Further, the BSNL was compelled to pay Rs 18,500 crore towards the 3G and Broadband Spectrum charges, higher than any private company has paid, even though it was not allowed to participate in the tender for selecting the circles it required; private companies were allowed.
ANTI-WORKER RECOMMENDATIONS
The main target of corporatisation was the BSNL’s disinvestment and later its privatisation but the workers are aware of this danger. The VSNL was first disinvested and later sold to the Tatas. About 46 per cent shares of MTNL are already sold and disinvestment of another 5 per cent will mean its virtual privatisation. Learning from these experiences, BSNL workers and officers together, under the banner a Joint Action Committee, organised sustained struggles and defeated the government’s move to disinvest BSNL both in 2006 and 2008.
But the danger has with the Sam Pitroda committee recommending 30 per cent disinvestment. The BSNL board has pliantly adopted a resolution to that effect, ignoring the strong protest from the JAC. The unions have outright rejected the offer of shares to workers, knowing well that this is only a bait. They know that disinvestment is the prelude to privatisation, a la the known cases of VSNL, BALCO, Maruti Udyog Ltd, etc. The three lakh workers in BSNL cannot allow it.
The Sam Pitroda committee has recommended retrenchment of one lakh out of three lakh workers through VRS or transfer. BSNL management is trying to implement it, as desired by government, but the strong protest from the unions has so far foiled the move. Any VRS move is completely against the government’s assurances at the time of corporatisation and later in the 2006 agreement.
The government is pressurising the management to share the BSNL’s valuable copper cables and its large number of mobile towers with the private companies for the latter’s services. This unbundling of basic infrastructure is against the BSNL’s interest.
If the BSNL has to survive and advance in the midst of cut-throat competition and price wars, it needs to offer better services through innovative and effective projects to attract new subscribers and keep them satisfied. While projects like Shikhar, ERP etc were started, it has to do much more for success.
The three lakh workforce including qualified engineers and skilled workers is an asset to the BSNL. The management and the workers’ unions must jointly discuss, plan and speedily implement the development programmes to provide the people the best telecom services. The management has to change its mindset accordingly.
BASIC REQUIEMENTS
If implemented in a planned way, the following steps may save the BSNL from the present crisis and enable it to serve the people better.
1) The anti-PSU policy and the discrimination vis-à-vis private companies must end. A positive approach from the government towards PSUs is required.
2) To improve financial viability, the government must implement its assurances on licence fee reimbursement, ADC, USO fund etc. It must be mandatory for the centre, states and PSUs to take telecom and connected services only from the PSUs (BSNL and MTNL), as is done in the case of Air India. Strategic alliances with other PSUs must be ensured. The Rs 18,500 crore paid by BSNL towards 3G and BWA spectrum must be returned.
3) Issue of absorption ITS officers in BSNL must be settled without delay. Deputations for more than 10 years are hindering the BSNL’s development and expansion.
4) Adequate mobile equipments must be procured immediately. Capacity crunch due to cancellation of the 45.5 million lines in 2007 and 95 million lines in 2010 is the major cause of the present crisis.
5) The proposal of disinvestment or IPO must be scrapped.
6) The existing manpower, a great asset, must be effectively utilised and not retrenched through VRS etc.
7) In order to motivate the workers, their genuine demands must be conceded, creating a better and cordial atmosphere. Workers must be taken into confidence in development and connected matters. Daily monitoring is required to improve the services.
The BSNL has got a strong infrastructure throughout the country, both in urban and rural areas, and a dedicated and committed workforce. The common people look to it for satisfactory services. It is still a debt free company. It can overcome the present crisis, grow and develop if suitable remedial actions are taken without delay.
That the BSNL has surpassed all private companies by providing 2.3 million connections out of a total of 12.4 million by September 2010, is encouraging. This progress has to be kept up.
Under the banner of JAC, the three lakh workers are determined to defend the BSNL and save it from the present crisis. The Save BSNL Conventions organised by the JAC in various circles have sent the message to the workers to proactively participate in the efforts to improve services. The ensuing Parliament March on November 15 and the three-day strike from December 1 are intended to compel the government to change its anti-PSU, anti-workers policy, to save the BSNL and improve its services.
Source: www.pd.cpim.org
Vol. XXXIV, No. 44, October 31, 2010
