Is it wise to waste taxpayer money on sinking PSUs?

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Narendra Modi government plans Rs 74,000 crore safety plan for the public telecommunications companies BSNL and MTNL. BSNL is the country the biggest loss PSU at Rs 13,804 crore, while MTNL is the third, with a loss of Rs 3,398 crore.

ThePrint asks: Modi government plans to bail out BSNL, MTNL: Is it wise to waste taxpayer money by sinking PSUs?

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Relaunching loss-making PSUs by injecting taxpayer money appears to be a fiscally reckless decision

Radhika pandey
Economist, NIPFP

Government plans Rs 74,000 crore safety plan to revive BSNL and MTNL. The strategy to revive deficit PSUs by injecting taxpayers’ money appears to be a fiscally reckless decision. At a time when the government follows an aggressive divestment strategy to mop up the extra revenue to fund infrastructure and social protection programs, the proposal to inject Rs 74,000 crore to revive MTNL and BSNL is questionable.

Any restructuring strategy for struggling PSUs is a painful and long-term process, but some bold decisions need to be made. The decision to use taxpayers’ money must be accompanied by a commitment to undertake comprehensive reforms to promote efficiency and competition. In the absence of that commitment, a bailout simply sets the stage for another round of inefficiency and higher costs.

Although the decision to relaunch MTNL and BSNL came too late, it should prompt policy makers to initiate restructuring plans when the power supply starts showing the first signs of trouble. A range of options – from strategic selling, privatization, liquidation to monetization of locked-in assets – should be considered.

On the budgetary front, this decision will create additional difficulties for the government. While the overall budget deficit was indexed to 3.4 percent in the interim budget, taking into account off-budget commitments, the real budget deficit could be much higher. Although spending commitments are huge, tax revenues have been lower than expected. In this context, the decision to spend an additional crore of Rs 74,000 seems to be contentious.

Opinions are personal.

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Also read: Starting with BSNL and MTNL, the new Indian government must introduce the bankruptcy process in the public sector

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BSNL has valuable assets and infrastructure – there is a case for government support

Mahesh Uppal
Telecommunications Regulatory Consultant

I think the answer is not that simple. There is a case to support these companies, but they should come with key conditions. The government must be prepared to allow better quality management and, more importantly, to let BSNL and MTNL continue their work without interruption.

The government should not only be willing, but insist on bringing in a new business-oriented partner capable of rapidly upgrading its infrastructure and services to levels that the market expects from a key player nationwide. I think BSNL has valuable assets and infrastructure.

Its access across the country is something its competitors would kill for. There are all the reasons to have a public sector actor in a key area of ​​the economy. It could be an alternative in a wide range of situations where private actors can be difficult to manage. The sector and consumers do not only need competition between private players. They need competition between private and public players as well as between technologies, business models, wireline, cellular and satellite services.

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The government has adopted a discriminatory policy against BSNL, which favors private operators

P. Abhimanyu
General Secretary, BSNL Employees Union

While the government is now considering a bailout, it was the government that killed BSNL in the first place. The bailout is only one way to prepare the ground for the privatization of BSNL. We are a 100% government controlled company and that is why our internal operations have always faced government interference.

We were not allowed to level the playing field. The government has adopted a discriminatory policy against BSNL, which favors private operators.

Other private companies such as Vodafone-Idea, Airtel and even Reliance have high debts, it is however the BSNL which is reprimanded.

Taking quick loans for any capital expenditure is extremely difficult as the prior DoT approval is required which usually takes a long time. Between 2006 and 2012, the government did not authorize any equipment purchases and all BSNL tenders were canceled. We announced a call for tenders for the supply of mobile equipment for the deployment of 45 million lines, which was canceled.

At a time when 5G is knocking on our doors and when all private operators have switched to 4G, BSNL has not even been allocated 4G spectrum.

To generate revenue, BSNL needs to expand its network, which requires an injection of capital and a technology upgrade – the government has not helped BSNL in either of these areas.

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Also read: BSNL employees receive February salary but their woes are not over, blames Modi government for cash flow crisis

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Piecemeal financing will not work, government needs an appropriate strategy to revive BSNL and MTNL

Manoj Gairola
Telecom analyst

The government does not inflict Rs 74,000 crore in BSNL and MTNL. What he proposed is to give a 4G free of charge worth Rs 20,000 crore to BSNL and Rs 13,000 crore for the deployment of its network. The rest is intended for the voluntary retirement scheme for employees.

Now compare it with its competitors Reliance Jio and Airtel. Confidence has invested over Rs 300,000 crore in Jio, while Airtel promoters have invested crores to upgrade their network to 4G.

The government, which owns BSNL and MTNL, has not made any substantial investment in the two companies for some time. Companies have had to draw on their own cash reserves. In the last three months, BSNL has stopped paying its suppliers. As a result, much of its network is down. MTNL is almost a dead network. In all cases, MTNL and BSNL mainly have 2G customers.

The deployment of 4G will take at least two years. At that point, BSNL will fall ill. He is already considering a loss of Rs 10,000 crore for an income of Rs 20,000 crore.

If the government is to revive BSNL and MTNL, it will need to develop an appropriate strategy. Otherwise, any financial support given to it piecemeal will be a waste of taxpayer dollars.

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By Fatima Khan, Revathi Krishnan and Mahua Venkatesh.

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