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Sale only option for terminally ill MTNL!
With the revival prospect of the State-run Mahanagar Telephone Nigam Limited (MTNL) looking bleak, the Government is mulling sale of the financially distressed public sector telecom firm soon.
A highly-placed Government source told The Pioneer that the MTNL recently submitted a report on its asset and liability to the Prime Minister’s Office (PMO) and suggested that the Government can either go for 100 per cent stake sale or opt for a strategic disinvestment and offload majority share without completely washing its hands off the company. The PMO had recently asked the MTNL to submit its asset and liability reports and the revival plan, if any.
As far as the shareholding pattern of MTNL is concerned, at present the Government holds majority of 57.03 per cent shares, while the rest 42.97 per cent is held by public holdings, including domestic financial institutions (DFIs) such as insurance companies, banks, individuals and others. The move comes at a time when NITI Aayog, which has been tasked by the Government to identify companies for disinvestment, has made a case for strategic sale in 44 public sector companies.
However, the source said that Principal Secretary to the Prime Minister expressed unhappiness over the presentation made last week of August by the MTNL’s current acting chief, PK Purwar, Director (Finance) of MTNL, who is now CMD-in-charge of the company. In turn, the Principal Secretary asked the firm to submit its asset and liability reports to take it forward with a possible selling proposition. Later, within two weeks MTNL submitted it accordingly with a possible revival option.
On August 26, chiefs of some public sector units, including MTNL and BSNL, met at the PMO to present the current financial status of their respective units. They were asked by the PMO to give the presentation on possible options to revive the sick or loss-making units which can be taken forward with the Centre for its future course of action.
“Concerned with the poor show of the company, the PMO expressed its discontent over the productivity, saying that the MTNL has over around 46,000 employees working in Delhi, Mumbai and abroad and the average age of employees is over 55 years of age which is not a productive age for the company. The revival at this age is not possible,” the source added.
After meeting, sources said, MTNL delegation, including acting CMD, met Telecom Minister Manoj Sinha later in the day in this regard. “They all discussed about the fallout of the crucial meeting with the PMO, while Sinha assured them of possible solution to this problem soon,” it said.
Industry insiders are of view that the Government is not interested in divestment plan at all as MTNL is a sick unit, with persistent loss for years. “The Government always prefers divestment option when the PSU is a profiteering venture. Hence, the selling option is in the offing and now, the ball is in PMO’s court,” they said.
Panicked with the Government’s move, unions have also written to the PMO,
DoT and Telecom Ministry to sort out the matter as soon as possible. As per the Government sources, more than 2,000 tweets on average were received by the Telecom Minister and the PMO for early revival of the company. But it looks bleak as far as the plan of the Government is concerned. “Sending a tough message, the PMO also said that it could only offer administrative support to the PSU but not the financial support if some revival plan happens in the future,” the source added.
MTNL, which operates in Delhi and Mumbai and in the island nation of Mauritius, has around 46,000 employees, out of which 26,000 will be retiring in the next 8-10 years.
The inter-ministerial Telecom Commission had also proposed voluntary retirement scheme (VRS) for the MTNL employees who are 50 years of age and above. When contacted on the VRS spend, an MTNL official said on condition of anonymity, “Employee cost for MTNL is about 80 per cent of its revenues against an industry average of 3-4 per cent. The Government would spend around Rs 2,000 crore in all for VRS and can save around Rs 500-700 crore in a year.”
As development is the main agenda of the Narendra Modi Government, it has always backed strategic sale, focussing only on key sectors and leave the non-core areas for the private sector. In doing so, it has gone back to the Atal Bihari Vajpayee Government’s policy, which saw the Government sell such sick firms such as IPCL, VSNL, Modern Foods and Balco to private players.
As far as divestment plan is concerned, the Modi-led Government targetted to collect Rs 56,500 crore through disinvestment in PSUs in FY17, according to the Union Budget 2016-17. Of the total budgeted proceeds, Rs 36,000 crore is estimated to come from minority stake sale in PSUs, the remaining Rs 20,500 crore from strategic sale in both profit- and loss-making companies. In 2015-16, the Government was able to meet less than half of the disinvestment estimates at Rs 25,312 crore, against the target of Rs 69,500 crore. It had targeted Rs 28,500 crore from strategic sales, but nothing came as per its expectation.
To add the woes the MTNL’s net losses widened in the April-June quarter too. As per a regulatory filing it said on Tuesday that MTNL posted loss at Rs 718.02 crore in first quarter this financial year. The company posted a net loss of Rs 734.24 crore during the corresponding quarter in 2015-16. The total income of the company for the April-June quarter was at Rs 744.72 crore, which is slightly less than Rs 780.12 crore clocked during the same period a year ago.
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