Govt to merge BSNL, MTNL. Unveils Rs.68,751 crores revival package; offers VRS to staffers over 50 years of age

A laudable step taken by the government to merge BSNL and MTNL

A laudable step taken by the government to merge BSNL and MTNL
A laudable step taken by the government to merge BSNL and MTNL

Giving a big boost to the ailing government telecom companies Bharatiya Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), the Union Cabinet on Wednesday approved merger of the two companies and revival package of Rs.68,751 crores including providing (4th Generation) 4G spectrum, paying Goods and Services Tax (GST) and other dues and an attractive Voluntary Retirement Scheme (VRS) to employees above 50 years of age. “In the case of BSNL and MTNL, the government’s view is clear. These are strategic assets of India. The entire army network is maintained by BSNL,” said Telecom Minister Ravi Shankar Prasad, reiterating that no privatization of these two telecom companies will be undertaken.

Prasad said that MTNL will be merged with BSNL soon and will operate as a subsidiary of BSNL.  The package includes raising of Rs.15,000-crores worth sovereign bonds to meet the immediate capital requirement of both the companies, 4G spectrum allocation worth Rs.20,140 crores, Rs.29,937 crores for VRS covering 50 percent of their employees, and Rs.3,674 crores for goods and services tax that will be levied on the allocation of radio waves.

Figure 1. Revival package details (amt in crores)
Figure 1. Revival package details (amt in crores)

“The VRS package approved by the Cabinet will give eligible employees 125 percent of income that they would have earned by serving the company till the age of 60 years. With this decision, we have taken care of the interest of lakhs of employees of these PSUs,” Prasad said.  BSNL has around 1.68 lakh employees and MTNL around 22,000.  “The VRS is voluntary; nobody can be forced to opt for it,” he said.

The total debt on both the companies stood at Rs.40,000 crores, of which half of the liability is on MTNL alone which operates in Delhi and Mumbai. Both the companies have been demanding spectrum to start 4G services to remain competitive in the market.  Telecom Secretary Anshu Prakash said the spectrum will be allocated to both the companies administratively within a month.

“The spectrum allocation to BSNL worth Rs.14,115 crores will be in lieu of equity shares and about Rs.6,295 crores for MTNL in lieu of preferential shares,” Prakash said.  The Government will monetise MTNL and BSNL assets worth Rs.37,500 crores over a period of three years. Both companies across India have land assets worth more than Rs.3 lakh crores ($42 billion).

“The assets primarily include land assets but also rental and leasing of their buildings. MTNL has around 29 retail outlets in Delhi alone,” Prakash said.  He said BSNL will also need around Rs.10,000 crores to roll out 4G services in phases and MTNL around Rs.1100 crores.

“The debt on BSNL is the lowest. They can raise capital expenditure required for rolling out network from the banks and bringing in efficiency in their operations,” Prakash said.  In the VRS package, the government has approved Rs.17,169 crores as ex-gratia component and Rs.12,768 crores for preponement of pensionary benefit.

“Employees above the age of 53.5 years will get 125 per cent of their salary which they could have earned in balance period of their service,” said Telecom Secretary.  Employees in the age bracket of 50 to 53.5 years opting for the VRS will get benefit in the range of 80 to 100 per cent of the remuneration to be paid in the balance period of their service.

Fraud on BSNL and MTNL:

It must be remembered that BSNL and MTNL were allotted Broadband Wireless Access (BWA) Spectrum, now termed as 4G spectrum in mid-2010 through auction. Though BSNL and MTNL were allotted 4G Spectrum (BWA) in the 2010 3G/ BWA auction, in a controversial decision, the Government in 2013 allowed these two public sector companies to return their spectrum to settle the dues! There were allegations that this controversial decision was taken to pave way for Mukesh Ambani’s Reliance Jio to monopolise the internet-based voice and data sector. Even telecom unions kept mum on this dubious decision to help the private 4G operators. At last Government has taken a good decision, though more than eight years business in 4G sector was lost to BSNL and MTNL.


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