Tuesday, September 17, 2019

Revival and restructuring of BSNL


Revival and restructuring of BSNL

( Govt has issued specific guidelines for Revival /Restructuring /closure of PSus. The Guidelines may expect certain sacrifices from the stake holders . Govt cannot avoid its own guidelines in the name of objection of one of its prime limbs viz MOF (if at all anything so). MOF / DOE may have rights to question about the DOT’s Proposals and may direct to follow PIB/ EFC Mechanism (Public Investment Board/ Expenditure Finance Committee). It is a specified task given to the concerned Ministry to act as per the Govt Guidelines to decide the process of Revival/ Restructuring of the given PSU. The process may be delayed but cannot be kept in cold storage for long. Infusion of equity is found normally as the mechanism for revival. In the case of ITI Ltd financial assistance  were also given as aid. But the process was very long drawn. In the case of Air India it took 10 years to get the announced equity infusion.
 In the case of BSNL/MTNL, if any road map is already drawn, it is better to segregate the plans by not treating both the PSUs in similar footing. Each Psu  may need a specific mechanism as per its required strategic, business and financial positions.
Our Business area is pan india . We came with Govt retirement Rules FR 56 a  ( 60 years) to BSNL - but MTNL got it vide DPE orders where powers are there  for the  cabinet to reduce to 58 years. MTNL is a disinvested company. MTNL already experienced VRS, in our case no such experience. MTNL Net worth is negative, but BSNL is still having positive net worth and we are incipient sick only. MTNL’s debt servicing finance consumes 63 % of rev. MTNL has already floated bonds with Govt Guarantee.  As on date, Merger plan is not contemplated and so different road map is better as done for different PSUs.)
                                                                                                                  (RP 17-9-19)


“Guidelines for “Streamlining the mechanism for revival and restructuring of sick/ incipient sick and weak Central Public Sector Enterprises: General principles and mechanism of restructuring”


Some Salient Points
3. Primary responsibility for supervision of a CPSE for its efficient functioning lies in the administrative ministry and final view for restructuring and revival of sick and incipient sick CPSEs or taking appropriate measures for CPSEs showing early indications of weakness has to be taken by them with approval of the competent authority after inter - ministerial consultation and concurrence of the Ministry of Finance through PIB/ EFC mechanism as may be required. It is in the public interest to make this process, time bound, comprehensive, performance driven and efficient so that such decisions are taken and implemented in a time bound manner to minimise further losses
4.2.2 Incipient sick CPSEs: A CPSE would be considered incipient sick if it meets one of the following criteria:
a. If its net worth is less than 50% of its paid-up capital in any financial year.
b. If it had incurred losses consecutively for three years
4.4 The administrative ministry will take the following action:
(b) The administrative ministry shall initiate the process for preparation of restructuring/ revival plan, which may include disinvestment or privatisation or closure options, for sick/ incipient sick CPSEs based on the classification as given above within 6 months from the closure of the financial year or within one month from finalisation of Annual Accounts, whichever is earlier.
(c) Restructuring and revival plan for the sick and incipient sick CPSEs shall be prepared within nine months of the closure of the financial year.
(d) External expert agency which has experience and expertise of the business environment, operational issues, technology option and financial viability of the sector in which such CPSE is functioning may be engaged by the government and shall function under the supervision of the administrative ministry for preparation of the future road map.
4.5.1 Perspective of Relevance and Functioning:
a) Background and purpose of the formation of the CPSE.
b) Economic and regulatory environment along with their impact on the growth of the company
c) Liberalisation and its impact on its business operation
d) Ability of the CPSE in adapting new business strategies, technology to regain and sustain its economic viability.
e) Efforts and special interventions made for its revival or avert early sickness and its impact on the health of the CPSE
4.5.2 Strategic Plan for Restructuring/Revival:
(a) The concerned administrative ministry/department should clearly bring out the national and strategic interest served by the CPSEs in the light of the sectoral business environment, domestic as well as global.
4.5.3 Business Plan for Restructuring/ Revival Plan:
A. High Priority or Priority CPSE.
a) For high priority CPSEs, the business plan has to be made keeping in mind the strategic national interest and economically viable business opportunities.
b) For strategic business model, requirement for Government policy convergence should be clearly spelt out to meet the economic viability of such enterprises
4.5.4 Operational Restructuring:
a) Keeping in mind the business plan, the required human resource needs are to be assessed and rationalised.
c) Options for adopting requisite technology and up-gradation of the same as per requirement through various management options including JV, disinvestment or privatisation to be factored into the operational restructuring plan.
d) The options of merger or de-merger of various operations in line with the proposed business plan to ensure continuous procurement of new technology and its up-gradation
4.5.5 Financial Restructuring Plan:
a) For high priority and priority CPSEs, a comprehensive financial restructuring plan should be drawn comprising various methods of financing with minimum and unavoidable viability gap funding in the strategic national/defence interest.
Limited private investment through disinvestment within permissible limits may also be considered under financial plan.
4.6 Mechanism and Methodology to be followed for restructuring/revival/closing of sick CPSEs
(d) Implementation plan with specified time line for various stages should be objective, quantifiable and supported with the monitoring mechanism.

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