The government’s decision to inject Rs 1.64 trillion into the struggling Bharat Sanchar Nigam Limited (BSNL) may look like yet another instance of throwing good money after bad, but such a stance would be unfair. The fresh package should be seen as a move to bolster government presence in a strategic sector, with the aim to bridge the digital divide in the country and keep competition in the sector healthy. It is obvious that such funding should have come earlier to help improve BSNL’s health. The Centre had approved a Rs 74,000-crore package in October 2019, and there has been a lull since. In just under three years, BSNL’s share in the wired-connections has shrunk by almost half even as the overall market expanded by a fifth. In terms of wireless connections, while there was a small dip in its market share, it managed to more or less hold on to its subscriber base in the rural and remote areas, underscoring the need to help it tide over financial and other pain-points if a “connected India” is to take Bharat along.
Even though active internet users in rural areas outnumber their urban counterparts—351 million versus 341 million—many continue to remain outside the digital world taking shape around them. The 351 million represent just 37% of the rural population in the country. This needs to be seen against the hunger for getting digitally connected. A Deloitte report from February found that while India will add 250 million more smartphone-users to hit one billion by 2026, this growth will largely come from the rural parts of the country, with a compound annual growth rate of 6% between 2021 and 2026. Though the progress has been slow in many states, BSNL is implementing the ambitious BharatNet project by 2025. It may not be commercially viable, but it would provide broadband connectivity to gram panchayats. There is also work being done in Maoist-infected districts. Against such a backdrop, telcos facilitating telephony and internet access remains critical, even if they are not profitable. No private sector telecom company will engage in such work of national importance.
The fact also is that BSNL has tried to get more agile, though there is still a yawning gap with its private sector peers. It has drastically cut its workforce from 165,000 to 64,536, as a result of which the proportion of employee benefit expenses to total income has more than halved to 26%. Losses, too, have narrowed, from Rs 13,804 crore in FY19 to Rs 7,453 crore in FY21. The slippage in revenue though is worrying. The government, having pumped in money, needs to allow BSNL to be managed professionally. With the telecom space reduced to a virtual duopoly, with one of the three private sector players struggling for survival, BSNL’s presence is required. From the social good and competition perspectives, BSNL needs to be nursed back to health by the government. After all, the same government extended concessions to Vodafone and Bharti Airtel over AGR dues. The perspective should be clear: BSNL may not be commercially viable, but its relevance comes from the fact that it is executing gigantic projects that no private sector company would ever do. In that sense, it is wrong to expect BSNL to catch up with its private sector peers in financial performance. The government is right in extending the lifeline to the public sector major.