New Delhi: State-owned Bharat Sanchar Nigam Ltd (BSNL) wants the government to pay for reducing its employee strength by up to one-third in line with recommendations made by the Sam Pitroda panel to improve performance and make the company more efficient.
BSNL will seek the financial package in a request to the department of telecommunications (DoT), according to a senior BSNL official who spoke on condition of anonymity as he’s not authorized to speak with the media.
The BSNL board will ask for the money to fund a payout equalling four-five years of salary for a voluntary retirement scheme, the official said.
The Pitroda committee wants the company to cut its staffing to 200,000 from 300,000 currently, while the company itself has said that 60,000 workers are due to retire anyway over the next five years.
The money may help blunt the resistance that it expects from worker unions to the employee-reduction plan, according to the board.
The panel was set up after a performance review on 6 January chaired by Prime Minister Manmohan Singh. The committee headed by Sam Pitroda had Deepak Parekh of Housing Development Finance Corp. and telecom secretary P.J. Thomas as its members. The panel submitted its report containing 15 recommendations on 9 February.
The BSNL board considered the recommendations on 10 March and agreed to them in principle after which they were forwarded to DoT. The forwarded suggestions were reviewed by Mint.
The Pitroda panel says the state-owned company needs to bring its staff strength closer to levels comparable with rivals. For instance, market leader Bharti Airtel Ltd has about 24,000 employees.
According to an internal DoT note seen by Mint, BSNL is expected to post a pre-tax loss of Rs2,612 crore on revenue of Rs32,966 crore for the fiscal 2010. In the year before, BSNL had posted a profit of Rs575 crore on sales of Rs35,812 crore.
The loss comes in a year when BSNL got Rs2,600 crore from the universal obligation fund to subsidize the landline business in rural areas and Rs3,080 crore as interest from surplus cash.
As per the note, BSNL’s employee cost has almost doubled from Rs7,309 crore in 2006-07 to an estimated Rs13,967 crore in 2009-10, while the customer base has risen to 90 million (including 28 million fixed-line and 62 million mobile subscribers) from 65.7 million in 2006-07.
Costs also rose because of a revision in salary, effective April 2007, that adds up to Rs4,000 crore. The arrears up to March 2010 have yet to be included in the balance sheet.
Pitroda has also suggested that the government divest a 30% stake in BSNL and that the top management be completely restructured. Another suggestion calls for the creation of two subsidiaries—one for BSNL’s tower infrastructure and another to monetise an estimated 2.5 million sq. m of vacant real estate in seven major cities.
“They have faced significant interference from the government and there is a serious lack of accountability leading to a lot of waste of resources. If the Pitroda committee recommendations are followed then they could become a viable firm again. But it may be a case of too little too late,” said a regulatory expert with a Delhi-based consulting firm, asking not to be named. He was sceptical about the implementation of the recommendations because of union opposition.
Late last year, the state-owned operator implemented the suggestions of management consulting firm Boston Consulting Group (BCG) to improve operational efficiencies. BCG had made two key recommendations—improve the sales and distribution network and turn the towers business off into a subsidiary. The telco was also asked to divide its businesses into different verticals with individuals who reported to the chairman and managing director.
“BSNL has been able to restructure its management into the suggested strategic business units and moved much of its redundant engineering staff to strengthen its distribution network. But it has been unable to get the tower subsidiary moving as yet,” the BSNL executive said.