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Is BSNL Crisis a product of 2G Scam?

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Anant Chetan
Anant Chetanhttp://infiniteseaofopportunities.com
An aficionado blogger and an engineer by profession. By qualifications, a Masters in Embedded System Design.

2G, 3G, CWG, coalG, madamG” as soon as I uttered these words, my friend (the same for whom I wrote He turned from being a die hard Modi fan to a Modi hater!) turned around, looked at me for a second and asked “Do you think 2G spectrum allocation was a scam?”

Of course it was and everybody knows it.

How? He asked, settling down on the couch. I could sense some sort of confidence from his body language, as if he knew what I was about to say and how I would not be able to prove my point.

Nevertheless, I started with whatever I knew. The government gave away the licenses at throwaway prices; 85 out of the 122 licenses awarded were illegal. The recipients did not fulfill the necessary requirements. The process was not transparent. And some more…

Again with the same type of confidence he said “and how does it affect the common man of India?” He continued, if the government would have followed the exact rules and regulations mentioned in book, had awarded the licenses to a limited number of companies, with heavy fees, would it not have affected the price of the service we common people used? Would the service cost not go up when the companies had paid hefty amount for the licenses and had only a few competitors in the market?

Awkward silence in the room.

I had no rebuttal to this. It made sense to me. May be the way government awarded licenses was unfair, some deserving company might have been left behind but the people of India did enjoy affordable services. How can this be called a scam? Can a scam be good for the people?

Moreover, Congress came up with Zero Loss theory according to which there was no loss incurred to the government. In 2017 the court also acquitted A. Raja and all his buddies, re-enforcing the fact that there was no scam. Was it just a political gimmick, highlighted by BJP for its own electoral benefits?  I had tried to dig up more information about the scam but every time I would only find the same things;  be it government not following the procedure or missing transparency or crony capitalism or favoritism. But nowhere I could find how it affected the common man like me, ………until this month.

My favorite politician, who just returned from Bangkok and will be traveling to Indonesia soon, as if it was his transit stay in India, dropped a harmless looking tweet:


It might look like another tweet from an opposition leader, however, it is not. This tweet gives an important insight as to how Congress came out clean when the shit hit the fan.

I started to dig up information through news articles, reports, different court cases related to BSNL and I started gathering information not just from 2019, or 2014 or 2011 or 2007/08 but since the time BSNL came into existence in 2000.

BSNL was very much a profit making company in the beginning or till 2007 to be precise. What happened after 2007? What changed in the later part of the decade? It was India’s largest telco both by revenue and subscriber base till 2006-07. The PSU had over 75 million customers (fixed-line and mobile), had revenues of Rs 39,750 crores, with a net profit of Rs 7,805 crore. What changed in the next two or three years that it made its very first loss of Rs.1,822.65 crore in 2009-10? Continue reading to know some of the policies/government actions that lead to the mess.

First, when in 2006-07, the telecom market in India was growing at 50% every year, BSNL’s expansion plans were foiled by the government policies. BSNL was not allowed the extra lines it requested, whereas the private vendors like Bharti Airtel expanded their services. BSNL’s tender for 45 million new lines was put on hold and later only half of the requested number i.e. 23 million were authorized. BSNL started lagging behind its competitors.

Second, a few years later, BSNL was not allowed to buy equipment from Chinese vendor amid the security concerns. However, all other private telecom companies were allowed to buy equipment from whichever vendor they wanted to.  This temporary ban was released in 2010, I am not sure if the Chinese had become friends by then and but am pretty sure that BSNL had lost its market share to the private vendors.

Third, Access Deficit Charges (ADC) which were levied on the private vendors so as to create a fund that would help BSNL provide rural services was discontinued. Instead it was replaced by Universal Service Obligation (USO). However, the interesting part was that even BSNL was asked to make a certain contribution to this fund. In short, it receives less amount for the rural services than before. Just to explain, if there are a total of five vendors including BSNL, and an amount of 100 Rs has to be generated for low cost services, earlier the private vendors were paying 25 each. But now with USO, all the five were paying Rs 20 each. So instead of Rs 100, BSNL now received only Rs 80 because Rs 20 were its own. In addition to this, even the cellular companies were allowed to use the USO funds, if they claim they are providing services in rural areas, cutting the funds for BSNL even further.

Fourth, around in the same time frame happened the spectrum auctions 2G, 3G and BWA (Broadband Wireless Access). BSNL was awarded BWA spectrum in a different frequency range than the private vendors. BSNL was awarded spectrum in 2.6Ghz whereas private vendors in 2.3Ghz (smaller frequency provides larger coverage). BSNL had to later surrender the spectrum, bearing a huge financial loss plus massive loss in market share. Moreover, BSNL was also forced to sell its WiMax franchise to Startnet, incurring further losses.

