January 29, 2023

Should taxpayers’ money be spent on making BSNL compete in the market?

Ashwini Vaishnav, minister in charge of railways, communications, electronics and IT, in an interview today to Times of India, has outlined plans for state-owned telecom company BSNL.

There are three points he made. One, there will be an investment in 2022-23 of Rs 45,000 crore. Two, it will be used to upgrade BSNL’s entire network to 4G and also upgrade the IT systems. Three, BSNL continues to provide support where commercial services are unviable.

Separately, Vaishnav indicated that 5G telecom auctions will begin by the middle of 2022-23.

When the telecom plans for 2022-23 are combined with the reliability of government’s promises about investment in BSNL, it begs the question should BSNL be subsidised by taxpayers to compete against private telecom companies that are one generation ahead in offering technology? In telecom services, lagging in technology is a recipe for failure and losses.

Budget promises and subsequent spending over the years suggest that governments are not really keen on making BSNL truly competitive. For example, in 2021-22, the original budget allocation to upgrade BSNL’s network to 4G was Rs 25,973 crore. Eventually, last week’s budget’s revised numbers showed that the spending would be limited to Rs 5,525 crore, or just Rs 21 of every Rs 100 that had been planned.

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This is a pattern that repeats itself which is why there is no guarantee that even the planned Rs 45,000 crore will be spent. In the meantime, BSLN’s competitors will widen the gap.

Perhaps it is time to see BSNL as a special purpose telecom vehicle to plug gaps that are left by private companies. That way there will be no money wasted on making it compete with old technology. Instead, there can be budgetary support for a role where its services have no substitute. It may be the most cost effective way forward for taxpayers. Also, a larger social need is served without trying to compete with companies that are on the threshold of transitioning to 5G while BSNL hasn’t even moved entirely to 4G.



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