August8 , 2022

Explained: Three reasons why a revival package for BSNL was cleared

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The government Wednesday cleared a Rs 1.64 lakh crore booster shot for state-owned loss-making telecom company Bharat Sanchar Nigam Ltd (BSNL), with an aim to upgrade the operator’s network to 4G while de-stressing its balance sheet. The four-year turnaround plan includes both a cash component and a non-cash component.

What are the key aspects of BSNL’s revival package?

The package has three main focus areas. The government will focus on upgrading BSNL services, wherein the company will be administratively allocated spectrum in the 900 MHz and 1800 MHz frequencies at the cost of Rs 44,993 crore through equity infusion. The government will fund capital expenditure of Rs 22,471 crore for deployment of indigenous 4G stack by the operator, while also providing Rs 13,789 crore as viability gap funding for operating commercially unviable rural wireline operations done between FY15 and FY20.

How does the government plan to de-stress BSNL’s balance sheet?

The telecom department said the Centre will provide sovereign guarantee to BSNL and MTNL for raising long-term loans. They will be able to raise long-term bonds for an amount of Rs 40,399 crore.

To further improve the balance sheet, AGR dues of BSNL amounting to Rs 33,404 crore will be settled by conversion into equity, and the government will provide funds to BSNL for settling the AGR/GST dues.

Further, BSNL will re-issue preference share of Rs 7,500 crore to the government.

In addition to these measures, the Cabinet has also approved BSNL’s merger with Bharat Broadband Nigam Ltd — the nodal agency for BharatNet rollout — that will augment BSNL’s finer network.

Why has the government decided to infuse money into a loss-making company?

While the move to further support BSNL and not monetise it like Air India is in deviation from the government’s laid down privatisation policy, the case to keep the telecom company afloat has its genesis in three main strategies of the government.

One, with BSNL, the government is able to push forward with its rural broadband agenda. Nearly 36 per cent of BSNL’s optical fibre customers are in rural areas, and the operator assists the government in expanding to far-flung areas with low-income consumers for operations that are typically non-viable commercially.

Two, unlike private telecom operators, BSNL has had a heavy dependence on domestic component manufacturers — something that also helps foster a vendor base in the country. With BSNL launching 4G services and subsequently 5G, this will also take the domestic component industry along with it.

Lastly, the presence of BSNL’s network assets in border areas and left-wing extremism affected areas means that the government considers it a strategically important company for it to be privatised.

What could be the impact of a revival package?

With these measures, the Centre expects that BSNL will be able to improve the quality of existing services, roll out 4G services, and become financially viable. It also expects that with the implementation of this revival plan, BSNL will turn-around and earn profit in 2026-27 (April-March).

This is the second major revival package by the government after it had announced a Rs 70,000 crore package in 2019 that was mainly to fund BSNL and MTNL’s voluntary retirement scheme.



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