Interim financial assistance to M/s. ITI Ltd. for payment of salary to its employees
No: ----- Dated: Feb, 28 2014
Interim financial assistance to M/s. ITI Ltd. for payment of salary to its employees
The Cabinet Committee on Economic Affairs has approved financial assistance of Rs. 200 crore in the form of a soft loan to M/s Indian Telephone Industries Ltd. for mitigating the hardship being faced by the company in paying salary to its employees.
The soft loan of Rs. 200 crore is for payment of salaries to the employees of M/s ITI Ltd. Salaries will be disbursed as and when they are due.
The direct beneficiaries will be the employees of M/s ITI Ltd. whose strength as on 1st December 2013 was 7633 and their family members. M/s ITI Ltd., the company, will be the indirect beneficiary as it will not lose its employees.
As the proposal is for payment of salaries, there will be no any direct or major commercial impact. The soft loan will ensure that employees of M/s ITI Ltd. receive their salaries on time and motivate them to work in the company, which is on a slow and steady come back trail from being a 'sick' company.
Background:
M/s ITI Ltd., Bangalore, a Public Sector Undertaking under the Ministry of Communications & IT, Department of Telecommunications (DoT) was established in 1948 and converted into a PSU in 1950. It is the first PSU in the country. The company has incurred accumulated losses of Rs. 4,527 Crore as on 31.03.2013.
Due to a change in the technology preference in the market coupled with inadequate in-house infrastructure and R&D for catering to an exponential increase in wireless technology, M/s ITI Ltd. has not been able to compete on its own strength. In the past the company has been dependent on MTNL and BSNL to receive orders. The current level of losses of ITI Ltd. is largely on account of lack of profitable orders and heavy interest burden on borrowings. With shrinking of demand for fixed telephone lines, the company had diversified its business from production of fixed lines equipment to GSM equipments, trading activities and turnkey projects. However, margins in trading activities have been rather thin. The high fixed costs along with the social obligation of running some non-profitable operations in the past have resulted in loss over the years. These losses have resulted in the inability of
the company to invest in R&D and new product lines which could have helped the company achieve better margins in competitive market, where most technologies become obsolete quickly.