ITI: Mission Liquidation !

(Based on a paper circulated by ITIEU in a CPSTU meeting on 17-18 February, 2007)

ITI (Indian Telephone Industry) is sick while the ICT (Information and Communication Technology) industry is in boom. It is the irresolvable paradox of the era of LPG (Liberalisation, Privatisation and Globalisation). The story of ITI is not just a story of economics of mismanagement, lack of working capital, lack of technology, unfavourable pricing, depressed sales, etc. Rather, it is a clear-cut political story of our ruling establishments becoming anti-CPSEs, anti-worker and anti-nation, and, irrespective of their political colours, dancing to the tunes of US imperialism, WTO and TNCs.

In spite of the unfavourable domestic and global environment, CPSEs have emerged in flying colours and still contribute the larger share of over 11% of the GDP and 27% of industrial production in the country (as of 2006) as they have the wherewithal to withstand any economic storm because of its size and the workforce. One third of the government’s revenue generation is from CPSEs and they also earn a handsome 18% return on investments for the government. CPSEs still hold monopoly in coal, crude oil and refineries.

The telecom sector is growing rapidly, according to a government communiqué, from its 20-25% growth in 2003 to 40-45% growth in the last couple of years. We have the fifth largest network in the world next to China, USA, Japan and Germany. Our country is surpassing its Teledensity target of 15 by 2010 as per New Telecom Policy, 1999 as it is already pegged to attain a target of 22 by 2007 (actually it is more than 18). ITI and BSNL together constituted the monopoly of telecom equipment manufacturing and the unimaginably vast telecom network that is spread at the length and breadth of this country. But, unfortunately, BSNL is relegated to the third position as a telecom player in the country and fourth position in overall telecom providers next to Airtel, Reliance and Vodafone. And the ITI is now struggling for its survival begging for funds from the government. “The government’s wrong policies led to the extent of Commerce Secretary of US protesting against 30% quota for ITI in government orders of telephone manufacturing and the government is not ashamed of it.” Rather, the government is planning for “dilution of stakes,” another innovation for the term ‘disinvestment,’ by 10% in BSNL in spite of having sufficient cash surplus of more than 40,000 crores while the actual requirement for the proposed expansion is only 15000 crores. Such a disinvestment is only an indirect route for privatization. The government is hatching a conspiracy to sell out the magnificent CPSE to private multinationals and corporate houses. The way was cleared, way back, by increasing the ceiling for FDI to 74%.

ITI was one of the premier institutions of the country in telecom equipment manufacturing. ITI used to cater exclusively to the manufacturing needs of the then DoT, and the present BSNL. In the name of providing level playing field to the multinationals and private corporate houses, ITI was forcefully pushed into the competition – without an adequately level playing field for itself! It was an unequal competition consciously designed for the purpose of liquidating ITI. The Union Government in the 1980s set up C-Dot under Sam Pitroda to develop latest state-of-art technology including 10000 lines exchanges for telecom expansion. But in return for France giving missile technology to India, the then French President Mitterrand insisted on India buying the technology of a French telecom multinational also. So the indigenously developed C-Dot technology was abandoned for the sake of French multinational technology. Secondly, when mobile phone technology had created a sweeping revolution in telecom the world over, unlike China which negotiated with global telecom majors for technology transfer and domestic production, the Indian government freely opened the doors for foreign MNCs for the production of mobile phone technology and handed over licenses for key circles to private big business operators. But ITI infrastructure was not at all used for GSM manufacture or for handsets. Not only that, the entire infrastructure of the BSNL was put at the disposal of the private big business companies for no gain for BSNL though BSNL was forced to compete with all these global majors. ITI was looted by some corrupt bureaucrats as confirmed by a vigilance enquiry and the workers demanded a CBI enquiry which was never instituted. A major land scam is in the offing as there is a proposal to auction off valuable ITI land without fixing a higher reserve (minimum) price for land auction in tune with the sky-high market prices of land in Bangalore.

To come to the immediate problems confronted by the workers of ITI, none of the decisions applicable to CPSE workers are applicable to ITI workers. For example, the issue of merger of DA with basic pay is not applicable to workers of ITI as it is a loss-making company. ITI workers have to fight for the applicability of the issue of DA merger while the rest of their brethren are fighting for its retrospective effect. In the entire CPSE, retirement age is increased to 60 while it is brought back to 58 for ITI workers. The strength of workforce which was around 32000 in 1990 is ruthlessly brought down to around 13000 over a period. The projected ‘headcount’ (the term for workers in dehumanised management-speak), according to the ITI’s revival package, in 2011-2012, taking into account natural attrition due to superannuation, other separations including separation through VRS and induction of fresh qualified personnel is estimated to be around 8500. Even the wage revision was implemented much delayed, i.e., only from 2000 instead of 1997, and almost all kinds of fringe benefits, leave alone upward revision, are either withdrawn or suspended. Workers are facing uncertainty about disbursement of salary every month and are completely under dark about pay revision that is pending since 2007. 39 months arrears of the previous wage revision also are not yet paid while the management has not even showed it in the revival package.

