The Hindu Business Line : ADC relief

The Telecom Regulatory Authority of India's decision to slash Access Deficit Charges by over a third to Rs 2,050 crore is likely to provide some tariff relief to consumers from April 1. However, the relief will flow mainly to international long-distance users as the levy of 80 paise on outgoing calls has been removed and the incoming tariffs have been cut to Re 1 a minute from Rs 1.60. This cut is expected to reduce further the incentive for grey market calls. The regulator had the chance to eliminate it altogether by switching the levy on international calls to a share of the revenue. Already a part of the Access Deficit Charge is collected from telecom operators, reckoned at 0.75 per cent of their gross revenue. An increase in that share to about 3 per cent would have indeed made the entire exercise very simple, and in the same stroke knocked out the arbitrage opportunity that the grey market exploits.

The private operators had wanted the Access Deficit Charges cut by half to Rs 1,600 crore and domestic calls spared entirely. So while the new regime will let operators offer some tariff relief on domestic calls, it may not be material enough to stimulate a dramatic new surge in demand for telecom services in the system. On the one hand, TRAI has done the right thing going ahead with the reduction in the ADC, acknowledging that this is a depleting regime that will be phased out by 2008-09. And in the process, it has also prudently ignored the state-run Bharat Sanchar Nigam's appeal before the Telecom Disputes Tribunal challenging TRAI's tariff recommendations made last year. On the other, TRAI has missed an opportunity to merge the ADC regime with the Universal Service Obligation Fund. This is an eminently workable solution as only a third of the USO proceeds collected from telecom operators (at 5 per cent of adjusted gross revenues annually) has been spent on rural projects so far. TRAI could have pushed this through this year itself, as in the original consultation process, started in 2003, it had indicated that ADC could be phased out over a three/five-year period.

Further, as BSNL continues to be a profit-making enterprise, any cross-subsidy element to support its operations appears ill-merited. In 2005-06, BSNL's mobile segment rang in a 70 per cent rise in the profit-before-tax, even as its fixed-line operations recorded an 18 per cent decline in profits. And the mobile segment also maintained its profit-before-tax margin of 59 per cent, the same level as the previous year. Instead of depending on ADC, BSNL may be better off considering innovative measures such as disinvestment of equity stake to public or merger with MTNL to strengthen its operations and financials.

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