BSNL-MTNL: Finance Ministry turns down DoTs Rs 74,000 crore revival package

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Published: September 28, 2019 2:17:32 AM

It had also argued that strategic disinvestment of BSNL would not work out as there may not be any takers for it considering the current financial stress in the telecom industry.

Further, if the company was provided 4G spectrum by the government as part of the package then it would be able to compete in the market and start posting lower losses FY21 onwards and become profitable from FY24 onwards.

The revival plans for the ailing state-run BSNL and MTNL hangs in a limbo as the finance ministry is reportedly not keen to go ahead with the department of telecommunications’ (DoT’s) proposal for a massive Rs 74,000-crore bailout package.

According to sources, the finance ministry has suggested that the DoT come up with some alternative proposal to revive the ailing telcos.

The DoT’s proposal for a Rs 74,000-crore bailout package was based on the premise that closing down the loss-making BSNL and MTNL would cost even higher —around Rs 95,000 crore.

The assumption behind the revival package, which involved an attractive VRS package to BSNL’s 1.65 lakh employees, reducing their retirement age from the current 60 years to 58 years, was that it would reduce the wage bill of the company which in FY19 was 77% of its revenues.

Further, if the company was provided 4G spectrum by the government as part of the package then it would be able to compete in the market and start posting lower losses FY21 onwards and become profitable from FY24 onwards.

The components of the revival package drawn up by the DoT was as follows: The VRS payout would entail a cost of Rs 29,182 crore, another Rs 10,993 crore would be the cost in terms of payout of retiral benefits by advancing the retirement age from 60 to 58 years. The allotment of 4G spectrum would cost Rs 20,410 crore and another Rs 13,202 crore would be the capex required to rollout the 4G services.

The DoT’s logic was that closing down BSNL, for instance, which posted a net loss of Rs 13,804 crore on a revenue of Rs 18,865 crore in FY19, would require giving VRS to all its employees plus repayment of its total debts which would cost around Rs 95,000 crore. As opposed to it, a revival package of Rs 74,000 crore would cost less and by reducing its workforce and allocating it 4G spectrum would make the company competitive.

It had also argued that strategic disinvestment of BSNL would not work out as there may not be any takers for it considering the current financial stress in the telecom industry.

The optimistic projection underlying the revival blueprint was that BSNL would see its net loss widen to Rs 18,231 crore in FY20 but thereon it would start narrowing and come down to a loss of Rs 5,432 crore in FY21. It would post a net loss of Rs 396 crore in FY23 and then break into a profit of Rs 2,235 crore in FY24.

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