Where to use?

Prelims: Threats to Key Infrastructure (BSNL telecommunications).

Mains: Telecom sector of India or Government-owned telecommunications and its quality services, usage, advantages and limitations.

GS Paper 3: Economics || Changes in industrial policy, Infrastructure, Investment

Why in news?

Recently,  Union Cabinet approved a ₹1.64 lakh crore revival package for BSNL with a cash component of ₹43,964 crores.

BSNL: Storyline

  • The Bharat Sanchar Nigam Ltd. (BSNL) was incorporated in September 2000 as a company to take over the business of delivering telephone connectivity from the central government’s Department of Telecom Services. 
  • Its functions were meant to service the entire country excluding New Delhi and Mumbai where MTNL or Mahanagar Telephone Nigam Ltd would operate.

The government plan for recapitalisation

  • The non-cash component of ₹1.2 lakh crore, spread over four years, will include administrative allocation of 4G spectrum worth ₹44,993 crores. 
  • Capex aid of ₹22,471 crores over the successive four years to “boost development and deployment of Atmanirbhar 4G stack.”
  • Viability gap funding of ₹13,789 crores for commercially unviable rural wireline operations done from 2014-­15 to 2019­-20, debt structuring by raising of bonds with sovereign guarantee worth ₹40,399 crores and financial support for AGR (Adjusted Gross Revenue) dues worth ₹33,404 crores concluded the package.  
  • Earlier, in 2019, the Cabinet had cleared a package worth close to ₹70,000 crores for the revival of BSNL and MTNL, specifically to fund the Voluntary Retirement Scheme (VRS) package for the two firms.

BSNL’s performance over the last few years

  • BSNL had more than 1.5 lakh employees before the VRS was notified in 2019. 
  • About 78,000 had been involved to exercise the option. Before the VRS, FY20 numbers indicated the loss of ₹15,500 crores and employee costs at a staggering ₹13,600 crores.  
  • As of June 2021, the employee headcount was 64,000. 
  • BSNL spent more than 50% of remuneration on employees in FY16. 
    • That came down in FY21 to 36% but corresponds poorly with, for instance, Bharti Airtel whose numbers showed employee fees at about 4% for both FY21 and FY22.  
  • The government, which stated that the 2019 package helped BSNL stabilise and the latest bailout would help it become feasible, expects BSNL to become profitable in three to four years from now. 
  • Lately, Chairman P.K. Purwar has been quoted as saying that FY22 revenue would be a bit lower than the previous year at ₹17,000 crores. 

What went wrong with BSNL, which was profitable for much of the first decade of this century? 

  • A report by the Standing Committee on Information Technology submitted to Parliament in 2014 under the Demand for Grants quotes a BSNL representative as stating that though private operators started offering mobile services in the late 1990s, BSNL could do so only in 2002. 
  • Despite this, it was among one of the leading mobile service providers in most circles by 2005­-06 when its growth was going on in maximum swing. 
  • The testimony talks of problems to do with the ‘non-­procurement of equipment’ outset at this time. 

What was the issue with procuring equipment? 

  • In March 2020, BSNL floated a tender to procure 4G equipment to help develop its mobile broadband network. 
  • The ₹9,000­ crores contract included the upgradation of 50,000 sites across the country that ‘would position the telecom firm to offer high-­speed Internet key to its users. 
  • The project was noticed as vital for the survival of BSNL as it was already four years behind private enterprises in disclosing 4G services.
  • In April 2020, the Telecom Equipment and Services Export Promotion Council (TEPC) raised objections to the tender being ‘heavily in favour of multinational companies. 
  • The TEPC is an industry association illustrating domestic telecom equipment manufacturers such as Tejas Networks, Sterlite, HFCL, and Vihaan Networks. 
  • They stated that domestic suppliers could not partake in the tender due to stiff conditions, such as the requirement of previous experience in setting up a mobile network for at least 20 million subscribers. 
  • The government asked BSNL to revise the tender, but the question remained why did private operators not face the same objection when they placed orders for equipment with foreign companies?
  • Airtel, for instance, gave its $1­billion 4G equipment contract to Nokia of Finland that year. 
  • While uplifting domestic OE makers was a good idea, why should the entire burden of supporting indigenously developed equipment meant for 4G, and that too which had not been previously tested, fall on BSNL?  
  • By the looks of it, the pattern of BSNL carrying the burden of proving indigenous technology viable on a mass scale may continue. 
  • The government has categorically said that one of the causes BSNL must be funded is to help in the development of indigenous technology.
  • Problems surrounding BSNL’s access to quality equipment seem to be a recurring issue. 
  • In 2008, BSNL came up with an ambitious plan to raise network capacity by 94 million new lines at an investment of $ 10 billion. 
  • This would have made it the world's largest telecom equipment tender at the time. 
  • Allegations of irregularity in the process surfaced and the whole plan was scrapped. 
  • Naturally, BSNL slipped in terms of customer preference. 

 Threat to national security

  • As the government relied on BSNL’s networks during times of external aggression and internal disturbances, the telco should not compromise on the security factor.
  • The communication ministry declared outsourcing the building, management, and maintenance of its networks to global equipment majors may pose a “threat to national security”.
  • A team of officials from the Department of Telecommunications (DoT) Tamil Nadu LSA, BSNL, Chennai Telephones, and Law Enforcement Agencies (LEA) including Tamil Nadu Police jointly raided the suspected house at Kanathur, ECR, Chengalpattu District, and busted an illegal telecom setup on 1st June 2022, based on the inputs provided by DoT, TN LSA and BSNL, Chennai Telephones.

Review the stumbling skillsets

  • The telecom department was also mentioned in the 2014 report by the Standing Committee on IT as saying that BSNL and MTNL are not only troubled with a large number of employees but that the skills of these employees were not fitted for effecting services to mobile and broadband customers.  
  • That is unexpected because, firstly, BSNL had no trouble between 2002 and 2005­-06 in getting to the top in most circles it operated in, as mentioned. 
  • Secondly, the private operators themselves dipped into the cream of BSNL’s manpower to set up or mount up their functions. 
  • Though the private sector did have successful global partners (Airtel­Singapore Telecom, Essar­Hutchison (now Vodafone­Idea), nobody prevented BSNL from getting the best global consultants and know-how for its operations. 

Should profitability be the goal for such an enterprise?

  • The government needs a telecom associate for help in disaster relief, and, for telecom penetration in every cavity and gap of the country as a social commitment. 
  • The private sector cannot be reasonably anticipated to offer services in an area that is not profitable for them.
  • BSNL’s merger with the Bharat Broadband Network (BBNL), whose BharatNet optical fibre network of 5.8 lakh km would make for a blended investment of 14 lakh km of optical fibre, is crucial in socially backward areas where benefits may not be commercially feasible.  
  • But, is it logical to expect the company to turn profitable? 
  • After having failed close to two decades in terms of time to compete, is it even achievable to expect the company to become profitable? 
  • To kick, BSNL is not a pan­-India 4G service provider at a time when more than 98% of the country has 4G coverage. 
  • In fact, the latest package for BSNL was disclosed even as auctions for the 5G spectrum were proceeding.

Way forward

  • With BSNL, the government is capable to push forward with its rural broadband agenda. 
  • Nearly 36% of BSNL’s optical fibre customers are in rural areas, and the operator assists the government in developing far-flung areas with low-income consumers for operations that are normally non-viable commercially.
  • Unlike private telecom operators, BSNL has had a heavy dependence on domestic component manufacturers something that also aids to promote 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 deems it a strategically critical company for it to be privatised.