Snea(I)/chq/GoM/2012-14/01 Dated 05th May, 2013. To Sri P. Chidambaram, Hon Finance Minister, Govt of India, New Delhi

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SNEA(I)/CHQ/GoM/2012-14/01 Dated 05th May, 2013.


Sri P. Chidambaram,

Hon Finance Minister,

Govt of India, New Delhi.

Chairman, Group of Ministers for revival of BSNL & MTNL.

Sub:- Measures that could be taken in the short, medium and long term for revival and revitalisation of BSNL, the strategic Telecom PSU to protect the interest of the Telecom Industry as well as the users of telecom and the Nation at large.
BSNL is the strategic CPSU in the telecom sector which has met the social obligations of the telecom policies of the govt. in an unparalleled manner and facilitated the govt. to enforce policies and check cartelization by private operators. Besides, the company has met the strategic National telecom needs in an exemplary manner. BSNL has invested thousands of Crores in the Rural and remotest part of the country to develop optical fibre network and land lines whereas other private operators invested nothing in these areas. The private operators invested only in the lucrative Mobile sector where operational cost is very less. The entire burden of the social obligations of the Govt to provide telecom services to the Rural and remotest part of the country falls on the shoulders of BSNL. Therefore, it is incumbent upon the government to take appropriate policy decisions that help its strategic company get stronger as it readies to help the government break the cartel of private operators so as to allow healthy competition in the sector, thereby enabling percolation of benefits of fair and unregulated competition to users of telecom.

Our considered opinion suggests that following policy decisions would decisively impact revival of BSNL, and thus enable the government in leveraging telecom policy in larger National perspective.

A) Policy should address creation of perfect, meaningful and unprejudiced level playing field and not shackle BSNL to meet highly unviable component of social obligations of telecom policy by forcing it to provide rural landline services without fully remunerating adequate support to it clearly stipulated it in the policy:

Analyzed in right and unprejudiced perspective, BSNL has been fundamentally victim of investing thousands and thousands of crores towards building of massive countrywide telecom infrastructure over last decade, and this investment of incredible magnitude by BSNL is not compensated, even though unambiguous provisions to compensate it exist in NTP,99 which have were arbitrarily set aside. Why should BSNL meet social obligations of policy of the govt. and get bankrupt? Why should policy be discriminatory and hostile towards BSNL and allow private operators to exploit the infrastructure built by BSNL and not return huge investment on infrastructure?
Why should BSNL be shackled and thus forced to take the whole burden of providing landline services in rural India and get bankrupt? Why should clearly stipulated policy provisions to adequately compensate BSNL in terms of ADC, USO fund, exemption from payment of license fees, refund of spectrum charges etc. etc. for undertaking these activities be blatantly and deliberately violated by policy enforcers the way they have been so far to benefit private operators to allow BSNL get bankrupt? These core issues have to be addressed by GOM in totality, and adequate and comprehensive policy measures, which cannot be tweaked and done away with the way they have been, have to be brought in place. In case this major and arduous task before the GOM is addressed in a foolproof and impenetrable manner, BSNL would be out of woods.
B) Governments abject failure and total dithering to enforce its own decision on ITS Group A absorption have throttled the growth of the Company – Government has to take total responsibility and needs to act urgently and radically in the best interests of company for a top BSNL Management belongs to the company, not deputatioinists.

This is a classic case of failure of Government and its indecisiveness in ensuring that BSNL is led by the top Management which is part and parcel of the Company in order to help it face intense competition. Instead government through its deliberate inactions has created total chaos that has paralyzed growth of the Company. When the leaders of the Company do not own the Company, the results are obvious.

Even the recommendation made by telecom luminary, Sam Pitroda, on this critical issue, was grossly overlooked. Sam Pitroda in a very forthright manner concluded that prelude to repositioning BSNL as a strategic player in telecom sector in terms of revenues and market share has to be that top Management positions be occupied by professionals who are integral part of the company. This has to be the starting point for any revival effort. Government must act expeditiously to ensure BSNL is led by Managers who have a direct stake in the Company and not at all by deputationists. Let us very frankly mention that any kind of effort to revive and revitalize BSNL without its being led by Managers who are part of the Company would be simply humbug and farce, completely devoid of reality. Ensuring job for ITS is one thing, whereas revival of BSNL is an altogether different thing, having no relevance to job security of ITS and their utilization. Let GOM be under no illusion on this hard reality. GOM will be simply wasting its time by outlining a roadmap for revival of BSNL without addressing this core and fundamental issue of who executes the blueprint for revival, whether vested interest deputationists or those who are have stake in revival of BSNL.
C) Refund of 3G and obsolete BWA spectrum charges:

