Union Cabinet approves revival plan for BSNL, MTNL, gives nod to their merger

The Union Cabinet on Wednesday approved the proposal for revival of BSNL and MTNL by administrative allotment of spectrum for 4G services, debt restructuring by raising of bonds with sovereign guarantee, reducing employee costs, monetisation of assets and in-principle approval of merger of BSNL and MTNL.

Addressing a press conference after the meeting of Union Cabinet, Communications and IT Minister Ravi Shankar Prasad said the Cabinet approved administrative allotment of spectrum for 4G services to BSNL and MTNL so as to enable these PSUs to provide broadband and other data services. The spectrum will be funded by the government by capital infusion in these PSUs at a value of Rs 20,140 crore.

The GST of Rs 3,674 crore for the spectrum value will also be borne by the government. By using this spectrum allotment, BSNL and MTNL will be able to deliver 4G services, compete in the market and provide high-speed data using their vast network including in rural areas.

The minister said the Cabinet also approved in principle the merger of the Mahanagar Telephone Nigam Limited (MTNL) and the Bharat Sanchar Nigam Limited (BSNL).

"We are going to merge MTNL with BSNL. Since MTNL is a listed company with shares, the merger will take time. Till then, MTNL will act as a subsidiary of BSNL," he said.

He also said that the government has no plan to close or disinvest MTNL and BSNL and expressed confidence that the BSNL will become profitable in two years. "Neither MTNL or BSNL is being closed, nor being disinvested," he said.

The minister said that the BSNL and the MTNL will also raise long-term bonds of Rs 15,000 crore for which sovereign guarantee will be provided by the government.

BSNL and MTNL will restructure their existing debt with these resources. Prasad said the two organisations will also offer voluntary retirement to their employees, aged 50 years and above.

An official release said the ex-gratia component of VRS (voluntary retirement scheme) will require Rs 17,169 crore. In addition, the government will meet the cost towards pension, gratuity and commutation.

The release said the BSNL and the MTNL will monetise their assets so as to raise resources for retiring debt, servicing of bonds, upgrading of network, expansion and meeting the operational fund requirements.