Fifth, BSNL was forced to pay more for the spectrum as the private vendors were given a temporary exemption.

Sixth, BSNL was asked to return its CDMA specturm. The company had invested nearly Rs 600 crore in a countrywide CDMA network after it was allotted the 800 MHz spectrum by the government.Not only the entire investment went waste, but the company had to spend an extra Rs 250-300 crore to re-engineer  networks and move majority of our CDMA customers to lower-grade spectrum.

Now the trillion dollar questionWhy would somebody make a profit making company into a loss making company? What does anybody get out of a careful mismanagement like this?”

The government sold the 2G licenses at throwaway prices to the private vendors, even those who had no telecom experience or infrastructure. (which was by the way a pre-qualifier for the vendors bidding in the auction). Some of these private vendors later sold their stakes at a very high prices in just a few months or years. Unitech paid Rs 1658 crore for the licenses and sold 67% of their equity at Rs 6120 crore soon afterwards, making its full equity, Rs 5 lakh a few months ago, worth at Rs 9100 crore; Swan Telecom paid Rs 1537 crore and sold 45% of its equity at Rs 3217 crore later, making its total equity worth Rs 7192 crore. (these figures are taken from a paper Unfolding of a saga: 2G Spectrum by Govind Bahattacharjee).

Now comes an interesting question, how were these companies without any telecom infrastructure or a working setup, able to sell their stakes at such high prices?

These companies used BSNL’s infrastructure for FREE in the garb of Free Roaming services. Remember, BSNL is already a loss making company, its towers and infrastructure is just laying waste. Why not use it for the greater good? – Help the private vendors kick start their business.

So, yes Kapil Sibal’s zero loss theory was accurate. There was no loss to the government, BSNL bore the brunt at that time. As of today, BSNL may have incurred a total loss of more than Rs 90,000 Crore and the government just announced a Rs 70,000 crore bailout package. Now this is a loss to the government and the tax payers, but it is during the BJP rule. Congress never let any loss happen to the government so to say. CAG had come up with four different number ranging from 58,000 Crores to 1,76,000 Crores, it was media who used the bigger number to sensationalize and win TRPs. The current loss to the country definitely falls in that range.

More than the corrupt, cunning and selfish Congress and DMK leaders, BSNL employees are to be blamed for this huge mess. Not only were/are they incompetent but also betrayed their own company who provides them with their bread and butter. Why incompetent? 176,000 BSNL employees cater to a subscriber base of around 110 million whereas less than 20,000 each for Airtel and Jio cater to more than 300 million customers. A time and work question for students preparing for government jobs: How much more is the productivity of Airtel employees than the BSNL employees when considering the figures mentioned above? Your options are a) more than 95% b) less than 95% c) none of the above d) incomplete information. Post your answers in the comment sections.

Moreover, 176,000 is the number today, in 2010-11 it was more than 300,000. I think the government was simply hiring the people so as to keep the unemployment numbers in check. Remember Sam Pitroda? the “hua to hua fame? He was the first one to come up with this awesome Voluntary Retirement Scheme along with 30% divestment of the firm. Its exactly like Rahul Gandhi’s potato to gold machine; you take an unemployed person on one end and get a retired employee with lacs in his account on the other side. What an Idea Sir Ji!

Its the same with Air India or any other PSU.  Air India has been bearing the losses for the aviation scams. Coal gate scam; the coal was not mined as of that time so no loss. At the time when it would be mined, it would be a different government bearing the losses hence zero loss theory is always going to win and nation would always lose. Rahul Gandhi revealed his government’s past strategy, however he fumbled with the ordering of the different steps. The correct order is Mismanage, show mega losses, sell cheap to crony capitalists and merge. Maybe the people like Mr. S. Swami who filed the PIL in the first instance should refile the PIL after taking BSNL into account. Because in the first instance BSNL is not mentioned even once. 

The governments always come with solid strategies and long term plans. Its easy to look back and say “oh they built it piece by piece“, but it does not make sense before it is actually done. Be it scams like 2G, CoalGate or reforms like demonetization and abrogation of 370. Do you think Demonetization and scrapping 370 was spontaneous? No, they were not, the day BJP came to power, PM Modi started working on Demo and scrapping article 370. Have a look at Modi gov’s surgical strike(s) on Black Money and After effects of abrogating 35A and diluting 370

Thanks for your time and patience. Thanks for reading! Please visit my blog: Infinite Sea Of Opportunities for some other interesting articles.

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Anant Chetan
Anant Chetanhttp://infiniteseaofopportunities.com
An aficionado blogger and an engineer by profession. By qualifications, a Masters in Embedded System Design.
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