Corporate Planning & Monitoring Cell'
609, Bharat Sanchar Bhavan, Janpath
New Delhi: 110001
rn rradu ko nefa)bsnl.coin.
BRPSE Matter
TIMEBOUND / URGENT
w& t tln?TTiqriTrrqidRg
;ff^d
iERn* '-nRs Tt ronrq)
s K BHARlt*A"fTl* nl
1g*LgrlM rTEn
No: 1-207/201O/CP&Mi
To,
All BUs Head - Director( CM) / Director( CFA) / Director( Enterprise/) ED (NB)
Director'(HR/) liD (Finance/) IrD (CN)
Sr GM (Regulation)
Dt:0910612011
Sub: F-ollowu p actiono n the recommendatiomn adeb y BRPSEi n its 86tnm eetingh eld on 21.12.2010
ina itr reviewb y DOT on the Action takenr eporti n the meetingh eld in SancharB havano n 25.05.2011
rcgardirrg...
Ref: DOI' filc 10-1 612010-SIt JD ated3 1" May 2011
1. This is with referencet o the review meetingh eld under the chairmanshipo f Member(S)o n
25.05.2011o n the Action taken repofi submittedb y BSNL on the recommendationm ade by
BRPSFI to improve BSNI.'s physical and financial performance in its 86th meeting held on
21.12.2010.
2.
'l'he
Action takenr eporl submittedb y BSNL on the variousr ecommendationms adeb y BRPSEi s
placed at Annex I
3. DO1 vide letteru nderr eferencep laceda t Annexure II hass eekeda dditionali nputso n the Action
-l'aken
reports r-rbmittebdy DOT. The desiredi nputsa longw ith the units who has to providet he
samea rc indicatedb elow
3.1 RecommendationI (Para 2.18.1( i)): - To suggestth e ways throughw hich operationalle vel
synergy between BSNL and MTNL can be achieved, within the present regulatory and legal
liamen'ork" in consultation with MTNL
----Action by: DIR (Enterprise/) Sr GM (Regulation)
3.2 Recommendation No 2 (Para 2.18.1 (ii)): - BSNL may submit business plan as well as
strategyf br sustainableg rowth basedo n SWOT analysisin termso f financialf iguresi .e cost,
expenditurea ndr esultse xpected.
Commentso f CP&M Cell: The projectedr evenuee, xpenditurefr om 2011-12t o 2016-I 7 was
discusseda nd finalizedu ndert he chairmanshipo f CMD in the meetingh eld in the boardr oom
on 03.06.2011in the presenceo f DIR(CFA), DIR(HR), ED(F), ED(CA), Sr GMs/ GMs of
Businessp lanningu nit, BFC&I.
Page I of 2
Respectivep lanning units are now requiredt o provide inputs how the projectedr evenuesw ill
be achicved Action by All BU Heads
3.3 Recommendation No 3 (Para 2.18.1 (iiD) - BSNL may submit details about category wise
identifications of surplus staff as well as broad financial implications of suggested VRS
options. Fufther, steps envisaged to reduce cost of maintenance of infrastructure, results
expectedi n f-rnanciatle rms and the time taken to achieve intendedr esults may also be
indicated. ..Action By: DIR (HR)
3.4 RecommendationN o 4 (Para 2.18 (iv)):- Detailso f Strategica nd Non-Strategica ctivitiesa s
well as non-recoverable cost on strategic activities may be intimated after taking into
considerationth e views of of Administrator( USOF) as communicatedv ide letter No 30-
8/2006-tJSdFa ted2 4-5-1I.
Comments of CP&M Cell: The copy of the letter is placed at Annex III. In addition to
observationo f Administrator( USOF),B SNL for its CAPEX plans2 011-12h asp rojectedB E
of Rs 15 .277C rores.A ll BUs arer equestedto segregatea cho f the proposedp rojecta sp art of
Btr 2011-12in thef brm of strategi&c non-strategaicls o
--Action Bv All BU Heads
4. All concerneda re requestedt o provide point wise inputs on eacho f the abovea ctionablep oints on
top most priority and in any case positively by 1410612011.
Encl: As above
1
f'.t'' i'''l''*'l'o*t* *-: =- -"--:-- '- -""
(R.1,{.PADUKONE)
Pr. General Manager (Corporate Planning & Monitoring)
Copy To:
[] CMD BSNL lbr inlbrmation please
[2] ED(CA) for infbrmationp lease
[2] All Sr GMs / GMs of Planning Units / Finance - Sr GM (BP-Ent) / Sr GM (BP-CM) / Sr GM (BPCF'A)
/ Sr GM (BFC&I) / Sr GM (CNP) / Sr GM (CNO) / Sr GM OJWP-GSM-I)/ Sr GM(NWPCDMA/
Wi-Max) / Sr GM (NWP-BB) / Sr GM 0'{WP-CFA) / Sr GM(Trg) / GM (Corporate
Restructuring/')
Page2 of2
CP&M Cell, BSNL Corporate
-
Office,6tfhl oor, BharatS anchar
Bhawan, Harish Chandra Mathur
Lane, Janpath, New Delhi-110001
rL l a, r , r . l l * . r , { r .
