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February 11, 1998


Tooth extraction

DoT plays dentist with TRAI, the telecom watchdog.

A Staff Writer in Bombay

Email this story to a friend. India's experiment in opening up the telecommunications business to private entrepreneurs is at the crossroads as the government's Department of Telecommunications is fighting hard to shore up its regulatory privileges.

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In its latest and the deadliest salvo yet, DoT has sought an amendment to the fundamental mandate of the Telecom Regulatory Authority of India, a quasi-judicial and independent organisation, set up to take over DoT's regulatory functions.

DoT is being weaned away from regulatory responsibilities because it will now compete with private companies in a pluralistic environment.

Since the Telecom Regulatory Authority of India was set up in March last year, it has tread on several bureaucratic toes. Now it is paying the price.

DoT which, until then, had carried out regulatory functions, was hurt the most. Especially, when in November, Prime Minister I K Gujral directed the telecommunications ministry to separate DoT's regulatory functions so that the newly formed TRAI could be strengthened.

Last week, TRAI warned that any amendment to curtail its powers would severely undermine the confidence of investors.

In fact, when Birla AT&T raised India's biggest offshore telecom financing in June, the corporation's executives thanked the TRAI initiative for increasing the trust of their financiers.

"Beyond the venture's progress and the strengths of the two partners, we believe the Government of India's creation of the TRAI... had a strong influence on the success of this groundbreaking transaction," they had said.

TRAI Chairman Justice S S Sodhi has been reported as warning that "Any amendment to the Telecom Regulatory Authority of India Act of 1997 would undermine investor confidence, not only in the telecom sector, but in the economy as a whole. It would specially affect the confidence of the foreign investors."

The trust of investors in the Indian legal and regulatory mechanisms is crucial to the success of the telecom privatisation process.

This is borne out by a recent study undertaken by the Industrial Credit and Investment Corporation of India.

The study estimates that of the total funding requirement of the telecom companies, some Rs 450 billion, over 55 per cent is in debt funding. Of this, over 70 per cent would come from foreign sources.

But DoT is not impressed. It has turned down TRAI's request for consultations before approaching the Cabinet on its proposed amendments.

The authority's call for the adoption of a "transparent consultative" process for the proposed amendment of the TRAI Act, "with due weightage to the views of the authority itself", has not been heeded to by DoT, TRAI officials complain.

An ICICI report has also called for the transfer of all DoT's regulatory functions to the TRAI.

The Association of Basic Telecom Operators has taken a strong stance in opposition to any suggestions towards limiting or diminishing TRAI's role.

The ABTO has said in a note that it would soon file representations to the ministry of communications, ministry of finance and the Prime Minister's Office to thwart any move towards undermining the TRAI's role.

It will also seek specific clarifications to empower TRAI to oversee, regulate and arbitrate all segments of the telecom sector; right from licensing, to tariffs, to securing consumer interests.

The ABTO has claimed that such attempts to undermine TRAI would deal a deathblow to the growth of the telecom sector.

The ABTO agrees with Justice Sodhi and points out that tampering with the TRAI's mandate may lead to withdrawal of large investments which have been committed to the telecom sector.

Besides, the billions of dollars that are likely to flow into the industry may also shy away in the absence of an effective and powerful TRAI, the press note claims.

ABTO President Sunil Mittal has said the "Setting up an independent regulatory authority was a prerequisite to the opening up of the telecom sector to the private companies. All major foreign companies participated in the privatisation process on the express assurance of the telecom minister that an independent regulatory authority would be in place before the private services commenced. Therefore any attempt to dilute the role of the TRAI would be a retrograde step, affecting key investments in the telecom sector."


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