The main concern of the ITI is the badly needed working capital. The main reason behind long-accumulated losses of few thousands of crores of rupees (2500 crores approximately) is the government’s step-motherly attitude that refused to fund the ITI in time. The pending arrears for the supply to DoT and BSNL also run into hundreds of crores. On many instances, ITI was left with no option but to accept orders that cannot even equal material costs for the fear of being idle. In spite of signing MoU, DoT has, on many occasions, failed to honour its commitment, which led to the extent of ITI protesting against signing any more MoUs for more than 9 months in one instance. ITI was forced to sell its products at unaffordable prices that cannot even cover the production cost because of its cash-rich MNCs who wanted to keep the prices depressed in order to gain a foothold in the market. ITI also could not match private players, not because indigenous technology was impossible to develop, but because of the conscious policy of the government to discourage any indigenous technology in order to promote multinational technology providers. As a result, R&D was also almost eliminated.

On the other hand, MNCs were offered red carpet welcome by the government to loot our huge telecom network, market, land and the nation. ‘Special Economic Zones’ were offered to the MNCs while domestic PSEs were converted into ‘Special Sickness Zones’. The land offered for a pittance to the private players turned into the graveyards for the domestic PSEs. It is not just the land but also the unimaginably huge tax concessions for years together. Sriperumpudur in Chennai is not merely a graveyard for Rajiv Gandhi but also an assassination yard for local telecom PSEs. The country has seen more than 60000 crores of inflow of FDI by private MNCs so far but the government never cared for infusing similar capital for the survival of domestic PSEs like ITI which otherwise have immense potential to compete with private players including all varieties of MNCs.

Still, ITI has withstood this assault and has started showing signs of making profits. The financial assistance of Rs. 901 crores in 2005 provided by the government did help but only partially as the delay has made accumulated losses to increase more than the quantum of assistance. ITI has submitted a revival package in 2007 which is still pending with the government. It is already having orders for more than 1900 crores on hand and expecting orders for another 3500 crores soon. If the government can take care of the accumulated losses and infuse some working capital, then the ITI can very well become self sustainable and even make profits.

In such a scenario, merger of ITI with BSNL could be a viable option. The government is blocking the development of all PSEs, including BSNL and ITI in order to promote multinationals. In 2005, BSNL floated a global tender for 45.5 million GSM lines considering the large demand for mobiles. But, it was stalled by the private operator Motorola by raising a dispute in the court which was ultimately dismissed in 2007. The BSNL’s plans to issue purchase orders were again stalled by the new Communications Minister Raja in favour of the legally defeated Motorola citing higher costs compared to the cost finalized by the MTNL. The Minister conveniently sidelined the technical difference as also the difference in ratio of 2G and 3G lines in the tenders. According to the union, “The tender was reduced to 50% of the original and purchase orders issued to Ericsson for 13.5 million GSM lines only. The second bidder, Nokia refused to accept the purchase order for the balance 9.5 million, since the price was arbitrarily reduced. It was reoffered to Ericsson, which also refused. The result is that BSNL is not having GSM lines at present to provide mobile connections. The legally defeated Motorola has won politically. Where BSNL used to provide about 15 lakh connections in a month, it is not even able to provide half of it now. As a result, BSNL has gone down to the fourth from the earlier second position in the number of mobile connections.” The government’s design has come true. Even profit-making BSNL is being pushed out of competition for its incapacity to fulfil the market demands.

It is in this backdrop that merging ITI with BSNL can be a win-win situation for both. ITI will not be a burden on BSNL, rather ITI can act as a manufacturing arm of the BSNL. In such a situation, the BSNL need not wait for any tender to be approved by the government, rather BSNL can meet its requirements of the market, on the basis of its own decisions, using the new avatar of ‘ITI’ as BSNL’s own manufacturing unit. Such an amalgamation can enhance the resistance power and bargaining power of the working class that can also make BSNL free from any political manipulations dictated by the private operators like Motorola and Nokia. The combined strength of ITI and BSNL can be a symbiotic reinforcement to each other. The current losses of ITI that runs into few hundreds of crores (meager 403 crores) can easily be wiped out if quantum of sales is increased. In that way, accumulated losses can also be taken care of, even if the government does not come forward for any sincere revival package. BSNL’s financial viability, an issue that the BSNL union itself is concerned about and is raising as an issue even in their repeated strikes, can only be strengthened by BSNL’s own manufacture of telecom equipment and there is no better option than to takeover ITI, which has enormous physical assets despite accumulated balace-sheet losses, than setting up new units. ITI also has a 5000 crore asset of lands in prime localities. ITI on its own right can very well become self sustainable provided the government reversed its undeclared policy of liquidating it. Saving ITI is part of saving BSNL.

ITIEU also has requested the CPSTU to pass a resolution and the Joint Forum of BSNL Unions/Associations of Executives and Non-Executives to include the demand for the takeover by or merger of ITI with BSNL, which has given an indefinite strike call from 26 February onwards against the proposed disinvestment and few other demands.

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