MTNL gives details of VRS package under merger with BSNL

VRS may reduce BSNL-MTNL’s employee nos by over half

State-owned telecom operator Mahanagar Telefone Nigam Ltd or MTNL has released details of the voluntary retirement scheme or VRS that will be available to its employees as part of its merger with BSNL.

The company said the VRS has been based on the ‘Gujarat Model’. Under this model, employees will get a sum equal to 35 days of salary for each year of completed service, plus 25 days worth of salary for each year of service left till retirement.

The total amount to be paid to employees (ex-gratia) who opt for VRS has been pegged at Rs 17,169 cr, including that for BSNL as well.

The ex-gratia (one-time payment) on VRS wil be paid in two installments of 50% each during the current financial year and during Apr-Jun of next year. It will be supported via budgetary allocation from Government of India.

In addition to the Rs 17,169 cr of one-time VRS payment, MTNL and BSNL will also have to start paying pension to the employees who opt for the VRS earlier than usual.

This additional impact of early pension liability is estimated at Rs 12,768 cr, according to government’s letter to MTNL.

MTNL’s disclosure of the plan details also talks about the commutation of pension for VRS employees.

Commutation refers to the withdrawal of pension benefits in a lump-sum to meet emergencies such as medical requirements and family emergencies.

“For the employees currently more than 55 years of age, on optingfor VRS, the pension will be commuted only when they attain 60 years of age (current retirement age). For the employees, currently of age 55 years and less, on opting for VRS, the pension will be commuted in the sixth year i.e. 2024-25,” MTNL’s intimation said.

Even though the official note doesn’t mention it, it is expected that the VRS scheme will bring down the employee strength of BSNL by about 60% and that of MTNL by even more.

BSNL currently has around 176,000 employees and MTNL has around 22,000 employees. BSNL spends about 75% of its total revenue to pay salaries, while MTNL spends about 88% of its revenue for the same purpose.

The two companies have been on a downward spiral after private companies were allowed into the telecom sector in the 1990s.

Consumers preferred to get their connections from private companies as BSNL and MTNL’s levels of customer service left much to be desired. The companies have since then conducted many internal workshops and awareness campaigns to improve staff behavior towards customers in an effort remain relevant in the post-monopoly era.

The government is unwilling to close down or privatize the companies, partly because of strong opposition from the labor unions.

However, the revival plan includes provisions for the sale or lease of the assets — such as fiber and buildings — of MTNL and BSNL.

“The proceeds of asset monetisation will be credited to BSNL/MTNL to service the debt, CAPEX and other requirements,” MTNL’s intimation indicated.

You can also read Government of India document detailing the MTNL-BSNL merger process.