What happens when the government tries to revive a loss making but politically sensitive PSU in a manner that has a harmful effect on another PSU? Answer: the other PSU too comes under threat of becoming sick.

In an effort to revive telecom equipment manufacturer ITI, the Department of Telecommunications (DoT) forced Mahanagar Telephone Nigam Ltd (MTNL) to give orders for broadband and GSM to it. ITI is a politically sensitive PSU as it has a large manufacturing unit in Rai Bareli, Congress president and UPA chairperson Sonia Gandhi’s constituency.

When ITI was not able to deliver in two years, MTNL cancelled the orders for broadband. However, MTNL has suffered huge reverses in terms of loss of potential subscriber base. MTNL has a waiting list of 33,000 for broadband connections in Mumbai. In 2006, DoT had forced MTNL to give an order of 500,000 broadband connections. Till now, ITI has supplied only 40,000 connections. Consequently, MTNL cancelled the order.

Similarly, for GSM, MTNL gave ITI an order of 1.25 million lines in 2006. The project was to be commissioned by December 2006. Even now, the project is not complete. ITI has commissioned only a fourth of the quantity till now. Moreover, most of it is through swapping with the existing network. This means that no new capacity was added.

“ITI could not complete any of the projects,” said MTNL chairman and managing director R S P Sinha. “Therefore, in order to protect MTNL’s interests we have gone for other alternatives. “I do not agree with this,” said ITImanaging director S K Chatterjee. “We have supplied a part of the broadband order and are proceeding with the GSM order.” But according to Sinha, on the GSM project, ITI is working only on the non-core areas on the outskirts of Mumbai.

... contd.