Who'll foot the bill?

The country can expect to see another round of reductions in long-distance telecom tariffs, following the One India tariff announcement, though it's unlikely that rural India will join in the party since the higher monthly rentals that have to be paid will increase nearly six-fold in some cases. While there has been a lot of praise for Communications Minister Dayanidhi Maran, whose brainchild this is, the question is: who is going to pay for this? When protesting to Mr Maran some months ago, the chairman of the public sector Bharat Sanchar Nigam Ltd (BSNL) had said his enterprise stood to lose Rs 4,500 crore if the scheme was implemented. Since then, some changes were made in the scheme, such as allowing BSNL and its metro sister, Mahanagar Telephone Nigam Ltd (MTNL), to hike rentals to a fixed Rs 299 per month for those opting for the one-rupee-to-anywhere plan; current estimates are that the two state-owned enterprises could end up losing Rs 2,000-3,000 crore in a full year.

BSNL charges around Rs 2.20 per minute for a long-distance call, while it costs Rs 1.20-Rs 1.30 to complete the call, including the cost of carrying the calls across the long-distance network and the 30 paise access deficit charge (ADC) that is levied on all domestic long-distance traffic. The remaining rupee is used by BSNL to subsidise its local call business. In other words, once the new rupee per minute rate comes into effect, long-distance traffic will have to grow dramatically for BSNL to be able to continue to make the kind of money it has been doing till now. BSNL's hope is that, between the higher long-distance traffic and the increased rentals from those who opt for the One India plan, it will be revenue-neutral. Of course, the actual losses will depend upon how many people eventually opt for the One India plan.

The other problem with the new scheme is that, once again, it takes away the power of the regulator and of the telecom firms and puts it back where it used to be before reforms began, in the hands of the telecom minister. Since all tariffs are dependent upon the regulator, a truly independent BSNL/MTNL would have waited for TRAI's detailed Interconnect Usage Charges order that would have specified the ADC as well as the termination and carriage charges that are paid to other telecom networks when calls are routed to them, and then done their maths on what the appropriate tariff would be. Now, when the TRAI comes out with its IUC order, it will willy-nilly have to ensure that it conforms to the calculations that BSNL/MTNL have assumed while doing their maths. The crux of the issue is that, while long-distance tariffs have so far subsidised local calls, any reduction in long-distance tariffs can happen only when local call rates are hiked. It is not clear if One India has fully achieved this objective through hiking monthly rentals. If it has not, there can be no doubt that the balance will have to be made good through hiking the ADC that is levied on all long-distance traffic and then handed over to BSNL to subsidise its below-cost operations. In which case, customers could end up paying for One India through another route.