The Hindu Business Line : Running out of charge in rural India

“Bharti’s strategy of extensive roll-out ahead of competition, especially in new villages, has yielded rich dividends,” Mr Sunil Bharti Mittal, Chairman and Managing Director, Bharti Airtel Ltd, noted last month after his company notched up a 25 per cent growth in profits and 8.2 million new subscribers in the October-December 2008 quarter.

As cellular phone companies turn to rural India to sustain their breakneck expansion, they have, no doubt, the benefit of working in unexploited territory. The yields have been remarkably good. In the three months ended September 2008, the dozen cellular companies picked up nearly 20 million new subscribers in rural India, twice as many as they enlisted in the urban areas.

Yet they are likely to be slowed down in their tracks by the lack of electricity in the villages. The electricity is needed critically not just to power the transmission towers of cellular companies — they can use alternative energy sources such as diesel gensets — but to charge the cellular phones owned by local people.

Of the 5.93 lakh inhabited villages in the country, fewer than 4.8 lakh are touched by electricity. Mobile operators claim that over 4 lakh villages already have the benefit of a cellular signal, although not too many people living there have started using the phone. While more than seven out of every ten urban residents do have a mobile phone, not even two out of ten in rural India own one.

With the rural population expected to be 832 million (in 2010), and the number of rural households around 180 million, TRAI would like to put at least one phone in each household, unlike urban India that features multiple phones in each home.

Given that there are currently around 100 million rural subscribers, the balance of around 90-100 million rural subscribers needs to be acquired in the next two years.

That is the challenge TRAI has posed the cellular operators, for whom the problems of penetrating rural India are well known: acquiring land for erecting the base towers for transmitting signals has not been easy; each base tower costs Rs 30-40 lakh and, more often than not, electricity supply is there for just a few hours a day, if at all; and finally the promise of substantial revenue for the average revenue per user is expected to be thin from the relatively less prosperous rural residents.

To help the operators surmount these challenges, the regulator has at its disposal the funds it collects through the Universal Services Obligation levy, which is 5 per cent of cellular revenues. It had collected over Rs 20,000 crore till last year but has spent hardly a third of that so far.

USO funds

Initially the money was earmarked for setting up wired public telephones in villages, or reimbursing BSNL for upgrading the technology of 1.8 lakh public phones in the village to wireless in local loop. That latter exercise cost Rs 37,901 per connection.

Only in 2007 was it decided to use the USO fund to provide incentives for the spread of mobile phones in rural India. Subsidy is being offered for the erection of transmission towers but the offer needs to be enlarged to cover other infrastructure, such as the backhaul connectivity (linking each transmission tower to the core network, . This is so because optic fibre connectivity is very low in rural areas and operators have to use microwave links for backhaul purposes.

Using wireless microwave links is expensive. It is also time consuming as microwave based backhaul requires spectrum clearance. Eighty percent of rural backhaul is done through microwave links.

Can a family living below the poverty line afford to put down more than Rs 1,000 to buy a phone and then at least Rs 100 a month towards its use?

Or will the tax and revenue-sharing terms for operators be changed so that they can re-structure the tariffs and make the payments less onerous?

Surely it would be illogical to collect the 5 per cent USO levy from one already below the poverty line. Finally, is there a way to ensure electricity is available to anyone who wants to use the phone?

It is true people do not lack ingenuity. Ms Shibani Mandal, 37, working as a domestic help in New Delhi, carries her cell phone with her when she goes home to her village, Garkhali, in the 24 Paraganas district of West Bengal.

‘Powerless’ villages

It is one of those thousands of villages that ought to have been electrified under the Bharat Nirman Programme under Rajiv Gandhi Grameen Vidyutikaran Yojna. The government website confirms that a low-tension electricity line of the State electricity board has been extended into the village.

Her house as yet does not have conventional electricity but has a solar panel that lights a lamp and a television set; it also sustains her cell-phone during her stay there. For many others in the village — there are about 50 people with phones, says Shibani — charging means taking the phone to a friend in the next village, which is blessed with conventional electricity sockets.

Out of 5,93,731 inhabited villages (as per 2001 census), 4,73,136 (almost 80 per cent) have been electrified up to March 2008. The remaining villages are to be covered by 2009. But in the government’s book, a village is considered electrified if even 10 per cent of households have electricity. That means 90 per cent of the population could remain “powerless”.

And in practice, the frequent and long interruptions in the electricity supply put a large number of these “electrified” villages at par with the non-electrified ones. The dream of universal phone connectivity may soon run out of charge.