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Union cabinet approves BSNL, MTNL merger; announced Rs 29,000 Cr for their revival

A telecom tower

The Union Cabinet has approved the merger of state-owned Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) on Wednesday. Telecom and IT Minister Ravi Shankar Prasad said the government will put in Rs 29,000 crore for revival of both companies and their assets worth Rs 38,000 would be monetised. Prasad also said the merger would be “operationalised gradually”. MTNL will become a subsidiary of BSNL until the merger is completed as the entire process to merge both the firms together would take a longer time.

Four steps for their revival

The cabinet has provided a four-way revival plan for BSNL and MTNL.

  1. Allotment of 4G spectrum: The government has approved the administrative allotment of 4G spectrum services to BSNL and MTLNL which will enable them to provide broadband and other data services. It will be funded by the central government by capital infusion of Rs 20,000 Crores. The centre will also bear the GST amount of Rs 3,674 crore through budgetary resources.
  2. Telcos to raise long-term bonds: BSNL and MTNL will raise long-term bonds of Rs 15,000 crore for which sovereign guarantee will be provided by the central government. BSNL and MTNL will also restructure their existing debt and meet the capital expenditure, operational expenditure and other requirements.
  3. Voluntary retirement for employees: BSNL and MTNL will offer voluntary retirement (VR) to their employees who are aged above 50 years through VR scheme, the cost will be born by the central government through budgetary support. The ex-gratia component of VRS will require additional funds of Rs 17,169 crore. The government will also meet the cost of pension, gratuity, and commutation.
  4. BSNL and MTNL to monetise the assets: The telecom companies will monetise their assets so as to raise resources for debts, servicing of bonds, up-gradation of network, expansion, and meeting operational fund requirements. Both the companies have collected debt of Rs 40,000 crore.

Opposition by Finance Ministry: The Finance Ministry had previously opposed any financial backing to BSNL and MTNL and said that any upfront cost support to them would be a huge burden on the budgetary resources of the government. Also, Department of Telecommunication is seeking comments from the Finance Ministry on the cabinet memo circulated to the nodal ministries in regards to the merger.

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