To revive the ailing telecom PSUs such as BSNL and MTNL, telecom minister Kapil Sibal has urged Prime Minister Manmohan Singh to constitute a group of ministers (GoM).

In a letter to the PM, Sibal has said that he expects BSNL to make losses of around R10,000 crore in 2012-13, while MTNL’s net worth is likely to get completely eroded.

“Unless immediate steps are taken to revive and revitalise these PSUs, they would turn sick very shortly,” Sibal wrote.BSNL, which offers services in all regions except Mumbai and Delhi, registered a loss of R 8,851 crore in 2011-12 and MTNL about R4,110 during the same period. Financial results for 2012-13 have not been declared by the companies.

“Due to change in the business environment and hyper competition in the telecom market, the financial position of BSNL and MTNL has deteriorated in the last 3-4 years,” Sibal said.

In a recent presentation to Sibal, both BSNL and MTNL have stated that they will not see any turnaround this fiscal. BSNL, in its presentation, said estimates indicate that its revenues for the year-ended March 2013 would be around R25,384 crore, down 9% from R27,944 crore during 2011-12.

MTNL, which operates in Delhi and Mumbai, revealed that its losses for the first six months of this fiscal (2012-13) increased to R2,153 crore, up 26% compared to a loss R1,714 crore for the six months ended September 2011.

?(The) Sam Pitroda Committee was constituted in 2010 to suggest a path for positioning these PSUs for better delivery of services. Many of the recommendations have since been implemented. However, the environment has changed since then. Immediate action, together with financial support, would be required to put these PSUs back on the track,? Sibal said in his letter.

The department of telecommunications (DoT) recently sought Cabinet approval for the Centre to bear the one-time spectrum fee for these state-owned telcos and also refund part of their 4G airwaves costs as they had surrendered this spectrum last year citing lack of a business case.

If the Cabinet approves these demands, it will cost the Centre over Rs 23,200 crore.

Making a case for government support to these two mobile phone firms, the DoT, in its Cabinet note, said BSNL and MTNL are of strategic importance to the country, are providing services in far-flung areas and jointly account for 80% of landline and 71% of broadband connections in India.

It further added that liabilities of both the PSUs “had led to difficulties in meeting their basic financial commitments like payment of salaries to staff and operation and maintenance of their telecom network”.

However, all private mobile phone operators companies have strongly opposed the telecom department’s move to seek financial bailout for BSNL and MTNL.

Industry bodies representing both GSM and CDMA operators, in a joint letter to the telecom minister, said, “Consideration of any such proposal was not permissible as it would be in contravention of all tenets of policy, fair competition and level playing field”, while adding that current rules “assures level playing field for all operators”.

Sam Pitroda, advisor to the Prime Minister, had headed a committee to review BSNL?s operations in 2009-10. The committee recommended selection of the best professionals from the private sector at market rates, and appointment of an eminent person from the private sector as chairman.

A sharp reduction was also suggested through retirement or transfer of 100,000 lakh employees through processes such as voluntary retirement scheme (VRS). Pitroda had further recommended disinvesting 30% stake through a IPO of which 10% should be returned to the government and 20%t used for BSNL?s employee VRS, expansion and operations.