BSNL was blatantly denied the choice offered to all other private operators to decide circles with regard to obtaining 3G spectrum and was thus forced to pay pan India 3G spectrum charges of Rs 10186 crores. In sharp contrast, Private operators were given complete flexibility to decide LSAs of their choice. Fully exploiting the freedom given to private operators, they entered into a carefully worked out cartel and bid for selected circles. It is quite significant to note that between them, Airtel, Vodafone and Idea together paid marginally higher than BSNL alone was forced to pay for Pan India 3 G spectrum.

Not only did the cartelization by these private operators rob the exchequer of thousands of crores in revenue but it inflicted incredible losses on exclusive 3G business domain of BSNL. Incredible losses inflicted on BSNL by naked breach of policy, and in clear recognition of the fact that BSNL has profusely bled and continues to bleed to the tune of more than Rs 10,000 crores by providing rural landline services in remotest parts of the Country, it is incumbent upon the government to refund Rs 10,186 crores BSNL has paid towards 3G spectrum. Refund of this amount would be fully consistent with policy commitments contained in NTP, 1999 and other policy provisions.

Similarly BSNL was allocated a redundant BWA spectrum band in 2.6 GHz at market value of Rs 8313 crores. BWA spectrum was allotted for BSNL in early 2008 for Rural WiMax project of DoIT. On the contrary, Private operators for the same value were allocated a commercially excellent band in 2.3 GHz, according to their choice of LSAs having overriding commercial and technical features over highly obsolete band BSNL was allocated.
In view of very high obsolescence of the BWA spectrum band BSNL was allocated, and considering the fact that BSNL has Pan India 3G spectrum, BSNL management decided to surrender redundant band in all but four Circles in the Country and has sought refund of Rs 7000 crores thereof. BSNL’s expansion plans are adversely affected because it has no capital reserves. Government withholding refund of Rs 7000 crores is not unlawful but is badly impeding the growth of BSNL. There is just no justification for Government to delay refund Rs 7000 crores which could be potentially invested in badly needed operational expansion of the Company. It is high and appropriate time that GOM decides to refund this legitimate amount to BSNL.

D) Exemption from payment to USO fund contribution and license fee.

Universal Service Obligation Fund (USO Fund) was constituted for expansion and development of the Telecom services and infrastructure in the Rural areas alone. BSNL is the only operator having invested thousands of Crores in the Rural and remotest parts of the country and is maintaining the rural network with incredible operational losses. Almost 100% of land line connections in rural and remote areas are provided by BSNL with huge capital investments and recurring losses. Even after this, BSNL is forced to contribute towards USO Fund to the tune of thousands of Crores per year. Considering the fact that BSNL is alone meeting the social obligations of the Govt’s telecom policy and providing 100% landline connections in the rural areas, BSNL should be exempted from paying contributions towards USO Fund of Rs 1750 per annum, as USO fund is constituted for expansion and development of the rural areas.

NTP’99 exempts recovery of license fee from BSNL (then DoT) in respect of its fixed line services. BSNL has been paying the license fee in respect of basic services and cellular services also. Further it is facing the recurring financial loss of Rs. 1200 crores per annum on the payment of license fee alone contrary to NTP’99 for the Wired Line network in Urban and Rural areas of the country which was created by DOT and was transferred to BSNL along with its liability. The license fee paid by BSNL should be reimbursed and BSNL should be exempted from further payment.
E) Prior involvement of CVC/CAG in finalization of tenders for procurement of equipment for expansion as recommended by Sam Pitroda Committee to defeat derailing of procurement by vested interests, including vendors:
BSNL is a victim of counterproductive legacy followed in Govt. departments for tendering processes. When private operators are complete flexibility to take decisions across the table on procurement issues, BSNL has to be permitted to have total commercial flexibility to procure timely equipments. Chaining BSNL to follow Government time consuming procedures has damned the expansion plans of BSNL for the last several years. Three major tenders for procurement of GSM mobile equipments were forced to be scrap, transmission NMS tender is also scrapped and so on, all at the final stages. When BSNL has to compete with the private operators in a fiercely contested competition, the complex and time consuming procedures it is forced to follow clubbed with an unprofessional and alien management have wrecked havoc on the growth of BSNL.

