BSNL links fund allocations for expenditure

The management of cash-strapped Bharat Sanchar Nigam Ltd has decided to link future fund allocations for all 24 circles to the realisation of specific revenue targets in financial year 2011-12. 


In an internal communication, BSNL chairman & managing director RK Upadhayay has directed
all circle heads to go on a revenue maximisation drive, failing which fund allocations will stand frozen. Each circle head has been told to expand business on a war-footing and achieve a minimum 25% revenue growth this fiscal. 


"Future budget allocations across circles will directly be in proportion to revenue receipts generated by them. A circle that misses revenue growth targets will be branded a non-performer and denied its monthly funds allocation," a BSNL executive familiar with the matter told ET. 


The CMD's directive comes at a time when the loss-making telco is running a near 500-crore revenue deficit every month. Telecoms minister Kapil Sibal wants the BSNL management to take the tough calls and manage it like a private telecom company. 
BSNL chief general managers (CGMs) in all 24 territorial circles have been categorically told to crank up monthly revenues from the broadband, WiMAX, mobile, value-added services and leased circuits businesses. 


But company executives believe realising the higher revenue target could be a tall order since the state-owned telco has virtually put all its expansion-oriented tenders on hold. 
"It will be tough to grow business in a scenario where the BSNL management has put all its mega equipment procurement decisions linked to expanding its cellular, WLL and broadband networks on hold," said a senior BSNL official. 


Under the new revenue maximisation strategy, BSNL's circles have been divided into three revenue-wise categories - those with less than 1,000 crore revenue, those with 1,000-2,000 crore revenue and circles with revenues in excess of 2,000 crore. 


BSNL's revenues have crashed over the past five years. Back in 2005-06, it had notched up revenues of 40,177 crore. Thereafter, it dipped to 32,045 crore by 2009-10 when BSNL suffered a 1,823 crore for the first time. 


The company's revenues are tipped to slide further this financial year to below 30,000 crore, that may lead to still higher losses. 


Small wonder, the steep decline in BSNL's profitability in recent years had induced prime minister Manmohan Singh to seek suggestions from his telecoms advisor Sam Pitroda and banker Deepak Parekh. They had recommended a strategic 30% stake sale and staff cuts by 100,000. They had also suggested raising funds from the sale of infrastructure, such as signal towers and real estate. But the government's failure to act on the Pitroda report, despite the BSNL board's approval, has posted a serious setback in plans to revive the telecom company. 


Subsequently, BSNL planned to sell 30% stake through an IPO. But the telecom department told a parliamentary committee last year that in order to get the right valuation, the state-run telco's listing would be taken up only after the company's performance improved. 

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