Pitroda’s decision on BSNL correct
March.11 : The cancellation of the Rs 30,000-crore tender by BSNL for the 93 million lines to be laid underscores the unending roadblocks faced by this once-upon-a-time telecom giant. The problems of this once blue chip corporation started when the then telecom minister, Mr Dayanidhi Maran, delayed the first tender, which was floated in 2006 for 45 million lines. By the time he was ready to take a decision he was eased out and the current telecom minister, Mr A. Raja, took over. This delay led to BSNL facing the pinch of capacity constraints.
After further delay under Mr Raja and some bickering over price, it was decided to float this 93-million-line tender, which made history as it was the largest ever tender floated in the world for the telecom sector. The process that followed was mired in controversy and court cases and the last straw was a corruption charge made by one of the BSNL board members. The matter went before the Central Vigilance Commission last year, which concluded that there was no transparency in awarding the tender. There was an uproar among the workers of BSNL and allegations that BSNL would not be able to compete at this rate. There is no doubt that there is huge money involved in the deal. According to industry sources, these huge deals attract payments of two per cent kickbacks on equipment value and services. In this case, the amount involved would be around Rs 500 crores, which is big money. Sam Pitroda, known as the telecom czar during Rajiv Gandhi’s government and who is now an adviser to the Prime Minister, was appointed to resolve the issue arising out of the CVC’s observations. On February 15, 2010, nearly two years after the tender was issued, he recommended that the tender be scrapped and a fresh tender awarded in 60 days. He also said he preferred the Bharti model where, instead of buying equipment, BSNL should buy capacity. Now, in a new twist, another BSNL board member has alleged that BSNL does not need such huge capacity and that it has not used at least 29 per cent of its existing capacity. This may not be entirely true because in South India BSNL has some genuine difficulties in using capacity. In all these twists and turns, the battered telecom major has seen its market share down to around 12 per cent and is now in sixth position. Even Idea, a newcomer, is bigger. Its balance sheet has taken a beating as its profits were down for the second year in succession to Rs 575 crores at March end 2009. A major part of this profit is interest earned on cash reserves.
Behind the vacillating fortunes of BSNL there seems to be a not-so-hidden message that all is not well between telecom minister A. Raja and the government. It may be recalled that Mr Raja had initially been left out at the time of ministry formation at the Centre and it was only because of pressure from the DMK, a Congress alliance partner and the party to which Mr Raja belongs, that he was finally made telecom minister again. But it has been a very tenuous relationship between him and the government. In recent times all important decisions relating to the telecom industry have been taken outside the telecom ministry. Whether it is the 3G spectrum auction or the improvement of BSNL and MTNL, it was either the government or an empowered committee that took the decisions. Mr Pitroda has recommend a three-member committee to evaluate the new tender and has set a deadline of 60 days. One hopes that further time will not be lost beyond the 10 months that have already gone by. But Mr Pitroda’s decision is a good one. If the Rs 30,000-crore tender was allowed to go through, it would have been disastrous for BSNL.
After further delay under Mr Raja and some bickering over price, it was decided to float this 93-million-line tender, which made history as it was the largest ever tender floated in the world for the telecom sector. The process that followed was mired in controversy and court cases and the last straw was a corruption charge made by one of the BSNL board members. The matter went before the Central Vigilance Commission last year, which concluded that there was no transparency in awarding the tender. There was an uproar among the workers of BSNL and allegations that BSNL would not be able to compete at this rate. There is no doubt that there is huge money involved in the deal. According to industry sources, these huge deals attract payments of two per cent kickbacks on equipment value and services. In this case, the amount involved would be around Rs 500 crores, which is big money. Sam Pitroda, known as the telecom czar during Rajiv Gandhi’s government and who is now an adviser to the Prime Minister, was appointed to resolve the issue arising out of the CVC’s observations. On February 15, 2010, nearly two years after the tender was issued, he recommended that the tender be scrapped and a fresh tender awarded in 60 days. He also said he preferred the Bharti model where, instead of buying equipment, BSNL should buy capacity. Now, in a new twist, another BSNL board member has alleged that BSNL does not need such huge capacity and that it has not used at least 29 per cent of its existing capacity. This may not be entirely true because in South India BSNL has some genuine difficulties in using capacity. In all these twists and turns, the battered telecom major has seen its market share down to around 12 per cent and is now in sixth position. Even Idea, a newcomer, is bigger. Its balance sheet has taken a beating as its profits were down for the second year in succession to Rs 575 crores at March end 2009. A major part of this profit is interest earned on cash reserves.
Behind the vacillating fortunes of BSNL there seems to be a not-so-hidden message that all is not well between telecom minister A. Raja and the government. It may be recalled that Mr Raja had initially been left out at the time of ministry formation at the Centre and it was only because of pressure from the DMK, a Congress alliance partner and the party to which Mr Raja belongs, that he was finally made telecom minister again. But it has been a very tenuous relationship between him and the government. In recent times all important decisions relating to the telecom industry have been taken outside the telecom ministry. Whether it is the 3G spectrum auction or the improvement of BSNL and MTNL, it was either the government or an empowered committee that took the decisions. Mr Pitroda has recommend a three-member committee to evaluate the new tender and has set a deadline of 60 days. One hopes that further time will not be lost beyond the 10 months that have already gone by. But Mr Pitroda’s decision is a good one. If the Rs 30,000-crore tender was allowed to go through, it would have been disastrous for BSNL.
