The Telegraph
Since 1st March, 1999
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Bad news on phone
- BSNL puts higher rental on the table

New Delhi, Jan. 18: Land-line phone users, get ready for a shock: monthly rentals could rise and free calls could be scrapped.

Bharat Sanchar Nigam Ltd (BSNL), the largest provider of fixed-phone services with 40 million subscribers, is considering the two steps to make up for its losses arising from a recent cut in access deficit charges (ADC).

Early this month, the telecom regulator, Trai, cut ADC ' a charge telecom companies pay to subsidise loss-making services in rural areas. ADC is a component of the cost of long-distance calls.

As it has installed most of the telephones in rural areas, BSNL gets a lion's share of the Rs 5,000 crore a year the charge generates.

On January 6, the Telecom Regulatory Authority of India cut the per minute ADC for long-distance domestic calls over 200 km from 80 to 30 paise and for outgoing overseas calls from Rs 4.25 to Rs 2.50.

The new ADC regime comes into effect from February 1.

The regulator claimed that the lower ADC, leading to a cut in call cost, would not hurt BSNL which would continue to receive Rs 5,000 crore a year, betting on greater use stemming from cheaper rates.

However, BSNL ' and its twin Mahanagar Telephone Nigam Ltd which is mulling a similar move ' anticipates a loss of Rs 1,254 crore because of the cut in ADC.

Proposed customer-unfriendly measures such as higher rental with no free calls could be a method of pressuring the finance ministry into compensating them for the anticipated loss of revenue a little over a month before P. Chidambaram presents the budget.

A senior BSNL executive said: 'The regulator seems to have forgotten the financial burden that we would have to face while lowering the ADC. As a commercial organisation, we would have to take steps to manage the burden.'

A.K. Sinha, chairman and managing director, said re-arrangements like revision of rental, reduction in the number of free calls and an increase in tariff would be examined to compensate for the loss.

BSNL has approached the department of Telecommunications for approval, pointing to the problems it could face if no action is taken.

Sinha said: 'We have written to the department with detailed analysis of the new ADC regime, including its impact and the options available to us.'

A senior department official said the BSNL call rates are the lowest in the country and have helped the poor gain access to communication services. BSNL charges Rs 1.20 for a three-minute call while Trai has suggested the same rate for a two-minute call.

The official also said BSNL is offering services at a subsidised rate in rural areas and low rentals in urban areas.

Department sources agreed. 'The cut in the ADC has hit them badly. We will examine their analysis and soon send our suggestions. It is difficult to comment on whether a hike in rentals or other unpopular measures are necessary. However, the option to approach the finance ministry is still open.'

When the cut in ADC was announced, Sinha had said: 'We are yet to understand the impact. The new regime (ADC) is unlikely to upset our existing plans. We hope that the reduction will be offset by the growth in volume of calls.'

Clearly, BSNL is no longer optimistic about a volume surge to compensate for the loss.

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