The union cabinet on Wednesday approved the proposal for revival of public sector telephony companies 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 merger of BSNL & MTNL.

The two firms have been in dire straits for long, and there were speculations over its future, but telecom minister Ravi Shankar Prasad told reporters after the cabinet meet that the two are neither being closed nor being divested.

The cabinet decided to go for administrative allotment of spectrum for 4G services to BSNL and MTNL so as to enable the two to provide broadband and other data services. The spectrum will be funded by the government by capital infusion in at a value of Rs 20,140 crore. In addition, the GST amount of Rs 3,674 crore will also be borne by the government 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 crore for which sovereign guarantee will be provided by the government, an official release said. With these resources, BSNL and MTNL will restructure their existing debt and also partly meet capex, opex and other requirements.
 
The two firms will also offer “attractive voluntary retirement scheme (VRS)” to their employees aged 50 years and above, the cost of which will be borne by the government through budgetary support. The ex-gratia component of VRS will require Rs. 17,169 crore. The government will also meet 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 upgradation, expansion and meeting the operational fund requirements.
 
The cabinet granted in-principle nod to the merger of BSNL and MTNL. “It is expected that with the implementation of said revival plan, BSNL and MTNL will be able to provide reliable and quality services through its robust telecommunication network throughout the country including rural and remote areas,” the official note added.