' lJrl I t I t t ^ I t (
j
No 1- 207I BRPSE/2100 -Cp&M
e{Ffiil €?rR
( rTnd {f{*Tr 6t Sqrra)
BHARASTA NCHANRIG AMLI MITED
(A Govl of lndia Enierpnse,
Dt:1910512011
S Follow up action on the Recommendationmsa de by the Board for Reconstructioonf Publics ector Enterprise(B RpsE) in its meetingh eld officialosf DOT with and BSNL on 21.i2.2010
Ref : 1.D IR( PSU-
L) et teNr o 10-16/201O-Is dua ted. t6thM av2 011
2. DtR( psu-r)L etterN o 10-16 r2010-suI d ated1 stM a;rr2011
The point wise action taken / action plannedb y BSNL on the various recommendatiomnsa deb y BRPSEi n its reviewm eetingh eldo n 21.12.2010 givenb elow. are
Recommendatio1n ( para2 .1g( i) :
'.'TheB oards tronglyr ecommends the merger of lTl Ltd. with 8SNL or its takeover
by the BSNL as a separates ubsidiary thereby ensuring strategicv ertical integrations.T his shoutd enable BSNL fo combine seruicep roviding with manufactureo f the productsa nd thuse mergea s a leadingg tobatp tuy"i ui,ts ome
of the Chinesec ompaniesh ave done in recentt imes. tTis-produ'cmt ix ioutdb e apprgpriatetyc hanged to enabte it to producem obite telephonesa ni other productsb y bringingi n the latestf oreign technologies/I./ 's accumulated/o ssess
mgt alsoh elp BSNLt o gain tax advantages.S imitiarlyt,h erei s no reasonfo r the
MTNLt o continuea s a separatee ntity.f his could atso'Aeb roughtu nder8 SNL as a subsidiary"
Action taken / Action planned:
lTl Merger:
The corporateo bjectivesa nd businesss trategieso f BSNL and lTl are quite
diverse. BSNL is 1 telecom operator while ltl is equipment manufacturing
companyT. he coreb usinesso f BSNLi s to provideh ighq ualityte lecoms ervices
and state-of-the-arti/n novativep roductsa crossd ifferenbt usinessa nd customer
segmentsb y sourcinga nd -leveragintgh e latestt echnologieOs.n the otherh and,
lTl is intoe quipmenmt anufacturinagn di s riddenw ithm anyw eaknessessu cha s
inadequatien - house.R&Dv,e ryh ighc ostb ase,s hortageo f relevanst kills,r ow
valuea dditione tc. BSNLd oesn ot havee xpertiseo r skillst o assistl Tl in any of
thesea reasT' hef astp aceo_f changesin telecommunicatitoenc hnologieasn dt he
competitioins furthere rodinglT l'sp rofitabiliatyt a rapidp ace.I n thJabsenceo f
any shared corporateo bjectiveso r businesss ynergiesv, erticali ntegrationo f BSNLi ntot elecorne quipmenmt anufacturinwgi lln otn 6 in its businessin ierests.
It willb e relevantto mentionth atB SNLh ass tartedin curr"inlogs sess ince2 009-10
and therefore the suggestion of BSNL gaining Tax advantage from the
accumulateldo sseso f lTl doesn ota rise.
BSNL'ss alarya nd wagec osti s moret han 50% staff expenditure of its revenues.T hus,t o curtail and revive BSNL, aRFse itserf has recommended implementatioonf VRS in BSNL.T hat beinj regarding in" .rr", the recommendation mergerw ith lrl will be contraryto thise i".orr"ndations and further
fiffi:L*: 3i:ffit$l,rttr.
asa ili nes taroi rl rr wirar rso" .or. parot r
MTNL Merger:
All the majort elecomp layerss ucha s BhartiR, eriance presencea nd are and rata havep an-lndia able to exploitt his to garner. urtor"rc in all the LSAst hus increasintgh eirm arkets hare.I n the .1J".oi Mumbai riffirise customersD, erhia nd is the hubf or majorityo f corporated ecisionLs nd in Delhia nd Mumbai.will henceh avingp resence tirinj in netterb usinessro i-ebNl. Duet o tneiestrictions in the licensincgo nditionsg,S NtLa nd MTNL. .n This noto peratein eacho thersa rea. operational
particularlfyro m .synergyi.s very rr.n Lqrit"i'i'l*""n BSNL and MTNL highm aroine nterpriseo usinessr.n Jryn"rgy between shalln oto nlyh elpt he PSUsp resent two psUs a unifiedv iewt oinis etites egmenbt uts hall alsoi mproveo veraisl erviced eriverya nds ervicea ssurance.
Followingtw o pointsn eed to be carefullya ddressed mergeor f MTNL beforea ny decisiono n the in BSNL is taken.
