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BSNL, ITS, DoT, Telecom Commission -- Making telephony competitive

T. H. Chowdary

THE TELECOMMUNICATION operations of the Government are finally being corporatised, effective October 1. The process began with the separation of telecommunication operations from postal services at the state level in 1974. The next step was the total separation of the telecoms at the national level from the Posts, and the creation of two separate departments -- Posts (DoP) and Telecoms (DoT) with separate boards and members on January 1, 1985, by the forward-looking Prime Minister, Rajiv Gandhi.

Rajiv Gandhi wanted the separation to be followed by the telecoms' corporatisation. The idea was to end the subsidies the telecoms were giving to the Posts and make the former a commercial enterprise. Top DoT officers and members of the Indian Telecom Se rvices (ITS) welcomed the separation, but not the corporatisation idea. The Prime Minister gave them an ultimatum, ``Either begin corporatisation or else...'' Hence, the birth of the VSNL and MTNL on April 1, 1986. While the VSNL welcomed the corporatisa tion and built the organisation into an enterprise, the MTNL was from the start an anaemic and toothless undertaking, with the Chairman of the Telecom Board himself becoming the Chairman of the Board of Directors and inducting his underlings into the boa rd and the DoT.

The MTNL was called ``experimental''. The DoT administered it, posting and transferring MTNL officers at will. Not until Mr Sam Pitroda took over the telecoms, did the DoT Secretary cease to be MTNL's chairman. Periodically reminded about the corporatisa tion of the rest of DoT's operations, the DoT appointed the (Hiregange) committee which reported that the MTNL performed no better than the rest of it, necessitating no further corporatisation! When the MTNL was created, the Cabinet was willing to give t he MTNL a tax holiday, but the DoT Secretary never sent up this proposal. He argued that corporatisation meant the diversion of telecom surpluses, by way of income tax on its profits and, thus, less development. This hindered further corporatisation. Bei ng part-department and part-corporation was leading to staff unrest. The MTNL staff demanded corporation pay scales, which the DoT refused.

In 1990, the Government appointed the Atreya Committee to study the re-structuring of telecoms. It recommended that telecom operations be immediately constituted into four regional operating companies with an all-India long-distance company holding the f our as subsidiaries. This was rejected by the ITS officers, who controlled the Telecom Commission following Mr Pitroda's exit. That was more than 10 years ago.

The liberalisation of the economy since 1991 also affected the telecoms. Private sector companies (P-Telcos) came into cellular mobile radio telephony and later into basic telephony as well. The latter meant stiff competition for the P-Telcos and DoT. Th e most important measure towards competition on a level-playing field is the corporatisation of the Government's telecom operations effective October 1.

Strange, but not unprecedented, is the attitude of DoT's civil service officials. The opposition from unionised employees, led by parties committed to dogmatic ideologies and opposed to hard work and delivering service to customers, is not surprising. Wh at is interesting are the strange demands from the highest level of offices in the DoT. Here are some:

*If the Ministry officials are not to lord over the company, the company's board of directors and managers should resist such authority without responsibility and accountability. The public and the subscribers would be on the BSNL's side if it was weakened by the Ministry in any manner.

*There are many examples of former government departments converted into state-owned enterprises and then privatised, doing well under competition. These are British Telecom, Korea Telecom, France Telecom, Teia, Deutsche Telekom and Telstra. BSNL could join their ranks under enterprising and able leadership.

If BSNL is required by national policy to invest in unremunerative segments such as rural telephony, it should work out the deficits in a scientific manner and require the Government to make those good. No sensible government would refuse to do so. In fa ct, former government-owned companies, such as British Telecom, consider it a privilege to undertake public service obligations to enhance brand image. Also, it would cost the Government less if these obligations are borne by the BSNL rather than the P-T elco dwarfs.

*As long as BSNL remains a government-owned company, it would be justified in seeking an income-tax exemption for, say, three-five years, a request the Indian Government was prepared to accept in 1986 when the MTNL was created. The tax liability saved could be ploughed into rural telephony. The Government would be wise, as it was in the late 1990s, to allow tax exemptions to all P-Telcos on their rural investments.

*The Government was generous to BSNL. When MTNL was created, its assets were valued at Rs 1,200 crore -- Rs 600 crore was the Government's equity and Rs 600 crore the interest-bearing (14 per cent) loan. Most of the Rs 1,200 crore was the DoT' s internal surplus. The interest-bearing capital assignable to the MTNL would not have been more than Rs 200 crore. The Government raised the money at about 8 per cent in previous years. In the BSNL's case, it made assets of Rs 68,000 cror e. It put the capital at only Rs 5,000 crore and the loan at Rs 5,000 crore. It is most likely that this is part of the loans DoT raised through MTNL to augment investible funds.

*Now that the BSNL is on us, the nation's efforts should be geared to make it a true enterprise, nourishing internal talents, inviting foreign talents in scientific, cost accounting, financial, economic and management areas. The board of directors, in addition to DoT officers, include outstanding talent from outside the government. They should be men of integrity, ready to resist back-seat management by Ministry officials.

*The DoT should be distinct from BSNL, VSNL, TCIL and HTL, the PSUs. All enterprises engaged in telecom equipment production and services must be nurtured by it. Public and private enterprises should be treated as national resources and should car e for the consumer's welfare. The DoT, Ministry of Information Technology and Ministry of Information and Broadcasting should together make India an IT superpower.

The Government should also reconsider the need for a Telecom Commission. With the corporatisation of telecoms, the latter has no function. Similarly, the huge establishment and numerous positions in the Commission are no longer justified.

(The author is Information Technology Advisor to the Government of Andhra Pradesh.)