Indian telecom agency to become company

The move will provide much needed infrastructure

The Indian cabinet has decided to turn its state-run telecom department into a company.

The decision has been made in response to an increasingly competitive market, after recent moves to deregulate several telecom services.

The new company is to be called Bharat Sanchar Nigam Ltd (Indian Communications Corp).

It will enable the department to resist political pressures as they will no longer be under the thumb of the government

PK Sandhill

But the move has not been welcomed by telecom workers' unions who have threatened to go on strike.

The company will have an authorised share capital of 100bn rupees ($2.2bn) out of which the government will contribute 50bn rupees.

The source of the remaining equity capital has not been disclosed.

Analysts say the move will help the department to compete with domestic and Indian private firms, who have been allowed into various areas, including long-distance telephone services.

Boost for internet market

"It will enable the department to resist political pressures as they will no longer be under the thumb of the government," PK Sandhill of the Associated Chambers of Commerce and Industry said.

It is also expected to help increase infrastructure for India's growing internet market and software industries.

Opposition

The department employs more than 400,000 workers and is said to be massively overstaffed.

Communications Minister Ram Vilas Paswan says the interests of telecom employees will be protected.

"Financial viability, employee retirement pensions and job security were the three demands raised by employees," Mr Paswan said.

The government was negotiating with the various unions, he added.

But telecom unions have reacted sharply to the decision and one body - the National Action Committee Against Telecom Corporatisation - says it will agitate on Friday.

"The committee has called for a nationwide demonstration to oppose the corporatisation decision as we feel the same is not financially viable," PS Ramkutty, joint convenor of the committee, said.

India has three telephone lines for every 100 people and the government plans to increase this number five times over the next 10 years.