4G Spectrum, VRS get Cabinet nod, Union Government to bear the cost of VRS

Funding through the capital infusion of over Rs 20,000 Crore and Rs 15,000 Crore Sovereign guarantee for long term bonds

New Delhi: The Union Cabinet today approved the proposal for revival of BSNL and MTNL by administrative allotment of spectrum for 4G services, debt restructuring by raising of bonds with sovereign guarantee, reducing employee costs, monetisation of assets and in-principle approval of the merger of BSNL & MTNL.

The Union Cabinet has granted approval for administrative allotment of 4G spectrum to BSNL and MTNL so as to enable these PSUs to provide broadband and other data services. The 4G Spectrum will be funded by the Government of India by capital infusion in these PSUs at a value of Rs 20,140 Cr in addition; the GST amount of Rs 3,674 Cr to this spectrum value will also be borne by the Government of India through Budgetary resources. By using this spectrum allotment, BSNL and MTNL will be able to deliver 4G services, compete in the market and provide high-speed data using their vast network including in rural areas.

BSNL and MTNL will also raise long-term bonds of Rs 15,000 Cr for which sovereign guarantee will be provided by the Government of India. It’ll help BSNL and MTNL to restructure their existing debt and also partly meet CAPEX, OPEX and other requirements.

The Union Cabinet also granted approval for the Voluntary Retirement to the BNSL and MTNL employees, aged 50 years and above through attractive Voluntary Retirement Scheme (VRS), the cost of which will be borne by the Government of India through budgetary support. The ex-gratia component of VRS will require Rs. 17,169 Cr in addition, GoI will be meeting the cost towards Pension, Gratuity and Commutation. Details of the scheme will be finalised by BSNL/MTNL.

BSNL and MTNL will monetise their assets so as to raise resources for retiring debt, servicing of bonds, network up-gradation, expansion and meeting the operational fund requirements.

It is expected that with the implementation of the revival plan, BSNL and MTNL will be able to compete with the private telecom companies.

BSNL of late failed to give salaries of its employees on time and looking up to the government to bail it out. Both BSNL and MTNL have high revenue-to-wage ratio. BSNL has a headcount of 163,000 while MTNL employs 22,000 workforces.

Union Home Minister Amit Shah lauded the decision and congratulated the Prime Minister for the revival of BSNL and MTNL. He twitted

Meanwhile, former Congress president Rahul Gandhi ridiculed the merger of the BSNL and MTNL. on a social networking site, Gandhi twitted