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October 24, 1997


DoT asked to revise 10-year perspective plan

The Committee of Secretaries has asked the Department of Telecommunications to rework its 10-year perspective plan, taking into account the proposed restructuring of the department and the need of increasing private-sector participation in the telecom sector.

The perspective plan should 'clearly distinguish between the role of the government as a policy maker and service provider in the telecommunications sector and assign a greater role to the private sector in providing basic and value-added services,' according to CoS.

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Sources in the Cabinet Secretariat say that the perspective plan should incorporate DoT's technology plan, bringing out the strategic options. The department has also been asked to submit a note on the status of basic communication infrastructure and its capacity to cater to the projected growth, especially in rural areas.

It has been asked to make an assessment of whether there is a need to develop alternative telecommunication highways through other government agencies or the private sector.

The CoS feels the perspective plan assigns a dominant role for the public sector with the target for private-sector participation is much lower than it should be. 'There is no advantage in limiting the role of the private sector, especially when it is clear that the department. by itself, is not in a position to meet the gap.'

CoS concludes that the present technique of forecasting demand for value-added services is not realistic. It should thus be reviewed immediately with a view to supporting efforts aimed at creating a services capacity that will spur economic growth.

The department recently formulated a new perspective plan for 10 years (1997-2007), covering both the Ninth and Tenth Five Year Plans. The last perspective plan was prepared in 1989 for 1990-2000.

Taking into account the annual growth rate of 16.5 per cent in actual demand for telephones between 1991 and 1997, DoT has projected an increase in the number of telephone connections from an estimated 14.43 million direct exchange lines in March 1997 to 81.83 million by March 2007.

In other words, this requires provision of 67.4 million new DELs during the 10 years. Of this target, 47 million DELs are proposed to be provided by DoT and Mahanagar Telephone Nigam Limited and the balance 20.4 million by private operators.

Of the 47 million DELs, DoT intends to install 40.7 million DELs at a cost of Rs 2.02 trillion. The balance of 6.3 million lines are proposed to be provided by the Mahanagar Telephone Nigam Limited at a cost of Rs 300.17 billion.

DoT has told CoS that 'It is likely that the projections made now may go out' in case the demand for telephone shoots up under the impact of good growth in other sectors of the economy. The perspective plan would thus be revised after the end of the Ninth Plan.

DoT claims that it would aim to 'provide the widest permissible range of service with world-standard quality to customers at reasonable prices. 'This broader objective includes the target to extend nascent 'integrated services digital network', introduced in a few major cities, to all district headquarters. The perspective plan also envisages provision of intelligent network services in all major cities.

This is the only realistic solution to preventing the impending disaster in the telecom services sector. Several private operators are not only expected to collapse under the mounting losses, but also face suits from foreign banks and institutions that provide suppliers credit for imported equipment.

The government has to decide whether it wants the golden goose to die a premature death due to high outflow of licence fees at the start of the project. It has to strike a balance between the primary objective of providing affordable services to consumers through private sector participation, with the secondary objective of making a bonanza by cashing in on the private sector's greed for licences.

They admit that that several private operators have committed a grave error by quoting unsustainable licence fees without doing the requisite homework while trying to cash in on the once-in-a-lifetime opportunity offered through tendering competition.

The CoS has also asked DoT to consider replacing licence fee with a revenue-sharing arrangement in the tendering competition for provision of basic services in telecom circles. It may be recalled that there were no takers in the second and third round of tendering.

At a recent CoS meeting, participants suggested that DoT should consider making further changes in the tendering conditions and explore 'alternative methodologies like revenue sharing, etc. While issuing tender (notice) for the remaining circles'. The committee desired that DoT should examine 'global experience in encouraging private sector investments in the telecom sector' and draw the 'necessary lessons'.

According to industry sources, this sage advice of the CoS should be accepted by the government not only for the proposed tendering competition but for the earlier licence fee-based competition.

The licence fee in the case of all value-added and basic service providers could be converted into a revenue-sharing arrangement. The remaining instalments of the licence fee should be paid under the proposed arrangement from the year the revenue receipts show a surplus after deduction of expenditure, interest and depreciation.

- Compiled from the Indian media

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