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July 17, 1997


DoT, not VSNL, to negotiate tariff issue

The Department of Telecommunications has decided to take in its own hands international bilateral negotiations on tariffs on telephone calls. These negotiations, over the last few years, were handled by the Videsh Sanchar Nigam Limited.

Following the decision of DoT, say Nigam sources, VSNL withdrew this month its offer made to the US carriers last month. DoT is now expected to conclude the negotiations with the US, with VSNL aiding it.

The move is significant as it comes close on the heels of the US Federal Communication Commission chief Reed Hundt's visit to India last month. Hundt had meetings with the Communications Minister Beni Prasad Verma, DoT Secretary A V Gokak and Member (Services) P S Saran. The US has been pressuring India to reduce its tariff accounting rate from the present level of $1.58 per minute to $0.46 per minute by the end of 2001.

On the face of it senior DoT officials state that the move is in consonance with the latest revenue sharing arrangement between the department and VSNL where the latter's revenue is fixed and any change in tariffs with other countries has a direct bearing on DoT's revenue collections.

DoT had recently revised its revenue sharing formula with VSNL just before the VSNL GDR earlier this year, through which the Nigam would get Rs 10 for every minute of call traffic, incoming or outgoing.

According to DoT's own assessments, a 5 to 8 per cent reduction in tariff was planned. Though whether the department succumbs to the US pressure remains to be seen.

VSNL had offered US carriers reduction in tariffs from the present level of $1.58 per minute to $1.4 for 1997-98, $1.26 per minute for 1998-99 and $1.16 per minute for 1999-2000.

According to sources, DoT is working out a model to analyse the effects of a 20 to 30 per cent reduction in tariffs along with a corresponding lowering of charges collected from subscribers in India.

The model is also expected to project the growth in triad volume as a result of the lowering of tariff charged from domestic subscribers for international calls and the extent to which volume growth in traffic can offset losses through lowering of charges.

- Compiled from the Indian media

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