No Profits For BSNL For Next Two Years; But VRS Will Save Rs 10,000 Crore Per Year

No Profits For BSNL For Next Two Years; But VRS Will Save Rs 10,000 Crore Per Year
No Profits For BSNL For Next Two Years; But VRS Will Save Rs 10,000 Crore Per Year

Despite saving nearly Rs 10,000 crore annually with employees opting for voluntary retirement, the Bharat Sanchar Nigam Limited (BSNL) stillwon’t be profitable for another two years, according to a parliamentary standing committee report. 

Reduced Expenditure

On 10 March, the Parliamentary Standing Committee on Information Technology represented its report tabled in the Lok Sabha and the Rajya Sabha.

According to this “the expenditure of BSNL has reduced from Rs. 34,400 crore per annum to Rs. 24,687 crore per annum (Annualized value of 9 months figures) mainly due to savings in employee benefits expense, due to VRS [Voluntary Retirement Scheme] as part of revival package,”.

EBITDA Positive

Now, BSNL is “EBITDA positive” and yet, only “expects to be profitable from FY 2023-24 onwards” as per the report, based on presentations from the telecom department.

Here EBITDA represents Earnings Before Interest, Taxes, Depreciation, and Amortization.

Basically, it is an accounting metric that is used to measure the overall financial performance of a company.

Dependency On 4G Services

Further, the report mentions that the government-owned telecommunication company’s revenue has not grown “mainly” because it is currently not a 4G service provider.

The “monetization of land assets” has not taken place is the other reason.

Further, the report noted the likelihood of reaching profitability by 2023-24 if “subject to the full realization of the revenue and cash flow from services as well as monetization of land assets as envisaged at the stage of processing of the revival package,”.

Moving ahead, the report mentions that the committee had asked the telecom department why 4G spectrum had not been allocated to BSNL or its other PSU, MTNL, in 2020-21 itself. 

While replying to the question, the Telecom Secretary Anshu Prakash told the panel that a tender for telecom equipment providers to provide 4G equipment to BSNL had been issued so the company could start 4G services but the department canceled it later because it wanted to “encourage BSNL as a vehicle for Indian telecom equipment”.

“Now they have floated a fresh tender in which there will be a proof of concept which will be a substitute for experience. Leading companies like TCS, Tech Mahindra, Sterlite, and L&T have purchased documents for the proof of concept. BSNL had nearly 1600 queries after the pre-bid meeting, which will be answered shortly”  the report quoted.

Delayed Monetisation Of Asset

The land and building assets of BSNL and MTNL identified for monetization are worth Rs 67,837 crore and Rs 17,985 crore, respectively according to the standing committee’s report.

On the other hand, the expected revenue from “monetization of land/building assets of BSNL and MTNL for the year 2021-22 is Rs. 1200 crore and Rs. 300 crores respectively”.

The reason behind the low cost of monetization is caused due to “Land prices have fallen. Rentals have fallen” as mentioned in the report.

The Covid-induced lockdown also caused delays in the process. But they hope to monetize more property this year.

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