The Telegraph
Since 1st March, 1999
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The companies (amendment) bill, presented to the Rajya Sabha, is virtually the only movement on the reform front. There is a limit to touting the national highway development programme. In every other area (value added tax, privatization, foreign direct investment, agriculture) the government has moved into election mode. And this hypothesis is vindicated once again by the decision to roll back telephone tariffs. Pulse rates for calls from fixed to mobile phones have been increased from 30 to 60 seconds, Bharat Sanchar Nigam Limited has increased the number of free calls on basic phones and Mahanagar Telephone Nigam Limited has also reduced fixed to mobile call charges. It is significant that Mr Venkaiah Naidu is keen to claim the rollback credit for the Bharatiya Janata Party, rather than for National Democratic Alliance allies. But this credit has doubtful validity. First, as Mr Arun Shourie pointed out, this is the fourth time since 1999 that attempts at tariff rationalization have been rolled back. Second, both the BSNL and MTNL will suffer revenue losses, with losses to the former as a result of the present changes estimated at Rs 3,476 crore. MTNL losses are lower at Rs 146 crore. The government is in no position to bail out BSNL or MTNL through supplementary grants. Third, this will therefore adversely impact expansion and telecommunication network up-gradation plans of both BSNL and MTNL. Quite understandably, private operators concentrate on metros and larger towns.

Rural expansion, especially below the district-level, is BSNLís territory. One should also mention that the largest expansion in cell phones is thanks to BSNL, not private operators. While tariffs are indeed dependent on the interconnect user charge regime and the Telecom Regulatory Authority of India will review IUC issues afresh, the broad message is one of pandering to metro users at the expense of rural ones. This fits in with the BJPís strategy of pandering to the urban middle class and trading community. Other than VAT postponement, there have been tax sops to edible oils and textiles and waiver of interest on agricultural credit in 14 states. An increase in excise exemption limits for power-looms and ready-made garments is also expected. While the governmentís cynical use of populism is understandable, the argument that the telephone tariff rollback is in the countryís interests is not.

Measured per capita, India continues to have one of the lowest telephone penetration ratios in the world. The number of lines, especially of the mobile variety, has indeed increased sharply in the last one year. But the base is still low. Further expansions are contingent on reasonable tariffs that do justice to both the consumer and the provider. That is the TRAIís job, without meddling from the government.

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