(i) salary: The salaryo f the employeeso f MTNL is retativelhy ighert hant hat of BSNL.o n merger,i t is anticipatedt,h at tne emptoyees also demandm atchingp ay of BSNLm ay with that or vriNf*hich wilt furtheri ncrease the salary& wage cosi or the combin"J. n1itya dverselya ffectrng viabilityo f the combinede ntity. the
(ii)PensionT: he pensiono f the emproyees of the MTNL is paid through MTNLi nternarl esourcesw hereasih e'pensiono f tt.l" is paid through employeeso f BSNL the consolidaterdr nd or-inJiao r the Government. mergert,h e emproyeeosf on MTNLm ay arsoo emanop ryr"nl oi'p"nrion throughth e Governmenwt hichr .y in.r.r..-in" financial Government. burdeno f the
Recommendatio2n (para2 .1g( ii)):
"The Board aavised-D /offi and BSNL to submit a cogentr evivar/ restructurinpgl an for B,fNt- withina periodo f foumoiln, the BRPSEi,n corpo,rating for the consideratioonf busrnessp ,tana s wella s strategyfo r sustainablger owth
t7h,ert n B3o caordm. panv,t akingi nto accountt he yoye;;;;;;;", s and obseruationosr Thep tan siourd be basedo n the swoi"anir,ysrs or the companya nd, intera lia,i ncrudet he mergero f MTNLa ,nd,BSNLr.n i piu, by independent courd arsob e apprised consuttait for greatei clarity.,,
Action taken / planned:
BSNLh asc onstituled unitsa nd Corporate3 gore groupc onsistinogf officers Affairst -os uggest/ r6comr"nO seryicesg,r owtha ndb rand_imaogfe
-BSNL.
from all the Business
measures to improve
T'hek eyr ecommendationmsa deb y the CoreG roupa re. (i) Fortificationo f stable revenues treamst hrough concertedf ocus on broadbandN, GN voicea nd enterpriseo usinessw ith major Governmenptr ojects. focuso n
(ii) Focussinogn top 100c itiesf romm onitorinpgu rpose
(iii) Focus on tower & Infra businessa nd"'ieal estate infrastructure monetisation.
(iv) Clearc ut segregationo f commerciaal ctivitiesfr om socialo bligationto ensureb otht opl inea ndb ottomli ne.
(v) centralizationo f various support activitiess uch as pranning, procuremenint cludingm arketinga nd moref ocuso n service customerc are, delivery & service assurance,r evenue managementa nd maintenancoef assetso n decentralizebda sis.
(vi) Valueb asedm anagemenfto r all CAPEXa ctivitiesth ereby onry undertaking those projectsw hich adds varue to the organizationth rough augmentingit s bottoml ine. - (u,vrev?
(uii)s egmenwt isete chnororgoyi lo utr ritnetin iric arperto ilo ut. (viii) Progressivme igrationo i BSNL,sr@; netvvortto< Neit generation
networkt herebye. nsuringc onvergencec,o nsolidationa nd-seamless delivery of various services to end customers across different technologies.
(ix) Realignmenotf workf orcea longw ithi ntroductioonf various to reduce measures the spirallings alarya ndw agec ost.
(x) lmplementatioonf Enterpriserr sysiemss uch as ERp priority on top most so as to enablec entralizedm onitoringa nd fasterd issemination
of information.
n 3 2.1
?sNL may inctude vRS plan n rationatize the manpowera t worker and management level and also sourcesf or funding rfs t/RS ptan. steii-iiyZrco be taken to reducet he costo n maintenancoef infrastrucluraen d iaprtalize'ittii irtut assefsi nctuding buildings." landa nd
Action Ptanned /proposal for VRS in BSNL
Thought he Unionsa ndA ssociationisn BSNLh avea rwayso pposed scheme,t here is vRS an urgentn eed for givings ome ritrr.tiu" opportuhiivto -tto r" who are.voluntariwlya ntingt o take retirementto createw in-wins ituation the employee bothf or and the organizationA.n alternateV RS scheme,w hichi s different fromt he DPE suggesteds chemesi,s also beinge "amineo. Details schemes of the two are as follows.
DPEs chemefo r vRS in Enterprisetsh atm ake_marginparol fitso r loss-making Enterpriseksn, owna st heG ujarast chemei,s asf oiloris:
a' Thec ompensatiownil lc onsisot f s.alaroyf 35d aysf ore veryc ompleteyde ar of servicea nd2 5 daysf ort heb alancbo f serviiet eftu ntilr rt#il;ation. Thec ompensatiwoniil b es ubjectto a minimumof Rs.25,000o1ri -s o oays salaryw hicheveirs higher.H oweverth, isc ompensatiosnh alln ote xceed
b.
c.
d.
the sum of the sararyt hat the emproyeew ourdd rawa t the prevairing for the revel balanceo f the periodr eftb efoies uperannuation.
salaryf or the purposeo f VRSw iilc onsisot f basicp aya nd DA onry.
A19,a.rosf wagesd ue to revisione tc.w ill not be includedin computing eligiblea mount. the
Paymento f bonuss houldc onformt o the provisionsin the Bonus Act;
.V!1R1Su.atL eavem ay be encashedin proportionatme easureu p to the dateo f
i .
il.
