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August 22, 1997


MTNL not to absorb DoT employees

Notwithstanding the Disinvestment Commission recommendations, the communications ministry has ruled out the possibility of the Mahanagar Telephone Nigam Limited absorbing those employees who are on deputation from the Department of Telecommunication.

The Disinvestment Commission had, in its third report, recommended that "The Mahanagar Telephone Nigam Limited will need to phase out deputation from the DoT according to a declared plan of absorption."

The commission also suggested that this should be done by "Offering senior executives attractive emoluments." The emoluments are to be determined on the basis of performance-related contracts for five years. The recommendations are aimed at facilitating a smooth sailing for the government's plan for divesting 15 per cent stake in the Mahanagar Telephone Nigam Limited.

The communications ministry's move is likely to adversely affect the pricing of MTNL's GDR issue. The disinvestment will be done through a global GDR offer of 107 million shares.

The Telecom Commission members, however, find this particular recommendation not feasible. According to the members, giving attractive emoluments to those employees, who are on deputation to MTNL, will create unrest among the DoT workforce.

The communications ministry officials fear a nation-wide strike if the Telecom Commission allows MTNL to absorb deputed executive on a higher pay scale as DoT executives will be deprived, even though they share the same rank and grade.

Regarding the possibility of a strike, a Telecom Commission member said "Last year, there was a nation-wide strike of communications ministry employees though the disparity was only of Rs 100. This time the disparity in pay scales would be in range of Rs 900 to Rs 2,400 which surely means a strike."

This will, in turn, mean that DoT will have to raise the salary of its executives to ward off the impending strike.

According to communication ministry officials, a raise in pay scale is out of the question as it amounts to a huge burden on the exchequer. Hence, the decision is to maintain the status quo. However, this may affect the MTNL's GDR prices.

According to investment bankers, global investors would like to be sure that their investments are going into enhancing the profitability of MTNL and given the record of the government, this does not seem to be happening.

According to the commission's third report, MTNL had, as on March 31, 1996, lent Rs 59.32 billion to DoT. In the process, some of the transactional costs on Mahanagar Telephone Nigam Limited's borrowings, which are quite substantial, are being absorbed by the public sector company and this has adversely affected its profitability and share value.

A large section of the investors are of the opinion that siphoning off of MTNL's money by DoT is taking place because over 99 per cent of MTNL's employees are on deputation from DoT. These executives are vulnerable to the pressure from DoT as their carrier prospects are dependent on the department.

- Compiled from the Indian media

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