First the good news. The committee headed by Sam Pitroda to suggest measures to put the ailing, state-owned telecom firm BSNL back on track has submitted an excellent report within record time. That the decision to constitute the committee was taken in January and the report was submitted before the end of February is testimony to the fact that it does not take much to fix things if the will is there. Another typical Pitroda stamp on the report is that it is only a four-page document unlike the voluminous reports the government is infamous for dishing out, which then simply pass on to the archives. There can be no dispute on the 15-point agenda suggested by Pitroda to turn around the company, which until four years ago was a highly profitable one with immense growth potential.
Pitroda has rightly noted the latent potential still existing in the company: it is the seventh largest telecommunication company in the world providing a comprehensive range of telecom services with an equity capital of Rs 12,000 crore, net assets worth Rs 88,000 crore and a turnover of Rs 35,000 crore. It caters to 90 million subscribers, has 3 lakh employees, 7,50,000 km of optic fibre, a network of 40,000 towers, extensive urban and unparalleled rural coverage and many more unique assets and capabilities that offer potential for growth and revenue generation.
Now let?s come to the bad news. Though this is not Pitroda?s fault, the report doesn?t have a timeline for its implementation. In an interaction with this newspaper, Pitroda said that his brief did not extend to timelines?that is something for the government to decide. The PM should intervene and ask the department of telecommunications to immediately start processing the recommendations by fixing timelines. Since the DoT secretary, PJ Thomas, was himself a member of the committee and it is he who has to implement the measures, there can be no excuse for delays from DoT.
The implementation timeline is important because the current chairman & MD of BSNL is retiring in July, and that?s the time to kick in the first and most important recommendation of the report?separating the post of MD/CEO from that of CMD?meaning a non-executive chairman remains distinct from the MD, whose responsibility is the day-to-day running of the company. If the set of measures suggested by Pitroda has to be implemented, the structural changes suggested should be the first to be implemented. We are already in the month of March so the government should immediately set up a search committee to identify names of eminent personalities who could be considered for the post of chairman (naturally the person has to be outside of the BSNL) and also that of MD (in this case both internal and industry names can be considered).
If this opportunity is squandered and in the routine process the DoT selects an incumbent from BSNL as its next CMD in July as is the past practice, one can be sure that the recommendations will not move ahead but be summarily buried by the government through a series of other committees and sub-committees. Blunt as it may sound, no CMD or telecom minister would like to forgo the powers they enjoy.
Though Pitroda has not said so in as many words, the idea behind splitting the post of CMD is that a chairman who is an eminent industry personality would not succumb to pressures from any telecom minister while taking decisions and would support and encourage the MD in running the company on sound commercial lines without any fear or favour.
Another the key recommendation of Pitroda is divesting 30% in BSNL in stages after fundamental changes have been made. He has said that returns from the 10% sale should go back to the government while the remaining 20% should be utilised for employee VRS, expansion and operations. Considering that BSNL has 1 lakh surplus employees and currently it is not the right time to list the company, these suggestions make sense. However, Pitroda should have recommended a wholesome strategic sale?government bringing down its stake to below 51%. Though he has recommended that the administrative ministry should not interfere in its day-to-day working and only liaise through the board,it is easier said than done where the government happens to be the major shareholder.
In this connection, the example of MTNL, the other state-owned firm that provides telecom services in Delhi and Mumbai, is apt. Though the company is only 56% owned by the government and is even listed on the NYSE, performance remains poor. Pitroda should also have exceeded his brief and suggested the merger of BSNL and MTNL, because their being distinct entities act as a growth barrier to both?MTNL cannot expand beyond two cities and BSNL is denied entry into the two most lucrative markets. The problems of BSNL and MTNL are similar and should have been tackled in one go rather than separately.
rishi.raj@expressindia.com