BSNL Revival: Govt says will merge MTNL with BSNL

The Union Cabinet has given its nod to a revival plan for BSNL and MTNL that includes the merger of the two companies

New Delhi: The revival of cash-strapped Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telecom Nigam Ltd (MTNL) is official now. The Union Cabinet has given its nod to a revival plan for the two cash-strapped companies on Wednesday that includes the merger of BSNL and MTNL, raising sovereign bonds, monetising assets and voluntary retirement scheme (VRS) for employees.

According to the revival package, after the merger, MTNL will be a subsidiary of BSNL.

What's the revival plan for BSNL, MTNL?

Announcing the revival plan for BSNL and MTNL, Telecom Minister Ravi Shankar Prasad said that the government wants to make the two state-run telecom companies more competitive by pouring in Rs 29,937 crores.

4G spectrum allocation, fund-raising & asset monetisation

The minister said that the government will raise Rs 15,000 crores via sovereign bonds. "Assets worth Rs 38,000 crore will be monetised in four years," the minister said. Conceding to a long-standing demand from BSNL and MTNL, Prasad said that 4G spectrum will be allocated to the telecom companies.

'Govt will offer an attractive VRS scheme for employees'

The minister also announced that the government will offer an attractive voluntary retirement scheme (VRS) package for employees in both the companies. The package will be offered to employees above the age of 53 and half. Those who opt for VRS will be given 125 percent remuneration of the salary, pension and gratuity till the age of 60, the minister said.

The backdrop

BSNL has over 1.70 lakh employees and almost half of them are set to retire over the next five to six years. The two PSUs spend a big chunk of their revenues on employee cost — BSNL spends 75.06 percent and that of MTNL is 87.15 percent of their total income. The corresponding figures for BSNL's and MTNL's private competitors vary between 2.9 to 5 percent.

The news comes a week after PSU Watch reported that sources have said that a group of ministers has been formed, headed by Union Home Minister Amit Shah, to consider the revival of BSNL and MTNL. The GoM has approved a revival plan proposed by the Department of Telecom (DoT).