Modi Cabinet approves BSNL, MTNL merger, employees to get package

In a major move, Modi Cabinet has approved the merger of BNSL and MTNL today. Interestingly, employees will be given a package that includes raising sovereign bonds, monetizing assets and voluntary retirement schemes (VRS). The decision has been taken to revive these loss-making telecom PSUs. The revival package for BSNL and MTNL includes raising of Rs 15,000 crore sovereign bonds and monetizing Rs 38,000 crore of assets in the next four years.

There are around 1.76 lakh employees in BSNL across India, while MTNL has a strength of as many as 22,000 employees in the country. The employee cost of BSNL and MTLNL is 75% and 87% of their total income respectively.

"BSNL has a lot of strength. Today`s cabinet decision will have a positive impact on the sector and on BSNL and MTNL. Once they get the 4G spectrum, they will be able to fight... But BSNL also will have to see its efficiency goes up. They have to monetise all their assets, not just the land. The only chance that BSNL has to be a pan-India player is it has to merge with MTNL.. They stand a fighting chance now with 4G spectrum, VRS, asset monetisation and merger," former Telecom Secretary Aruna Sundararajan, who was in the thick of action when BSNL-MTNL revival plans were discussed, told IANS.

Major decisions

1. Telecom Minister Ravi Shankar Prasad said at the briefing that BSNL and MTNL will raise a sovereign bond of Rs 15,000 crore for their revival and assets of both the PSUs worth Rs 38,000 crore will be monetized.

2. The Cabinet also approved a special VRS package for the employees.

3. Significantly, government has also approved the allocation of the 4G spectrum on an administrative allocation basis, which will be done at 2016 prices.

4. The Cabinet has also given an in-principle nod to the merger of BSNL and MTNL and till modalities are in place, MTNL will be a subsidiary of BSNL.

MTNL mainly operates in Delhi and Mumbai while BSNL operates in the rest of India. The state-owned operators BSNL and MTNL had 2.15 lakh and 6,701 subscribers exiting their networks in August respectively. Meanwhile, pending the merger; the MTNL will act as a subsidiary of BSNL till completion of the merger. 

"There will be administrative allotment of spectrum for 4G services to BSNL and MTNL to enable these PSUs to provide broadband and other data services. The spectrum will be funded by the Government of India through capital infusion in these PSUs at a value of Rs 20,140 crore and in addition, the GST amount of Rs 3,674 crore to this spectrum value will also be borne by the Government of India through budgetary resources. By using this spectrum allotment, BSNL and MTNL will be able to deliver 4G services, compete in the market and provide high speed data using their vast network including in rural areas," an official statement said.

"BSNL and MTNL will also offer Voluntary Retirement to their employees, aged 50 years and above through attractive Voluntary Retirement Scheme (VRS), the cost of which will be borne by the Government of India through budgetary support. The ex-gratia component of VRS will require Rs 17,169 crore in addition, GoI will be meeting the cost towards Pension, Gratuity and Commutation. Details of the scheme will be finalised by BSNL/MTNL," the statement said.