Only hard political choices can revive ITI

The Rs 1,000-crore package the government is working on for the revival of ITI will not have the desired impact unless it is followed up by certain key decisions which are very political in nature, according to sources familiar with the public sector telecom equipment manufacturer once a national mainstay.

The staff strength, which is currently down to 14,700 from its historical peak of 32,000 has to go down further to 9,000 by 2007 for the company to become viable. That is why the Rs 558 core sought for VRS expenditure incurred and planned constitutes the most important element of the package.

But the trouble is that the response to the current VRS offer has been poor as compared to the earlier one and the offer has been extended to the month-end.

Sources attribute this to the current political atmosphere with a Congress government at the Centre supported by the Left parties. The previous VRS had many takers as then there was a fear that the company may not survive.

It is also imperative that the number of factories, down by one to six with the closure of the one at Electronics City near Bangalore, be brought down further.

But politics gets in here too in a big way with as many as three factories "" Rae Bareily, Naini and Mankapur "" being located in politically significant Uttar Pradesh and Rae Bareli being the constituency of Congress president Sonia Gandhi.

Those arguing in favour of saving the company says that it has already done a lot to restructure and reinvent itself and has already laid the foundations of a return to viability. What it needs is sufficient orders (around 30-40 per cent of their total procurement) from BSNL and MTNL. For this it is not looking for a price preference.

ITI is willing to match the lowest rates tendered. What it needs is a minimum annual top line of Rs 2,500-2,600 crore to keep overheads to manageable levels.

They also argue that it is necessary for the country to retain some degree of manufacturing capability in telecom to avoid facing foreign suppliers' cartels.

They recall that irrespective of how many lines of C-DoT equipment was actually installed, the capability that Sam Pitroda and his boys established played a significant role in the crashing prices of foreign equipment.

These sources claim that ITI can become viable as it has technologically transformed itself in the last couple of years by accessing new technology for mobile infrastructure and IP switches. GSM technology has come from Alcatel of France and CDMA technology has come from ZET of China.

Technology for new generation IP-based switches has come from Tekelec of the US. As one source asserts, "There is life after C-DoT; this year ITI will be selling less than 2 lakh fixed line switches, compared to 38 lakh at its peak."

The revival package totalling Rs 1,000 crore was submitted to the government 16 months ago. The Rs 508 crore the Union finance minister mentioned in his budget speech was a part of it, just enough to keep the company out of the purview of BIFR.

The company has accumulated losses of Rs 1,048 upto 2003-04 when it made a loss of Rs 706 crore on a turnover of Rs 1,263 crore. As on March 31, 2004, shareholders' funds were at a minus Rs 841 crore.