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Government Rs 74,000 crore Bailout plan for BSNL and MTNL telecom PSUs

The government believes that company costs can be reduced by substantially reducing the retirement age from 60 to 58 and offering a lucrative VRS package. This would allow them to become more aggressive with the new rate plans. The government is also trying to monetize the blocked assets of companies, including towers, land and fiber optics.
 

Highlights of Bailout plan for BSNL and MTNL
  • The government is considering a rescue plan of 74,000 rs of CRS for the BSNL and MTNL state telecommunications hemorrhages
  • BSNL is the largest loss feeder in the country.
  • While MTNL was third with a loss of Rs.3,398 rupees
Government Rs 74,000 crore Bailout plan for BSNL and MTNL telecom PSUs

The government is considering a rescue plan of CRS 74,000 rs for telecommunication companies BSNL and MTNL, which are hemorrhagic. The strategy is to offer a good package of exits to thousands of employees, including an additional compensation of 5% (ex-gratia) to make the VRS attractive, while providing 4G spectrum and capital expenditure at the same time. The BSNL is the largest loss feeder in the country (estimate of Rs 13,804 in fiscal year 2019), while the MTNL was the third with a loss of Rs. Rs.3398 crore. Only Air India has a greater loss than MTNL. If the package passes, the two telecommunications power supply units will pass to the IA as the largest drainage of the national treasury.

Speaking with the TOI, officials are familiar with the proposal, for which a draft of the government note was distributed, the 4G spectrum estimated at more than Rs 20,000 crore will be allocated by the government and the cost of launching around Rs 13,000 crore will be paid by the PSU. The government will pay the invoice a little more than 40,000 crore rupees for the VRS package and the early retirement benefits.

In defending the rescue, the telecommunications department said that the closure of two Public Sector Units will cost 1.2 lakh crore rupees and therefore, remains unsurpassed. He said that a strategic disinvestment could not find many considering the financial stress in the telecommunications sector. However, a joint venture option can definitely be explored.

Over the past decade, BSNL and MTNL have continued to spiral downwards due to poor management, high personnel costs, incorrect and often unwanted government interference and slow updating of new technology. While the telecommunications industry is rapidly migrating to 4G and is also preparing for 5G, the two power supply units have yet to move to faster and more efficient technology. They have lost market share in the mobile services sector. The average revenue per user (ARPU) of these Public Sector Units is Rs 38 compared to Rs 70 for private players.
 

The government believes that company costs can be reduced by substantially reducing the retirement age from 60 to 58 and offering a lucrative VRS package. This would allow them to become more aggressive with the new rate plans. The government is also trying to monetize the blocked assets of companies, including towers, land and fiber optics.

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