Union cabinet approves merger of BSNL and MTNL is it correct?


Why Indian government is delaying the decision for merger of BSNL and MTNL and showing reasons of financial reasons.

Telecommunications department of Indian government decision won't come as a surprise to many as telecom companies are struggling to compete in the industry.

merger of BSNL and MTNL
The merger between the Public Telecom companies in India Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limied (MTNL) is delayed for economic reasons. Ravi Shankar Prasad, Minister of Electronics and Information Technology, said the decision was made considering several factors. 

As we already know, the financial situation of Telecom BSNL and MTNL is not in a good position. Metro servicing Telecom MTNL, on the other hand, is full of huge debts right now. The minister also said that "the government is closely examining the integration of services between BSNL and MTNL".

As a reminder, the Union Cabinet approved the BSNL and MTNL merger plan in 2019, as well as providing a major recovery plan for the former.

Merging of BSNL and MTNL plan is for now postponed

Telecommunications ministers Shri Ravi shankar prasad, in a written response to Lok Sabha, said that the modi government will undertake "Close cooperation and service integration between BSNL and MTNL". At the time of written response, MTNL's debt is around Rs 20 billion.

This government decision won't come as a surprise to many as telecom companies are struggling to compete in the industry. Private telecom operators are investing heavily in 4G services, but both BSNL and MTNL continue to offer 3G services to customers.

At the end of 2019, the Union Cabinet approved a relaunch package for BSNL and gave the green light to merge two government-owned PSUs. Telecom companies benefited from this reactivation package, as they were able to cut the monthly salaries of employees with a voluntary retirement scheme in BSNL and MTNL (VRS 2019). Overall, the telecommunications company's recovery plan was estimated at a cost of around 70 thousand crore.

If all goes according to plan, MTNL will act as a subsidiary of BSNL after the merger, but here it is confirmed that the merger plan is postponed indefinitely. Both telecom companies also expected 4G spectrum from the Department of Telecommunications (DoT) as part of this reactivation plan.

In January of this year, a six-member Group of Ministers (GoM)  bsnl and mtnl merger committee said the merger would not have a positive impact on either party. They said the merger would not be "profitable" or "feasible" as telecom companies are struggling for positive cash flow.

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