Thes chemew illb e opent o all employee(se xecutiveasn dn on-executives) moret han5 5y earso f age.
with a viewt o maket hes chemea ttractiveth, ee mproyeoep tingfo rV RSw iil be givena dvancein crementnso tionalloyn the oat6 of retirjmenti,n the scale9 f payb eingd rawnb y him/hewr nicnh e/shew ouldh avee arnedin the normacl ourseti llt hea geo f superannuatioHne.r en, ormaml eanso ntyt nose incremenhtse /shew ouhh avee arnedin .hise "irtingp ays calew ithouitaking into consideratioann y extraneoufsa ctorsl ike p-oisibteti me bounolpost basedp romotioncso, mparisowni thj unior,e tc.i o illustratteh e point,a n ennqfgveoep tingf or VRS afterc ompietintgh e age of 56 mayb e br"r.o s additionainl crementosf pay,i f he/sheis nots tag,r-atinogth, erwisset agnation incremendtsu em ayb ea ddedo nt hed ateo f r"ti'r"r"ritu ndeVr RSs cheme. The notionapl ay so fixedw ill be countedfo r the purposeo f pensionary
benefitasn do therb enefitssu cha s leavee ncashmentAt, etc.
Then otionainl crementgsr antedw illb e grantedo y asrul as a speciacl ase
!o1t le purposeo f VRS. No additionaplE nsiocno ntributiowni l rj" gil"n bv BSNLt o Dor for the normailyre maininsge rviceo r ine emproyesee eking VRS.
VRS will be opent o all, i.e. withou!r ny restrictioonf service,G roupo r GradeT. he Managemenhto weverw, irrr eserveth e rigrrtto accepto r reject anya pplicatiowni thouat ssigninagn yr easonth ereof.
i l t .
tv.
V.
DPEg uiderine[os M No.2( 32)r97-DlE(w c) cl-xXil dated5 thM ay2 000] providefo r budgetarys upportf rom the Govi.t o the marginallpy rofit
'or
makinge nterprises loss f91VRSi mplementatilonn v.i ewo f BSNL'sc urrenfti nancial
fUlloTl ,lri,tvi,,Lf"Vtwili!i":ritt , lQpqb"i
Ine DoT may give its approvatlo .thep roposa(ro ptibn1 or option2 ) in principlea fterw hichd iscussionws ill be heldw itira ll siakeholders Associations includingth e andt he Unionsfo rf inalizintgh es cheme.
Followinga ctionsh ave been initiatedb y BSNLt o reducet he operational expenses.
(i) The TDM TAXs deployed across the country operations to cater to landtine are progressivelbye ingr eptaceo-witthh e lp TAX costo n power,A MC. to reduce
(ii) Existinge mployeesa re being retrained and reorientedto undertake new set of activitiesin saresa nd marketinga -tiviti"r".g. andV rjay. pioi".i-uo.rn
(iii)N o additionarm anpoweri s being deproyed broadband arthoughn umber of connectioniss increasing-atht b ;;te of 1s%t o 20%p er ands everanl ews ervices year are beingintroOuceO.
Followinga ctions have been initiatedb y BSNL to capitalize assets.includilnagn da nd its telecom building.
(i) A dedicatedb usines6u nit cailed ,New Business,h eaded by an ExecutiveD irectorh as beenc arvedw ithinB SNL focus to provides ustained on reveragingth e huge infrastructuiruec n as Towers, buitdingosf BSNL. randa nd
(ii) BSNL is. als.o using its training infrastructure advanced for impartingb oth and basicr evertrainintg-o p .rp".tiie participant. (iii) Auctioningo f higherb andwidthlt ix'e' ramooai
providers to carriersa nd service
(iv) seilingo f internationabra ndwidtho n Bharat Lankac abre (BLC)t o carriersa nd alsot o leverageit s upcomingc ;pacity cable on EIGs ubmarine
2.1
"ES^rL ma1d hife itt ottt ttiriii@, anf non-strategic. cD/ot efecomm a1s ee{Qooemment suwort tof unf strategicn on-recopera1cteo i to ensures wtainailk growtfr of as!,tL. ,,
Them ajorc ontributortos BSNLl ossesi,n additionto disproportionate wagec ost,a ret he variousu nviable salary& telegrapshy stemr,u ralw i-Maxe tcw Ih9itc9h. 9To perationssu cha s ruralw irel ine, BSNLn m olun askedt o do as parto f sociaol bligation.
ePc-SonNohLma sic. aallrleya dtya kenu pw itho oJ fo1p rovidindgu ec ompensatiofonr v arious unviablsec hemews hichit has. r".it"Jin thep ast.T hes ame includeads a p"t,9f the 1.00d ays was actionp rana nnouncebdy Hon,Moc&rr. Furthedre cisioinn thisr egardis awiiteOfr omD OT.
