VRS for staff may be only option for loss-making MTNL if it shuts: Execs

The govt-owned telecom has been making losses for all but one of the past 14 years, and has run up a debt of a staggering Rs 23,500 crore

Instituting a company-wide voluntary retirement scheme (VRS) may be the only option available to state-run telecom PSU Mahanagar Telephone Nigam (MTNL) and its 3,574 employees in the event of the company’s closure and delisting from the stock exchange, officials said.

Set up in 1986, the public sector undertaking (PSU) under the Ministry of Communications was tasked with providing telephone services in the Delhi and Mumbai circles. The company had stayed profitable till 2008-09. Since then, it made losses every year barring 2013-14, when it posted a profit of Rs 7,825 crore mainly due to write-back of provisions on account of pensionary liabilities and spectrum amortisation costs.

The government had, in October 2019, approved a Rs 68,751-crore revival package for loss-making telecom sector PSUs BSNL and MTNL. The package envisaged merging the entities and raising funds via the issuance of sovereign-backed bonds.

But MTNL’s huge debt, pegged at Rs 23,500 crore in FY23, has held up the merger with its relatively stable sister firm BSNL. Meanwhile, MTNL is yet to raise Rs 6,661 crore in sovereign bonds, having sought its board's nod only last week.

On Tuesday, media reports said the government may shut MTNL, and shift its operations to BSNL.

Question of employees

One of the conditions for the government approving a revival package for the struggling unit was that the employee unions would accept a voluntary retirement scheme (VRS).

Days later, MTNL had rolled out VRS in November 2019 for all regular and permanent staff aged 50 years and more as on January 31, 2020. “As many as 15,000 of its 22,000 total employees were eligible. The overwhelming majority of them, or 14,378 employees, opted for it. This goes to show little confidence the employees had in the PSU regaining its health,” a senior Department of Telecommunications (DoT) official said.

As of February, MTNL had 3,574 employees, all were based in Delhi or Mumbai.

Officials from DoT and BSNL said a similar VRS may be planned in case MTNL ceases to exist going forward. “Some employees, mostly from the technical and maintenance sides, would need to be retained. They may be shifted to BSNL. The majority of employees can, however, be given the option of a VRS,” a senior official from BSNL said.

Nearly 1,900 MTNL staffers are currently aged above 50. The average age of employees is 46 years.

Up to 46 months’ pay was expected to be given as a lump sum ex-gratia compensation as part of the VRS. MTNL had also segregated the scheme for three sets of employees--combined service optees, pro-rata optees and MTNL recruited employees. Combined service optees were to get ex-gratia plus admissible pension of up to 125 per cent of their salary while pro-rata optees were to get the same benefit as combined service optees having same period of service completed and remaining. MTNL recruited employees stood to receive ex-gratia up to 100 per cent of salary.

No other way

Beyond a VRS, retrenchment would be the only available option for most of the staff, who are unlikely to be absorbed into BSNL.

Combined with the last VRS and other measures, MTNL’s total staff strength had come down to just 4,430 as of December 2019. This was expected to reduce the annual salary expenditure to Rs 500 crore, from Rs 2,272 crore earlier. The footprint of the employee cost on revenue was also expected to reduce to 25 per cent, from a staggering 85 per cent earlier.

But officials said the losses had continued to pile up as operational revenue had nosedived. MTNL’s fixed-line customer base have come down from 3.54 million in November 2008, to 2.31 milliom this March, official data showed.

The closure of the entity may be the only way forward since the government has said multiple times that there are no plans to privatise the business. 

In April and July 2022, the Telecom ministry had informed Parliament in written response that the government had no plans of disinvesting in BSNL or MTNL.