FE Editorial : Don’t bail out MTNL/BSNL

A A

The Financial Express: Jan 31 2013, 21:12 IST

When the Cabinet deliberates over the telecom ministry proposal to give a R12,000 crore bailout to telecom PSUs BSNL and MTNL, it would do well to keep in mind the proposal is anti-competitive and makes no commercial sense, especially for a government that is so cash-strapped it is asking cash-rich PSUs like LIC and NMDC to, if need be, bail it out by participating in sales of other PSU shares. Apart from the R12,000 crore waiver of the one-time fees telcos are being asked to pay for the ‘extra’ spectrum they hold, other concessions include refunding the entry fees paid by the PSUs for the BWA spectrum they hold and haven’t been able to do much with despite getting this over a year before the private firms did—indeed, the two PSUs haven’t made much progress with the 3G spectrum they hold despite the nearly 2-year lead they had.

First, the level playing field issue. Since several private telcos are competing, and beating, the two PSUs, waiving their one-time fees while levying it on the private firms means that the PSUs have no incentive to try and turnaround their operations—indeed, they can continue to offer below-cost tariffs which spoil the market for the private firms also. Given that India has a Competition Commission, the fair thing would be to refer the matter to it. While the telecom ministry is justifying the move on the ground that the PSUs serve a social function, it needs to be pointed out that BSNL is now

... contd.

Ads by Google

Single Page Format

1 | 2 | 3 | Next

Freedom to soar Govt sends Rs 23k cr demand to telcos for excess spectrumTelcos directed to pay R8,000-cr spectrum fee by January 15 Decision on spectrum pricing in 3 weeks: Kapil Sibal

Previous Story Column : RBI, heal thyself Next Story Dena Bank Q3 profit up 10.6 pc at Rs 206 cr

Reader's Comments (3)| Post a Comment

Fe Comment

Narendra M Apte | 31-Jan-2013Reply | Forward

In almost all Public Sector Undertakings (PSUs), one common feature is that there is surplus staff. Two telecom PSUs, BSNL and MTNL, are no exception to this scenario. When there was no competition both these companies were earning monopoly profits and customer service was poor. After entry of private sector, two companies have lost market share rapidly. But one reason other than surplus staff, of these companiesâ€™ poor financial performance is lack of freedom to take business decisions at the right time on account of ministerial and bureaucratic interference. But let us not forget here that one or two former ministers who were in charge if Telecom ministry are responsible partly for sorry sate of affairs in both MTNL and BSNL. As pointed out in edit, it is now too late and these PSUs may never be able to turn a profit. But your suggestion that the government must exit these PSUs is unlikely to be even considered. Both our ministers and bureaucrats are never held accountable for their wrong decisions or no decisions. Our government will pour more funds in these PSUs as it has done in case of Air India., all in the name of aam adami!

Fe Comment

venkataramanaiah ramu | 31-Jan-2013Reply | Forward

Now a stage has got set-in where it is taken for granted that the 2 PSU's have to survive like the present only as there are no brighter prospects in sight and the loses are almost to be taken for granted, would become a feature of the PSUs. With the govt accepting that the two PSUs survive on funding, it would become a safe heaven for the two PSUs and ultimately become permanent liabilities. hence , in the interest of ensuring that the PSUs should not lay foundation for other PSUs to follow suite,an expert committee be set up under Sri.Petroda or other expert to suggest ways and means for salvaging the PSUs and suitable steps taken.

Fe Comment

KSRao | 31-Jan-2013Reply | Forward

Instead of doling out large sums of money to BSNL/MTNL, hand over the companies to the employees' cooperative charging them rentals for for using the facilities. Thus, the government will get money for nothing, employees will become entrepreneurs, and govt gets rid of a headache.