Furthear ll the newp lansi n whichD or / USo intends implementation to involveB SNLi n its and maintenancseu cha s Nationagii oaonandp lan( providing broadbancdo nnectivittoy. 2.sr akhsp anchayat,sr)" o"ing due compensation anaryzedbByS NLa nd is being workedo it ro' ^pr"renting, operatinga nd maintaininthge s aidi nfrastruiture.
ln additiona,l lt hem ajore xpansionths atB SNLs hailb e undertaking as mobilee xpansion, inf utures uch broadbanedx pansionN, GN deproymenett c shailb e governebdy BSNl..purebryy the businesrse quirement. such.asc overing Thed eproymepnrta ns villagets iooo populatiooni' t 3g0gp opulatioent cs hail examinedp urelyf romt he business be requiremenTt.h e cases,o thert hant hose governedb y businessr equiremenst,h all be executed, compensation provideda dequate isg ivenb yt heD OT/ USO.
*$tL to fr'epar1':Y 'f* tfiei mpfementation of tfie
aaiousm easure,rsu *riri-Oy CivIO, *SWt 9on* prwiig itsp e'fo*inu' ffie pfant ransfating into
i;:"i:i";ij;::::#,fr:#*'"I':;J;:l';,#fi,'"itriii'nry
anrre sponas'sli ,uiki''llal ^re
fevek, in order to compLete LI tYI t tL tLe 'ee ,vv-"----
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t i:li'l"";;X, ,ii]:'fni "?Y ;;v * i ) oi i - t z ^' " s i v e n i n r a b r e l
n.'r I 1,
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Table 1: MO[B and Financial for 2O11-12
BasedontheMoUtargets,thetargetsforthefour.businessunitshavebeen
definedT.h es ameil ;;;; furthe-r oiriiinrt"Ja tt her eveot f circresT.h e targets
havea tsob eenm ad"T 9?l"t^'Jil'ii'#I:1iU*tance
Manasement
[X:?"'ilf" Ffi 3 i6;;;ot er roramnc eM a na seme nt svstem)
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pertormanocef a SfVi-rrgu taliYro ,r'io-tixi timety-io'rrectmiveea surefo' r
'r"r,
ii,i i i g itt con tni u e d gr owth"'
ffi al tars e ts1 * ?::n" :['ffi;
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or B s N L
(ssA/ circle,)n .iro,nn'?t'inB-r.u;.;rip"";f; ate ottice(m onthlayn) dD oTo n
quarterlbYa sis'
i
T r ' , ( . 1 { ' ,
E.
File No. 10-l6/2010-5U.I
Ministry of Communications& iT
Departnrento f Telecommunicatoi ns
l'SU Division, SancharB havan,N ew Delhi
l2d I
oY'of -fJ
A
t--1- , _5llL
' . f
The CMD.
' \
\
.. .i: J-\'Lil
1 ' { L I
'
/ - i \ ,
r ) I , l l l
' - \
Subject: 866 Meeting of the Board for Reconstructiono f Public Sector Enterprises( BRPSE) to
roview the present status of performance and financial position of Bharat Sanchar Nigam
Limited (B SNL) hel d on 2l .12'20 lo-f ouow-UJclion re garding.
Sir.
I am directed to say that meeting of the committee constituted for analyzing the inputs
receivedf rom BSNL and ethcr Divisions of Departmento f Telecommunicationsa nd to finalizc a
restrucruringp lan for its onwardt ransmissionto BRPSEl vas hold undert he Chairmanshipo f Member
(Services)T, elecomC ommissiono n 25'05.20
1.
Z. Rccommendation-wisien puts receivedf rom BSNL in the matter and the input provided by
Administrator( USOf) vidc letter No,30-8/2006-IIS[d ated 24-5-11w erc discussedin detnil. As
decided in the aforcsaidm eeting,t sSNI, is requestedto furnish further inputs on the following flor
considerationd uringt he next meatingo f the committee:
(i) RecommendatioNno "l {psra 2.18.1( i)} - To suggestth e ways throughw hich operational
Ievel synergr bcf'*,eenB SNL and MTNI, can be achieved, within the presentr egulatorya nd
legal framcwork,i n consultationw ith MTNL.
(ii) RecommcndatioNn o.2 {para 2"18I (ii)l BSNL may subnritb usinessp lan as well as
strstery for sustainableg rowth basedo n SWOT Analysis in terms of financial figures i.c
cost,e xpenditurca nd resultse xpected.
(iii) RecommendatioNno .3 {para2 .181 (iii)i * BSNL may submitd c{ailsa boutc ategory-wise
idcntification of surplus stafT a-s well as broad financial implications of suggested VRS
options. Further, steps envisaged to reduce cost of maintenance of infrastructure, results
expected in hnancial terms and the time framc to aohieve intended results may also be
rndrcsted.
(iv) RecommendatioNno .4 {para2.l8.l (iv)} - Detailso f Strategic& non-stratcgiacc tivitiosa s
well as non-recovorablec ost on strategic activities may be intimated after taking into
considerationth e views of Administrator( USOF) as communicatedv ide letter No.30-8/2006-
USF dated 24-5-11, which has already been handed over to ths BSNL during the meeting.
(v) RecommcndatioNn o.5 {para 2.18.1 (v)} - The comrnentsfu mishedb y BSNL w.r.t. this
reeommcndatione re not in accordancew ith the recomrnendntiono f BRPSE. tsSNL may
revisit it and submit the dctails strictly in the rnanner specified in the BRPSE
recommendations.
