Much of the debate on fixing the state-owned BSNL, whose profits have plummeted, can’t see the wood for the trees. Hopefully, the Prime Minister’s Office (PMO), which is getting all manner of presentations on it, is able to see this. One argument, by the telecom ministry, is that BSNL should halve its order given its declining market share. Even a cursory look at BSNL’s subscriber base makes it obvious that its market share started declining two to three years ago when it didn’t have the capacity to deliver more phones — keep in mind that newcomer Uninor, with zero brand recall in India, got a million subscribers in 20 days in just eight cities! Additional capacity, and fast, is the need of the day.
The other argument is that BSNL shouldn’t be negotiating with Ericsson since the Central Vigilance Commission (CVC) proscribes post-bid negotiations. There are obviously reasons for the norms, but with BSNL getting Ericsson to cut prices by a third, it’s difficult to argue the CVC norms are cast in stone and that it’s better for BSNL to re-tender — a ridiculous concept of a short re-tender is being promoted, while it is well known government tenders take one to two years to get approved.
But even these are not the real issues. The real issue, for all PSUs, not just BSNL, relates to what is called “instrumentality of state”. Over the years, various courts have interpreted PSUs to be an arm of the state (“instrumentality”, according to Article 12 of the Constitution) and, by virtue of this, courts can give directions to various PSUs. This is the clause under which, for instance, the courts directed Air India to absorb its temporary workers; under which Nokia Siemens Network (NSN) went to court arguing that BSNL’s decision to disqualify it on technical grounds was incorrect. (However, a subsequent integrity panel comprising two retired election commissioners of India said BSNL was correct). If a private firm doesn’t give a contract to an NSN, or anyone else, the aggrieved party cannot go to court. But since a PSU is considered an arm of the state, this can be done arguing that the government and its affiliates have a duty to give everyone a chance. Ditto for aggrieved employees and a host of others. In other words, crippling a PSU’s functioning is one of the easiest things in the world.
If the PMO is serious about allowing PSUs to function in the manner private firms do, this is what it needs to focus on, either through amending the Constitution (in the manner the PM suggested will be done to allow overseas Indians to vote) or by ensuring it is heard/decided by a full bench of the Supreme Court.
In a recent case, involving the Mumbai International Airport (MIAL) and a firm which never got the contract for duty-free shops, the Solicitor General (SG) argued precisely this, that the principal reason for privatisation was to improve operational efficiencies — if the privatised body, in this case MIAL, was to be viewed as an instrumentality of state, how was it to function? Imagine a situation in which the Anil Ambani-owned Flag Telecom is free to award contracts to who it wants but the now privately-owned VSNL, though in the same line of work, can be taken to court by an aggrieved party since, by virtue of once being a PSU, it can be considered an instrument of state. The SG didn’t impress the Bombay High Court, but it is vital the government pursue this line, if need be constitutionally.
But, and here’s the rub, what happens if a firm, government or private, acts in an unfair manner — a telecom firm, say, refusing to give telephone lines to certain sections of society; or a private airport awarding expensive contracts which are, eventually, to be paid for by citizens? More on this in a subsequent article, but a distinction needs to be made between what is in “public interest” (like gold-plating airport costs) and what is “commercial” (awarding a contract). There are obviously grey areas, as in the case of the CVC guidelines, but a few points need to be kept in mind. One, when it comes to issues like gold-plating costs, there are independent regulators whose job is to review this. Two, even if the government is able to exclude PSUs from the purview of Article 12, there is nothing to prevent courts from issuing writs in matters of public interest. There are Supreme Court judgments (like the one by Justice Ahmad and Wadhwa in UP State Co-op versus CB Dubey, 1999) on this and in even the MIAL case, the judgment said MIAL was “performing the public function in the public interest and, therefore, in performance of those functions, it is obliged to act fairly and reasonably and justly …” In other words, the power of writ will remain applicable even if PSUs are not instruments of state, but this will then be applicable only when there is genuine public interest involved.