Three Revival Packages for BSNL: End of the Road for Minimum Government?

BSNL is now a zombie public enterprise, a perfect example of why the government should not be in business.

Image used for representation only. 

(Image: PTI)

Acting by the adage ‘government has no business to be in business’, the Modi Government adopted strategic disinvestment as a principal policy in 2015. It was also perfectly in line with the mantra of ‘minimum government maximum governance’, eloquently articulated by the Prime Minister himself repeatedly.

BSNL is in the business of providing telecom services. BSNL has only a small share and its quality of services is nothing to write home about. It has also been bleeding out for long, almost always being one of the top loss-making public sector enterprises. It has been, like Air India, a perfect candidate for government to exit from – by privatising or shutting down.

Yet, the Government has not only steadfastly held on to this appalling business, but has instead provided three ‘revival’ packages costing over Rs 3 lakh crore in the last four years. These revival packages have miserably failed. The government has only lost its fiscal shirt in the process. BSNL continues to slide into the abyss.

In addition to the BSNL, the government’s larger privatisation programme is also seemingly stalled. Is the policy of ‘minimum government maximum governance’ dead?

Maximum Package, Minimum Revival

Take a look at the three revival packages so far.

The three revival packages. 

Image: Aroop Mishra 

The government approved the third revival package for BSNL with a total outlay of Rs 89,047 crores recently on 7 June 2023. The first package was approved three and a half years back on 23 October 2019 for Rs 69,000 crore. The second package for Rs 1,64,000 crore was approved less than a year back on 27 July 2022.

The three revival packages aggregated to a whopping Rs 3,22,047 crore, almost equal to 1 per cent of India’s GDP! A maximum government package!

Most of the package cost was in the form of equity and grants from the budget of the central government. As this equity was a sham, the government is ending up spending in excess of all the revenues it receives in the form of spectrum auction prices, license fees, AGR dues, etc. from all the private telecom operators put together. What a fiscal burden!

Yet, BSNL continues to financially bleed.

BSNL revenue for the last five years. 

Image: Aroop Mishra 

BSNL’s revenue was Rs 19,321 crore in 2018-19, the year before the first revival package was granted. BSNL’s revenue fell to Rs 19,053 crore in 2021-22. In 2022-23 also, the revenue was only Rs 20,699 crore. Three years of revival, yet BSNL earns the same revenues as before in absolute terms.

Prior to 2019, private telecom operators were also making humungous losses thanks to the flawed AGR burden. Two of them, with more than two-third of the market share, have returned to making decent profits. BSNL, on the other hand, despite so much injection of equity and grants, continues to make humungous losses. In 2021-22, its net loss was Rs 6,982 crore, which has widened to Rs 8,161 crore in 2022-23.

Losing the Market Share

BSNL has been steadily losing market share in all three segments – wireless, wireline, and broadband.

(In crores)

Image: Aroop Mishra 

(In crores)

Image: Aroop Mishra 

(In crores)

Image: Aroop Mishra 

In March 2019, BSNL had 9.96% of wireless subscribers; in March 2023, it came down to 9.06%. In three years of ‘revival’, BSNL lost more than 1.2 crore subscribers and 10% of its small market share.

For broadband, the biggest growing telecom segment, BSNL is only a bit player in the segment- only 3.92% in March 2019 – has further gone down below 3.0% in March 2023.

Even in the small fixed wireline business segment, BSNL’s bread and butter for years, its market share has come down from 51.6% in March 2019 to only 25% in March 2023. BSNL lost the number one position in the fixed wireline segment in October 2022 and slid down to the number three position in March 2023.

This is no revival by any definition. It is more like pretending the sustenance of a near-dead person by keeping it on a ventilator.

It Will Take Years for BSNL to Set Up a 5G Network

Being a public enterprise, BSNL is subject to governmental policy control even if these policies impede its business.

BSNL was mandated to provide 4G services in the first revival package excluding technology from certain countries. For three and a half years, BSNL, constrained by the requirement of sourcing the network equipment only from indigenous sources, failed to even launch its 4G services.

BSNL could finally place a limited order for the deployment of 1,00,000 4G sites to TCS a few months back. Pilot 4G connections will only be provided in a couple of districts in Tamil Nadu now. BSNL will be entering into 4G when the bus has already left long ago thanks to governmental policy mandate.

In the meantime, the whole system is moving to 5G services.

In the third revival package, the government has subjected BSNL to use India’s own 4G/5G technology stack, developed under the Atmanirbhar programme. If experience is any guide, it will be years before BSNL will be able to set up a 5G network on the indigenously developed technology and start providing services.

Moreover, unable to compete with the private operators on technology and services and saddled largely with unwilling legacy 2G/3G subscribers, it is almost certain that BSNL will not be able to get any subscribers from its private sector competitors.

Being a public sector enterprise, the government has no compunction in throwing public funds to BSNL.

Why the Government Should Not be in Business

All three packages are provided for meeting the cost of spectrum through equity infusion by the government. Ironically, government fiscal managers justify these fiscal expenditures on the argument of it being cash neutral for government- spectrum payments come back to the government from BSNL. In the process, all the rigour of the commercial viability of investment gets thrown to the wind.

The first package provided for administrative allotment of spectrum for 4G services to BSNL and MTNL by capital infusion of Rs 20,140 Cr in addition, along with a GST amount of Rs 3,674 crore. The second package also provided for administrative allotment of spectrum in the 900/1800 MHz band at the cost of Rs 44,993 crore through equity infusion to improve existing services and provide 4G services. The third revival package of Rs. 87,048 crores is exclusively for allotment of the 4G/5G spectrum for BSNL through equity infusion.

More than 1.5 lakh crore of equity would be provided for 4G and 5G spectrum to BSNL. Private operators have to buy this spectrum at a hefty cost. BSNL gets it virtually free of cost and without any accountability. There cannot be a worse case of capital management.

Being a public sector and under the misconceived notion that employing more people is creating employment in the country, BSNL (including its earlier version of a departmental undertaking DoT), employed thousands of unnecessary and wrongly qualified workers. No wonder the first revival package was provided for meeting the entire VRS cost as well. In addition, servicing the debt on the balance sheet, payment of AGR dues, and miscellaneous other expenditures were also provided in the revival package.

Government policy constraints and unprofessional management have not allowed the sale or monetisation of non-core assets.

In the first revival package, it was decided that BSNL will monetise its assets to raise resources for retiring debt, servicing bonds, network upgradation, expansion and meeting the operational fund requirements. BSNL has not been able to monetise any of its assets.

BSNL, like Air India, is a highly misgoverned and maloperated organisation. It is a zombie public enterprise, a perfect example of why the government should not be in business.

(The author is the former Finance and Economic Affairs Secretary, Government of India. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)