7,-- Required details may please be sent on top priority as the next meeting of the committee is
----
'Woposed
to be held soon.f or which a separatein timationw ill be sent. -0{cf ^ ..u-,rel
) /'fur<-n\"^q '
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t 0 0 / t 0 0 4 u l d n ! s - r - f l 8 du l t t o B t z t o 0 zLL0 ) ' t ' dot i g L l L o z g \ i l
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J
No. 30-El2006tUSF
Government of India
Depertmeut of Telecommunicstion
Universal Service Obligntion Fund
Sanchgr Bhavan, New Delhi-lf 0001
Dated: 24.f.)1
To
The Membcr(S)T, elecomC ommission
Dopartmento f Telccommunioatious,
SancharB havan,20A shoksR oa4
New Delhi 110001
subject; support from DoTAJSOF for BSNL's existing rural wire lines (and netwofk)
Refcrencc,c MD BSNL's Letter No, 1-1201I/rP/BSNL dated 8'5'11 0n the
abovementionedsu bjecga ddresscdto Secretaryff ) and endorsedto the undersignedfo r
comments/necessaar)c't ion.
_
z.InthecontextoffsnnationofaDoTCommiffeeunderyourChairmanship,for
analysing the inputs reccived fiom BSNL and various Divisions of DoT and to finalisc a
restructuringp lan for onwards ubmissiont o BRPSE,I would like to bring tp kind notice
cefiain issues with regard to continuance of USOF suPport for BSNL's rural wire line
network.
3. Thesea rep lacedi n the enclosedA nnexure'
Enc[: As above
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ANNEXLTREI
NOTEONSLIPPORTF'ROMDOTruSOFFORBSNL'SE)ilSTINGRTJRAI'
}VIRE LINES AND NETWORK
A, BACKGBOUND
usoF had earlierg iveni nputf on TRAI'5C onsultation paper No' 2/2008
dated2 1.1.08r egardingth e mattero f ADca nd lts subsumptionin to USoFw herelna
view had been expressedth at usoF should not be call upon't o subsidiset he
incumbent'sw ire llne network lieu of ADC.D etailed reasoningfo r the same was
providedv ide tetterN o. 30-8/2006-USdFa ted8 .2'08' (copye ncloseda s ANNEXURE
t t).
2 . S u b s e q u e n t l y , b a s e d u p o n t h e d e c i s i o n o f t h e c o m p e t e n t a u t h o r i t y ,
UsoFRuleshavebeenamendedvide
ndianTelegraph(Amendment)Rules,2o08
dafeii1 8thlu ly, 2008t b enablEU SOFto stippbrt RuiSlH ouseholDd ELsin stiiltedp rlor
to1'4.zo02foramaxinil
mamountofR5.2o00croreperannumforaperiodof3
Years.Thiswastobein.
ieuofADcbeingphasedoutandinaccordancewiththeTRAI
Recommendatiodnas ted2 7thM arch'2 008'
3. Now,a caseh asb een madeo ut by BSNL fOr continuationo f suppor[f or its
Rurawl ire line Networkb eyondt he 3 year periodw hiche xpires in July 2011' The
quantumo f deflcitp rojectedb y BSNLis of the order of Rs'9306c rorep er annum'T his
wassubmlttedbyBsNLinpursuanceofM
nutesofMeetingheldonS.3.l.lchalredby
Secretary(T)todiscussvariousissuesre
atingtofinancia
supporttoBSNLfrom
GovernmenVDoITn. t hisr egardt,h e following comments may kindty be considered:-
@ t ) v 2
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B. CONCEPTUAANL ALYSIS
(i) BSNL'Ws ire LineN etworkw as installedIn the ooT perioda nd its CAPEXw as
fundedb y DoT.T hisn etworkh asi n the pastb eens upportedth roughA DCa ndv arious
USOFs chemefso r supportingR DEL(sr uralh ouseholdli nes)i ncludihgin ter aliat he
abovem entioneds ubsidyi,n lieu of ADC.T het otal USOFs upportb y way of various
RDELs chemesa mountsto Rs9 139.08c rorea so n 31,3.11F. ufther,U SOFh asa lready
supporredB sNLb v way of wir:e line Broadbands chemew here Rs.150oc rore of
subsidyc anb e availedb y BSNLfo r Broadbande nablemenot f about2 8,000r uralW ire
linee xchangesI.n spiteo f variousf orms of suppoftf or BSNL'rsu ral operation$t,h e
numbero f ruralw lre linesc ontinuesto declineT. hisw ouldi mplyt hat ruralc ustomers
are nor satisfied with the quality/utility of rural wire lines connectivity
(noh,vithstandlng the low/below cost tarlffs) in comparison with wireless
connectionfso r whicht ariffsa reo rlf orbearance.