It is to be noted that from 2004 to 2007, BSNL was competing neck to neck with the private operators, reached very close to the no 1 operator, Bharati Airtel. From 2007 onwards BSNL facing severe capacity crunch and the Govt interference in 2007 forced BSNL to cancel the 45.5 Million tender. Due to the agitation by the employees, BSNL was permitted to procure 23 million lines, just 50% equipments through that tender. Subsequent 93 Million tender and other two tenders for mobile expansions were also cancelled. The reduction of 45.5 M tender by 50%, cancellation of the next three tenders in a row made BSNL limping due to capacity crunch from 2007 till date. During the last six years from 2007 onwards, the country witnessed huge growth in the mobile sector, the crucial period in which BSNL facing capacity crunch and shortage of mobile equipments to expand and grow. If BSNL was allowed to procure the GSM mobile equipments as per its plan in 2007 and subsequent years, the success story of BSNL would have been something else.

Learning lessons from the past experience, a suitable and expeditious mechanism should be therefore evolved to finalise the procurements and tenders in BSNL involving all the agencies like CVC, CAG etc. as recommended by Sam Pitroda Committee.
F) Refunding Interest on notional loan of Rs 7500 Crores:
At the time of Corporatization, a notional loan of Rs 7500/- Crores was shown against BSNL, which has never paid and thereafter BSNL is forced to pay interest @ 14.5% per annum on this notional loan. So far BSNL has paid more than 12,000 Crores as interest alone on notional loan of Rs 7500 crores. BSNL was ready to repay the entire amount when it had cash reserves but was not permitted by the Govt. This notional loan must be waived off and whatever interest BSNL has paid on this notional loan must be refunded to BSNL.
G) Exemption for BSNL from payment towards additional spectrum.

BSNL having met the basic objective of telecom policy – affordable services of universal quality in an outstanding manner – there is very strong justification in exempting BSNL from onetime payment towards spectrum it is holding in excess of 4.2 mhz. BSNL will come under huge market liability if it is forced to make this onetime payment by borrowing from financial institutions and will come under huge debt. This will eventually cripple the growth of BSNL. GOM has to make realistic assessment relating to ability of BSNL to pay when it is under such severe financial strain. Thus, in recognition of unprecedented contribution of BSNL in expansion and maintenance of incredibly loss making rural operations, exempting BSNL from payment of spectrum charges it holds in excess of 4.2 mhz is irrefutably warranted.

H) Pension contribution on actual basic pay, not on the maximum of the pay scale.
Government stands committed to pay pension to BSNL absorbed employee from erstwhile DOT under the provisions stipulated in Rule-37 A. In fact, this special dispensation of pension under rule 37A vis-à-vis provisions contained in CCS Pension Rules 1972 constituted the cornerstone of the process that facilitated expeditious and smooth absorption. As per the DOP&T OM dated 15th May, 2000, based on the decision of the government on the recommendations of the 5th CPC, pension contribution payable w.e.f 01.01.1996 in respect of employees on foreign service/deputation was based on the maximum of the pay scale. Accordingly, BSNL has been paying pension contribution to DOT for the absorbed w.e.f 01.10.2000 on maximum of pay scale.

However, based on the recommendations of 6th CPC on pay revision of the Central Govt employees w.e.f 01.01.2006, the government, vide DOP&T Order No. 2/34/2008-Estt. (Pay II) dated 19.11.2009 and in supersession of its earlier order dated 15th May, 2000, modified its earlier order relating to pension contribution payable w.e.f 01.01.2006 in respect of employees on foreign service/ deputation, linking it to actual basic pay, and not on the maximum of the pay scale. The premise of Rule 37A is that its provisions will have complete parity with the provisions of CCS Pension Rules 1972 in all respects. Any distortion of Rule 37A vis-à-vis CCS Pension Rules 1972 is a clear breach of trust and understanding on which Rule 37A is carved out and on the basis of which about three lakh employees got absorbed in BSNL from DOT. Payment of Pension contribution by Government departments in terms of order of DOP&T is a corollary of 1972 Pension Rules and payment of pension contribution by BSNL has also be just in accordance to the said order. Forcing BSNL to pay pension contribution at maximum of pay scale is in direct contravention of Rule 37A seen and interpreted in the context of CCS pension Rules1972. BSNL has already paid about Rs 1,800 crores since 2007 (300 Crores per year) in excess of what it is to legitimately pay as pension contribution in terms of order of DOP&T derived from CCS Pension Rules1972. The existing DOP&T OM dated 19.11.2009 in letter and spirit to be implemented so that BSNL also pays pension contribution on actual basic and an ailing strategic telecom company of the Govt. is not subject to discrimination and unnecessarily overtaxed to jeopardize its growth.

