No more lifeline

Govt should either restructure or shut down telecom PSUs

How long will the government continue to support Mahanagar Telephone Nigam Limited, or MTNL? The state-owned telecommunications company will lose its service licence on April 6 but has reportedly been assured by the Department of Telecommunications (DoT) that this will not cause it to be shut down. It has been 20 years since MTNL was granted a licence for the Delhi circle. MTNL, though, argues that another date, January 2001, should have been considered as the beginning of its tenure. But there is no doubt that the real problem is that MTNL simply does not have the money for licence renewal. That would cost the public sector company as much as Rs 11,000 crore. But it already owes Rs 20,000 crore — a debt burden that it has struggled to pay off. MTNL, which was set up to operate only in Delhi and Mumbai, has 22,000 employees. Unfortunately, it has constantly lost mobile market share and now wants to surrender its 3G spectrum. It hopes to continue its landline service, however. MTNL also wants the government to essentially take over its massive debt burden.

The government must take a call on the future of the company. It must either be run well, and independently, as a focused and profit-making enterprise, or shut down. It cannot be allowed to languish in this manner, constantly receiving lifelines from the government budget. In the last Union Budget, it was allotted Rs 384 crore of budgetary support. There remain possibilities for the company’s revival — if, that is, it loses most of its employees, focuses on its profitable sectors, and sells its other assets. But the reason for any such revival, given MTNL’s history, must be carefully and transparently spelt out. Otherwise, there is the danger that revival plans will turn out to be just that — plans that are not put into action once the money that was allotted on the basis of those plans has been obtained. 

The problem is that the Telecom Commission — now renamed the Digital Communications Commission (DCC) after the release of the National Digital Communications Policy in 2018 — has indicated that the Union government wants to keep a state presence in the sector alive for “strategic” reasons. The government’s reasoning is far from clear unless it is merely another indication of its complete unwillingness to shut down loss-making public sector units. Nor is it certain that whatever strategic reasons it imagines requires it to subsidise telecom companies very few uses are worth the amount of money that it would take to keep MTNL and BSNL running. The government is reportedly willing to hand over Rs 8,000 crore as a start, but there is little doubt that it will have to keep on paying sums of that nature unless there is a fundamental restructuring of the two companies. Any such restructuring would have to ensure that the vast assets are not just leased but ideally sold to pay off a majority of the employees who would have to go. MTNL and BSNL should not be held responsible for the large number of employees as quite a few of them were transferred by DoT at the time of their formation. Admittedly, an election season is not the ideal time to go public about any such plan, but it’s a decision that has to be taken. Instead of asking the two PSUs to formulate a turnaround strategy and give an assurance to achieve higher revenue for getting financial support (this is precisely what the DCC did a fortnight ago), the government should clearly explain how it intends to evaluate the future utility of MTNL and BSNL, and how much it is willing to pay for “strategic” reasons.