Wrong number (PSU telecom revival plan is flawed)

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 Wrong number (PSU telecom revival plan is flawed)

Read more on - Polity | Economy | Schemes | S&T | Environment


    • Why have Telecom PSUs: India started MTNL and BSNL due to market failure and employment creation. The govt. didn't trust private parties, and thought it wouldn't build infra in remote regions. In the process, the DoT became the employer of 'first choice' and not just the 'last resort'.
    • Wireless technology: Due to its arrival, the landscape changed totally. Today, "ownership" may not be the best way to achieve govt's objectives. It is better to focus on Law of Contract and independent regulation.
    • TRAI 1997: The Telecom Regulatory Authority of India (TRAI) came in 1997, and private sector entered in a big way. 
      1. BSNL was formed in 2000 for India except for Delhi and Mumbai (where MTNL existed since 1986).
      2. This new PSU worked largely on principles of the parent department.
    • Private versus Public: It's said that for a monopoly, a private one would be abusive, and latter benign. So if all sectors slowly move towards monopolisation (by cartelisation or disruption), then PSUs will be the countervailing power (because they'll never join any cartel).
    • Reasons for keeping PSUs alive: Various reasons are given.
      1. Competition - Initial years saw BSNL become a market leader with 85% share in landlines (17% in mobiles, 25% in internet). It faltered over time, due to poor working culture. Today, its market share is only 10%, and MTNL has only 7% share in two biggest markets of India. So why keep them alive? They are not able to offer any meaningful competition.
      2. Serving rural markets: BSNL's rural market share is down to less than 8% in 2019 now. So it's useless there too. 
      3. Natural calamities: Do we need a PSU only? Regulatory toughness can make private players help adequately during natural calamities.
    • Technology shocks: PSUs cannot survive the rapid changes in technology. Policy had to change from being pro-PSU to neutral, and even anti-PSU! Entry of Jio destroyed all dynamics.
    • Revival plan: The 2019 revival plan is about merging BSNL and MTNL, to unlock synergies. But will it? Manpower costs are 60 to 80% of total costs, and return on capital has been negative. Even measures like land monetisation and VRS etc. may or may not work out.
    • The way out: Since outright shutting down is not possible, merge them, list them on the stock markets, and disinvest later. So "revive to sell" and not "revive to operate".
    • Summary : The telecom PSU revival plan is not a good idea, and 'revive to sell' may be considered.
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                                                                                                                                                        PT's IAS Academy: Wrong number (PSU telecom revival plan is flawed)
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                                                                                                                                                        Excellent study material for all civil services aspirants - begin learning - Kar ke dikhayenge!
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