16/03/2019 2:26 PM IST

BSNL, HAL, Air India: Has The Modi Govt Pushed PSUs Into More Trouble?

Both BSNL and MTNL have defaulted on salaries of its employees, who believe that the government should have supported these entities.

NurPhoto via Getty Images

After news broke that government-owned telecom firmsBharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) had defaulted on paying their employees’ salaries for the month of February, an image began circulating on social media pages and WhatsApp groups.

It was merely a collage of headlines from various news reports about cash-strapped PSUs defaulting on or delaying their employees’ salaries in various months, juxtaposed with a headline from anNDTV story about theBharatiya Janata Party (BJP) spending more than Rs 122 crore to contest the Karnataka assembly elections last year.

Like many other political memes and jokes that will float into our inboxes in the run-up to elections, this one is also a mix of truth and exaggeration (distinct, of course, from outright fake news)—the amount the BJP spends on advertisements and elections is certainly a matter of concern, especially considering the opaque nature ofpolitical funding in India, but that does not mean this is directly correlated to the sorry state of Indian PSUs.

A collage of headlines from various news reports about cash-strapped PSUs defaulting on or delaying their employees’ salaries.

But even a cursoryGoogle search will show that there has, indeed, been an upsurge in the number of news reports on cash-strapped PSUs having to hold back employee wages. Even with the emergence of leaner, richer rivals, a government job is much in demand in India for the benefits and stability it provides.

And while the Narendra Modi government had promised to launch schemes that would provide crores of jobs to young Indians, thenumbers show that India is facing ajobs crisis.

Kris Lakshmikanth, CMD, The Head Hunters India, a CXO-level hiring firm, was quoted as saying byFirstpost that one of the reasons for the cash crunch is the various welfare schemes that the Modi government has announced in the interim budget. “To fund these schemes the government needs money from PSUs and this is impacting their finances,” he said.


Reports say that the government has now released pending dues of Rs 171 crore to MTNL. Meanwhile, BSNL also said that it cleared salary dues on Friday from its internal accruals.

BSNL Chairman and Managing Director Anupam Shrivastava had said on Thursday that the telco was using internal accruals of Rs 850 crore to clear the February salary.

But employees point out that the situation should never have arisen in the first place.

“This is a joke,” K Jayprakash, General Secretary, National Union of BSNL Workers, told HuffPost India. “This is a government corporation and this should be financially supported by the Government of India and the Department of Telecom,” he added.

In 2016, then telecom ministerRavi Shankar Prasad had said in theLok Sabha that BSNL was suffering from a loss of Rs 8,000 crore when NDA took charge in 2014.

Prasad had also said that BSNL expects to be profitable in four years and has started registering a rise in income from services.

However, numbers suggest that the situation has hardly improved in 2018. According tofinancial data shared by the government, BSNL’s annual loss was Rs 7,992 crore for the fiscal year ended March 2018. It widened from a loss of Rs 4,793 crore in 2016-17.

DoT, according to PTI, had also emphasised in February this year that the government recognises the inherent strength and strategic position of BSNL in the telecom sector in the country.

Despite the government’s acknowledgement of the importance of BSNL and thepromise of a revival, things look bleak for the company.

Jayprakash alleged that the government is only supporting private operators, including billionaire Mukesh Ambani’sReliance Jio, and not supporting BSNL at all. This is the first time BSNL has delayed salaries of its 1.7 lakh employees.

Both BSNL and MTNL are facing stiff competition from private operators. Economist Vivek Kaul, writing forFirstpost, said BSNL used to make a lot of money and in 2004-05, the company made a profit of Rs 10,183 crore.

After that, he explained, the company’s main business model of landline phones went for a toss. Apart from the competition from private operators, both BSNL and MTNL have been ailing due to decisions taken by the government in the past, including transfer of almost three lakh DoT employees to BSNL at the time of its formation in 2000.

The revenue to wage ratio for BSNL is 60-70%, according toPTI. Overstaffing is a major problem with the PSUs. Even with the change in technology, the headcount is on the higher side compared to private telecom players who have about 25,000-30,000 employees, according to aDNA article.

BSNL, which has the lowest debt of Rs 14,000 crore among all telecom operators, has been trying to roll out 4G services across India through equity infusion of Rs 7,000 crore to help it compete in the market.

Jayprakash said when private operators are now offering 4G services to customers, BSNL is still in the 3G era.

“Who will come to us?” he asked.


Meanwhile,Hindustan Aeronautics Limited, currently in the eye of a storm thanks to the Rafale back-and-forth between Congress and BJP politicians, is in no better position.Reports from January said that the defence PSU had toborrow Rs 1,000 crore to pay its employees for the first time in 20 years.

The major reason for the trouble was the dues owed by its largest customer, the Indian Air Force (IAF), according toThe Times of India. HAL’s business is dependent on Ministry of Defence, which has to allot budget to the armed forces, which in turn pay HAL, the report added.

The Hindu reported that two other factors also led to the cash crisis — HAL paid a total of ₹11,500 crore to the government over two occasions in the past five years, as dividends and to buy back its shares.

HAL Director (Finance) Ananth Krishnan, however, toldIANS in February that the company’s financial condition was stable and said that the cash flows were affected “as receivables were delayed from our customers, namely IAF and Army.”

The company has also been suffering because the NDA government scrapped two of its crucial projects, according toThe Economic Times. These include the co-development of the fifth generation fighter (FGFA) with Russia and the licensed production of medium multi-role combat aircraft, in this case, a contract to make 108Rafale jets, the report added.

HAL, according toMint, is also beset by executive delays. High inventories and stretched working capital cycle are also causing a strain on the company’s earnings quality.

Air India

National carrierAir India defaulted on salary payments for the second consecutive month, missing the December payday, according toPTI.

The national carrier is staying afloat on a Rs 30,0231 crore bailout package extended by the previous UPA government. The 10-year financial succor began in 2012.

While the UPA government was criticised for letting Air India remain a big drain on the taxpayers’ money, BJP government has also not yet been successful in reviving the national carrier or selling it off.

The NDA government had initially planned to offload 76% equity share capital of the national carrier as well as transfer the management control to private players,PTI had said. The buyer was required to take over Rs 24,000 crore debt of the carrier along with over Rs 8,000 crore of liabilities.

It, however, did not attract any bidders. According toLivemint, the sale proposal had left out several crucial details of the deal. The details, including employee protection, were to be disclosed later.

The government has now chalked out another plan for Air India and will initiate the process of strategic disinvestment in the second half of 2019-20.

(With PTI inputs)