(i i) WhileT RAI'se stimationo f Rs2 000 crore per annums upportw as based
on the 90 takhR DEIws hiche xisteda so rr1 ,4.02T, RAIh adu nderestlmatetdh e decline
in theseR DEL5b y way of disconnectionAs.s per TRAIe ach nOtl *ts to reieive a
monthly support of Rs 214. An amount of Rs 3O0 crore was attributed to be the
reductionIn supporto n accounto f disconnecteRd DELST.h ist ranslatesin to estimate
of dlsconnectionosf about1 1.68t akhR DELsA, ctuallyb, asedo n datac ollectedf rom
BSNLth e declinein numberso f suchR DElss tooda t 36.55l akhR DEIass o n November
2008.
61 qr ril
(iii) Between Aprll 2008 and March 2011, itt
forms includlngi nter alla the supporte xtended
liner haved eclinedb y 19.7l akhs.
spite of USOF support In various
in lieu of ADQ BSNfs rural wire
(iv) tu per its mandate and legal framework, any support from uSoF has to
benefitt he rural populationb y way of accesst o affordablet elecommunications
servicesU. SOFs chemesh oulde nsurec oste ffectivec, ompetitives ervicep rovisioning
and a levet pllying field rather than supporting the survlval of a specific
/u11 I l r " i 4 F , 0 , i i ' . r 1 1 ! l l : 1 7 ! ' l L r : : l i t I F l F i ; I _ r - I - : : i r : i l _ l P T , i
technology/operatoars such. . The rnarkets cenarioa t the time when ADCw as
Introducedi s vastlyd iffererrtf rom the situationt oady. While in 2002 the rural
teledensityw dsI .ZVot,o day it is 331%.F urther,i t is cleart hat as thingss tand,t he
healthyg rowth in ruralt elephonesis comingn or from wire linesb ut from wireless
services.A s of February2 011,E RUd ata indicatest hat 97%o f rural telephonesa re
on wirelesst echnologlesa nd privateo p€ratoniw ere providlng8 8%o f rural wireless
connections.
(") lt asa n acceptedfa ct that wire linee xchangeasr e a valuablea sseti n so much
that they can provideb roadbandK. eepingth is aspecti n view,B SNL'rsu ralw ire line
broadbandis alreadyb eings upportedb y USOFin a resulto rientedm anner'W lth
adequatee ffortso n BSNL'psa rt this schemes houldh aveb eenl everagedb y them to
reverseth e declineI n utilityo f ruralw ire lines.S of ar 2.58l akhc onnectlonasn d4 368
kioskszh ave been providedb y BSNL.F ieldl evel reportso f interactionw ith rural
subscriberps oint to poor qualityo f servicea nd a lack of maintenancec/u stomer
relationsa nd marketinge ffortsb y BSNLle adingto poors alesa ndr evenuesin spiteo f
a faird emandfo r ruralb roadbandS,u bsiddyi sbursemenint thiss chemeis c ontingent
upon prouisiono f functionabl roadbandc onnectionasn d kiosksa per terms and
conditionso f USOFA greementsA. s on date,B SNLh asr eceivedR s'1 15'77C roreo f
subsidya gainstth lss cheme.
(vi) lt ls clear that Eeneraliseds upport againstr ural exchangesw ithout any
tarBetsr egardingo ptimumu tilisationo f the wire linen et work is not helpingto arrest
the decllnein the numbero f wire llnec onnectionasn d hencec ontinuancoef such
supportw ouldt antamountt o the wastageo f physicaat ss€tsa ndf irranciarle sources
by wayo f underutiliselda ndl inee xchangeasn dw asteds ubsidys upportf or the same'
tn sucha situationi t would perhapsb e bett€r to optimiset he utilisationo f these
assets by to sharing them with other operators' unbundling would generate an
incomes treamf or BSNLv ide rentalsa nd enhanceth e utilityo f thesen ationala ssets
'32.99Yoa so n 28.2.11
'As on 30.4,11
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l f , , / i 1 5 t i l 1 1 1 2 : r i 4 F , r ) r l ( r 1 1 i t 3 ? 2 4 5 i I I I F i F ! U - I - i I J U F T ' . ' .
asc ompefltlvee ntryi n the landtineb roadbands egmenwt oulde ncouratei nnovation
andi mprovedc ustomesr atisfaction,
(vii) Even if some additional form of result oriented support was to be
con$iderefdo r ruralw irel ines,it is a moot pointw hereU SOFs houlds upportB SNL's
net worka sp ert heira ctuale xpenditureo r asp er industrys tandardr egardingp er line
net costs. Supportingo n the basiso f actualc ostsi ncludinge mployeer emuneratiort
ando fficea nda drninistrativeex penseisn this mannerw ould neitherl ncentiviseB SNL
to ratlonalisceo stsa ndn or wouldi t incentiviseB SNLto enhancere venues.
(viii) TRAIh asb eenr nindfuol f the needt o improvee fficiencya, ttains ustalnability
andr estrict he periodo f supporta si se videntf rpm the followingc omrnents:
"ADC wos not to make the incumbent perpetuolly dependent on
supportb ut to allowt hem timef or adjustmendt uringt he periodo f transition
from o monopolisteicn vironmentw, herec rosss- ubsidizotiown osp ossibleto, a
com petltl ve b us i n ess e n v i ro n m e nt'
(source:C onsultatiorPr aperN o .2/2008)
Furthert,h e Authoritiesh avea lsor emarkedth at
"At this stdge the Authority is required to bolance two moin obiectives.
