While all eyes are on the first Union Budget of the second stint of Prime Minister Narendra Modi to be presented by first-time Finance Minister Narendra Modi, the government seems to have set the tone for its divestment agenda. The government has refused to infuse more funds into the struggling telecom giant Bharat Sanchar Nigam Limited (BSNL) although the company has sought urgent release of more operational funds, media reports say. The public sector company has outstanding liabilities to the tune of Rs 13,000 crores and cannot find the money to pay the June salary to its 1.76 lakh staff, a report in the Times of India says. The total salary payout amounts to Rs 850 crore. The accumulated operating losses of the BSNL is pegged at more than Rs 90,000 crore by the end of December 2018, according to a report by Kotak Institutional Equities.
A top BSNL official recently said in a letter to the telecommunication ministry that the BSNL is unable to bridge the gap between the revenue and expenses. "The gap between monthly revenues and bare expenses to continue operations as a going concern has reached to a level where continuing with the BSNL the operations would be nearly impossible without immediate infusion of adequate equity," Puran Chandra, senior general manager at BSNL's corporate budget and banking division, wrote to the joint secretary in the telecom ministry, the report said.
The letter sent last week adds an air of finality to the fate of the company by seeking the government view on the future and issue directives on "course of action". The February salary to the staff was delayed by about 10 days, but this is the first time the company is facing the prospect of having to borrow to pay the salary.
Industry observers attribute the financial crisis of the BSNL to the raging price war in the sector since the launch of Mukesh Ambani's Reliance Jio. There have been no reports of any government plan to prepare a roadmap for the ailing company nor a decision to close it down citing its 'strategic' importance for the country, the report said.
Top government officials have remained tight-lipped about what could be the BSNL's future although its chairman and managing director Anupam Shrivastava gave a detailed presentation to Prime Minister Modi. The government had almost gone to market with BSNL stake sales in August 2017 during the first stint of the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA). But it found the waters too choppy in the wake of Reliance Jio-triggered price wars and deferred a decision, causing the government to miss its divestment target by a wide margin.
The entire telecom sector is awaiting the Union Budget and any likely tax relief to telecom sector that could bring down the costs and increase profitability. The tariff wars have been so vicious that no major telecom service provider is making a profit and the high cost of the spectrum has continued to erode margins.