VRS package may save Rs 1,080 cr in annual salary tab: MTNL chief

THE Voluntary Retirement Scheme (VRS) being proposed by the telecom department could save Rs 1,080 crore in annual wage expenses for Mahanagar Telephone Nigam Ltd (MTNL), and the telco expects about 9,500 employees to opt for the scheme as and when it comes up, according to its chairman.
The Department of Telecom (DoT) has prepared a rescue plan for the distressed PSUs, MTNL and Bharat Sanchar Nigam Ltd (BSNL), in form of a revival package that entails components like VRS, asset monetisation, and allocation of 4G spectrum. According to sources, the revival plan may be taken up by the cabinet soon.
MTNL Chairman and Managing Director PK Purwar told a news agency...
recently that the telecom corporation expects annual salary expenses to reduce by Rs 1,080 crore, from the current about rs 2,500 crore - bringing it to far more managable levels of 40-50 per cent of revenue.
"We are expecting that nearly 50 per cent of the targeted employees may (opt for it)... 19,000 employees will be offered and we expect that number of people who will opt for it will be roughly 9,500. We will be saving about Rs 1,080 crore annually in salaries if VRS package is taken by 9,500 people," Purwar said.
He asserted that there is no proposal for lay-offs, and opting for VRS, too, would be purely at the discretion of employees who are eligible for it.
"There is absolutely no proposal in management or government to lay-off any employee in MTNL. VRS is a voluntary offer so it is up to the employees.... We expect that people who are retiring in the next four years may find it quite attractive. So from that point of view, the number which the MTNL management is looking at (around 9,500) is achievable," Purwar said.
Loss making state-run telecom firms MTNL and BSNL have asked for a voluntary retirement scheme for employees on the 'Gujarat model'. Under the model, an amount equivalent to 35 days of salary for each completed year of service, and 25 days of salary for each year of service left till retirement, is offered. The VRS scheme for BSNL and MTNL will have revenue impact worth Rs 6,365 crore and Rs 2,120 crore on each company, respectively. The revenue-to-wage ratio in case of MTNL has swelled to 90 per cent while in the case of BSNL it is hovering around 60-70 per cent. The DoT has recommended that VRS of both PSUs should be funded through a 10-year bond issue and the bonds should be paid back by lease revenue that they will get from land asset monetisation as well as corporations' earnings. Implementation of VRS is expected to lower expenses of the firms and provide them the much-needed liquidity.
Earlier, the board of BSNL reportedly approved the proposal to lay off over 54,000 employees. The final call on the matter is expected to be taken after the 2019 Lok Sabha elections are over. The BSNL board has approved three of ten suggestions put forth by a government expert panel, the Deccan Herald reported. The approved suggestions include reduction in retirement age from the existing 60 years to 58 years, Voluntary Retirement Scheme, and fast-tracking allocation of 4G spectrums to BSNL, the daily reported.
The expert panel, which recommended the steps approved by the BSNL board, was formed in the face of mounting losses at the telecom company. The three-member panel consists of professors Rekha Jain, Vishal Gupta and Ajay Pandey from Indian Institute of Ahmedabad (IIM-A).
The decision to cut down the retirement age and announce VRS package will see around 54,451 BSNL employees exiting the government-owned telco, the report said. This constitutes around 31 per cent of the 1.74 lakh-strong workforce of BSNL.
The move is expected to help the state-run telecom firm save Rs 13,895 crore on the wage bill over the next six years, whereas the VRS might help it save Rs 1,671 crore to Rs 1,921.24 crore every year, the report said. The decision to announce a VRS package could help the embattled telecom operator save up to Rs 1,921 crore annually, the report said, but at a cost of 13,000 crore
On the other hand, the Department of Telecommunications (DoT) is likely to wait for the 2019 Lok Sabha elections to be over before going ahead with the proposals regarding retirement age and VRS. The DoT has decided to wait as announcing VRS packages or layoffs and shutting down businesses of the telecom firm now could have a significant bearing on the employees and the elections, the report said.
Moreover, reports suggest that the DoT will approach the Election Commission of India seeking approval for its Cabinet proposal to offer VRS to BSNL and MTNL employees. The telecom ministry has to seek ECI's approval before going to the Cabinet as the Model Code of Conduct is in place in view of 2019 Lok Sabha elections. The DoT is reportedly preparing a Cabinet note for its VRS package.
BSNL has been posting losses since the entry of Reliance Jio in the Indian telecom market and the tariff war that followed. Last month, the company failed to pay its employees for the first time since it started operations. The full salaries were later disbursed after government released pending dues.
Meanwhile, reports suggested that the DoT may implement the recommendations under the 7th Pay Commission for BSNL sometime in April 2019. The department has already forwarded the demands of salary and pension hike raised by BSNL employee union AUAB to the Ministry of Finance.