I) Compensation for Telegraph services.
BSNL is maintaining the Telegraph services just to meet the social obligations of the Govt, especially the armed forces and incurring huge losses to the tune of Rs 500 crores per year. This is not properly assessed and reimbursed to BSNL. The expenditure incurred by BSNL during the past years has to be assessed and accumulated losses must be reimbursed to BSNL.
J) Compensation for Cable damage for the work executed by Govt agencies:
Large scale road widening and expansion works are going on throughout the country by different agencies like NHAI, Metro etc. During the expansion work, huge quantity of local and optical fibre cables are damaged but proper compensation is not given to BSNL for the restoration and repairing of the damaged cables. Further the local authorities and different agencies are not permitting BSNL to lay the cable to the newly developing areas. Appropriate and proper policy commitments should therefore be put in place to adequately compensate BSNL for the massive damages caused to its network by different Govt. agencies and free Right of Way (ROW) may be stipulated in policy for BSNL.

  1. Providing services to Central / State Govts, CPSUs, banks etc:

Considering the huge losses incurred by BSNL in meeting the social obligations of the Govt, as in the case of Air India, Govt should direct all Central and State Govt departments, PSUs and public sector Banks to take all telecom services from BSNL since it is the only operator having all Telecom services like landline with broadband, 2G services, 3G services (both data and voice), wireless broadband, data services, leased line circuits, MPLS VPN services, CDMA services etc etc. BSNL is having huge optical fibre network, abundant bandwidth to meet all requirements. This will also definitely meet the Govt requirements on security considerations.

L) Merger of BSNL and MTNL.
Business Capital Mumbai and National capital Delhi, the two lucrative business markets are served by MTNL. Remaining parts of the country are served by BSNL. Since all the business and Administrative headquarters are located in the twin metros served by MTNL and all other units and branches scattered throughout the country are served by BSNL, it will be a good business case to merge both the CPSUs. This will enable single CPSU entity of the Govt. to provide all type of telecom services on Pan India basis as demanded and needed by the Corporate houses, Railways, banks, Govt agencies and other business establishments.
M) Transfer of assets from erstwhile DOT to BSNL and making land bank for commercial utilization as recommended by Sam Pitroda Committee.
The assets transferred to BSNL on 01.10.2000 by Govt. are not yet transferred in the name of BSNL despite the fact that BSNL is maintaining the assets for the last 13 years and even paying taxes for the same. Sam Pitroda Committee recommended completing the transfer of the land and other assets in the name of BSNL and creating a land bank for its commercial utilization which makes a strong business case for BSNL for its revival. This process of actual transfer of assets from to BSNL and their optimal commercial utilization must be completed in a time bound manner.

We are confident that our considered views enunciated above would be given due and serious considerations in the course of deliberations on crucial issue of revival of BSNL.

With kind regards,

Sincerely Yours,

(K. Sebastin)

Copy to:

  1. Sri. Manmohan Singh Ji, Hon’ble PM, for kind information and n/a please.

  2. Sri Kapil Sibal, Hon MOC&IT, Govt of India for information and n/a please.

  3. Sri Anand Sharma, Hon Minister for commerce and industry for information and n/a please.

  4. Sri Montek Singh Aluwalia, Deputy Chairman, Planning Commission, for information and n/a pl.

  5. Sri Manish Tiwari, Hon Minister for Information and Broadcasting for information and n/a pl.

  6. Sri V Narayana Swamy, MOS, for personnel, public grievance and pensions for info and n/a pl.

  7. Sri. M. F. Farooqui, Secretary/DoT for information and necessary action please.

  8. Ms Rita Teaotia, Addl secretary/DOT for information and necessary action please.

  9. Sri R. K. Upadhyay, CMD, BSNL for information and necessary action please.

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