Wednesday 17 October 2012

Why does not Government sell BSNL and MTNL?

In the aftermath of a wave of reforms (more correctly incremental reforms), P. Chidambar said his government now gives more emphasis on quality of expenditure. Its welcome. In an effort to reduce fiscal deficit government now wants to reduce  unnecessary subsidies which according to them are fertilizer, oil,  though this have been challenged by IIM-A professors and C. P. Chandrasekhar and Jayati Ghosh ( here, here). Kelkar also recommended the same. It’s a step in right direction. But how justified is subsidizing the rich people who travel in Air India? Why does not government withdraw itself from this sector which private parties would welcome? Does not this reduce fiscal deficit? Whose interest it is serving? Is it seriously trying to increase quality of the expenditure? What would Mr. Kelkar and newly appointed chief economic advisor Rahuram Rajan, who also wants to see fiscal deficit reduced (read reducing subsidies) to the finance ministry say?

The Empowered Group of Ministers has recommended that all telecom companies with more than 4.4 gigahertz of spectrum are to pay a one-time fee for it. Lo and Behold, MTNL and BSNL want to the government to pay one-time spectrum fee for it. It means government has to pay Rs 11,000 crore subsidy.  The loss figures for BSNL is Rs 8,800 crore in 2011-12, and for MTNL it is Rs 4,100 crore.

Who will pay these losses? Aam aadmi, for whom the government is so much concerned about? How will the government raise this staggering amount? From trees? Surely, money does not grow on trees, as our prime minister often argues.

We have always heard government talking of selling PSUs or disinvestment. The government seems to sell profit making PSUs. But why does not talk about selling of MTNL and BSNL?

Will the government encourage poor quality of expenditure??? 




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