Flrstly, ta increase the dttractiveness of providirtg connections ond odequate
services in oreas thot would otherwise nat be a focus 'of attention for
commerciolly oriented service provider in o competitive environment, i.e, rural
and remote SDCAw hich ore particularly high cost ond low revenuea ress, This
alsoi ncludesth es uppartf or sustainabilitoyf existingru ral wirelines.S econdlyt,o
make this support efficient tn such a woy thdt i(s level gets adiusted to the
prolitabitity of rurot operdtions. The support hould get eliminoted when the
averogec ost gaes down eitherb ecouseo f increasingt eledensityin the area or
falt in the network operoting costo r increasel n revenue. lt Is also very lmportant
to keepi n mind that whatever schemeis firtzllsed to rneet the sbave oblectlves
should nat provide incentlvesf or incurrlng lossesh ut should Promotei mproved
performa nceo l the serulcep rovid e/'
(sourceC: onsultatioPn aperd ated2 I'tJanuary2, 008)
TheA uthorityh asa lson otedi n the IUCR egulatiodna ted2 9thO ctober2 003t hat:
ar i' irt"
J
2 0 1 1 1 2 i ) 4 F A t { r ' t 1 ? 3 3 i 2 4 9 1 TIR PSL-II - 5 : I JUPT, , .
"For BSNoLn d MTNL,t o the extentt hot the omounto f ADCd oes not covert he
futt amount of the deficit over time, the Authority rtoted thdt they have benefited on
account of being allowed entry into cellulor mobile without ony entry fee. The
Authortry also hopes that the deficit would he made good by the proftts thot these
srgonisations will earn from their cellular mobile and WLL(M) services, bearing in
mind the rapid subscribegr rowth being experiencedb y these services. This is
important to ollow more flexibility ta the torlff developments, which are o maJor
contrlbutory fdctor in spurring growth, teledensity ortd commercidl octivity in the
country. The Authority will be exonining oll these fodors ln greoter detail at the
time of the next review of the ADC regime."
In the ExplanatorMy emorandumto the IUCr egutation2 007d ated2 1s March,2 007,t he
Authorityh asn otedt hat:
'BSNL has not octively responded to the key purpose for which ADC was given,
tt may be recalled thot ADC hod specific purpose to be fulftlled in a time Jrame (1.e.
tariff rebolancing).F urther, BSNLls now offering tariff regimef or bundled serulces
which appear to be having some element of cross subsidy.'
In viewo f the above,it ls stronglyfe tt that the Departmenst houldr e-consider
the continuanceo f support to BSNLa galnstt he RuralW ire line Network
withoutl inkingi t to quantiflableim provements-idne liverables-sueh-as-quality
and numbero f ruralc onnectionsb,o th voicea nd data.l f unbundtingis the
meansto achieveth lst hent he sames houldb e considered.
RegardinBg SNfsc lalm of havingc ontributedm ore to the fund than having
receivbds ubsidyi,t wOuldb e pertinent o notet hat aso n datem oret han 85yo
of USOFs ubsidyh as been disbursedto BSNLw hile its sharei n the rural
telephonyis around1 5%a nd its shareI n USLl esst han4 0%. In fact in the
financiayl ear2 010-3.1B,S NLh as received9 6.83% of USOFs ubsidya gainsta
22"8Ysoh arei n USLc ontribution.
ln fact, given the facts stated above, a view could be taken that supportlng
BSNLi n this mannera mountst o crosss ubsidlzationo f its costs by other
operatorsw hichi s.nota justifiableu seo f the USOF und'
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(ix)
(x)
(xl)
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OPEXC ALCUIATIONS
As regards,t he calculationsp ut forth by BSNLi,t may be seen that TRAI
calculationrse jectedt he overallm ark up of 75CI%co nfinedt he mark up to
only3 costc omponentsi,,e .e lectricltyf,u el andp owera nd networko perating
costs. These costs constitutes only about 76% of OPEX and hence, the rnark
up factoro f 1.5w asr tot appliedt o the total averageO PEXb ut was llmitedt o
the sumo f these3 componenttso arrivea t ruralO PEX.
In BSNL'sc alculationsO, PEXi tems such as employeer emuneration,
administrativee xpensesL, igenseF eese tq have been evenly distributedi n
proportiont O the percentageo f rural and urban assetsw hich maY lead to
inaccuraciesa s sofile cost items are not correlated to assets, Thls
methodology also does not take lnto consideration the urban-rurat
distributiono f subscribersC. learly,c eftainc omponentso f OPEXw ould be
dependenut pont he subscribebr ase.A lso,i t is not understoodw hy, spectrum
fees haveb eena ddeda s a componenti n the calculationo f OPEXfo r Rural
Wlre line telephony.T o calculater evenued eficit it appearst hat fixed WLL
revenuesa nd costsh aveb eeni ncludedO. n the wholea much more detailed
analysiiss c alledf or,
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http://www.bsnlnewsbyashokhindocha.blogspot.com/ M-09426254999
(b)
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