Bharat versus Bharat Sanchar PDF Print E-mail
Tuesday, 25 May 2004 00:00
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So great is the awe in which Dr Manmohan Singh is held, the country’s dominant elite which, till a few weeks ago was hell bent on privatisation has thrown in the towel completely, now that Dr Singh has weighed in on the side of the Left.

The privatisation debate has been reduced to merely one of the money to be got from strategic sales. That’s sad, since though helpful, the money is not the real issue.

Indeed, the issue goes beyond even that of the losses of the PSUs which, once the monopoly profits of the oil firms are removed, are significant, never mind what the Left parties tell you.

The crux of the matter is that, over the past 57 years, the country’s economic policies have been held hostage to the interests of PSUs, and this causes enormous efficiency losses, not just for the economy, but even for the common man.

But since PSUs have become synonymous with the national flag, even though less than 6 per cent of the country’s work force is employed by them, few dare protest. In the 1980s, government policy on automobiles was distorted to provide tax concessions to only Maruti Udyog, then a government firm.

Till around the time it was privatised, no one except VSNL was allowed to provide international calls — once the monopoly was broken, call rates fell from around Rs 80 a minute four years ago to Rs 8-9 now.

In the case of the oil PSUs, similarly, while it is important to allow them to benefit from the rising oil prices, the deal worked out is completely lopsided and anti-consumer.

The PSUs are paid on what’s called an international price parity formula which sounds fine, but apart from the international price, this includes a 20 per cent import duty and the freight and insurance on the petroleum products as well!

After all I’ve written on the telecom deal, I can hardly be accused of being pro-Reliance, but surely it is unfair that the PSUs get the international price plus 25-30 per cent while the private ones get a much lower price?

There are a host of such examples, but I’ll just give a couple more, from the telecom field where PSU interests are once again raising prices for the common man. The Access Deficit Charge of Rs 5,250 crore levied on all long distance calls, for instance, has substantially hiked STD and ISD rates.

Where does this money go? To a PSU, Bharat Sanchar Nigam Limited which uses the money, interestingly, to keep its cellular call rates lower than those of the private sector competitors. So, not only is the common man in the remotest part of Laloo Prasad Yadav’s Bihar paying 40 per cent more every time he calls up his brother in Patna, it also distorts competition.

The latest example of such distortion is being played out right now, as you read this column, in the telecom regulator’s court. Today, thanks to major marches in technology, the quality of voice calls on Internet platforms is almost as good as it is on the usual copper/fibre lines and cost just a fraction.

I’m not talking of using your PC to call up someone using the Internet, but of your telecom company, a Hutch or an Airtel for instance, carrying the call from your mobile in Delhi to one in Mumbai using the Internet.

Imagine how costs would decline if your mobile phone company could simply tie up with a Satyam to deliver the call to Mumbai, or to the US on the Sify Internet platform?

Yet, this is not allowed since, if STD and ISD are opened up by allowing ISPs to carry voice traffic, BSNL’s revenues would come crashing down. Reliance and Bharti, it is true, will also be affected, but since there is a lot less traffic on their STD networks, the impact would be less.

But why, is the obvious question, doesn’t a Sify simply apply for an STD license and then carry voice traffic on its existing network? The reason is the high entry fee of Rs 100 crore. It’s ironic, but while the government slashed the entry fee when it issued the unified access license for companies like Reliance some months ago, it refuses to do the same for the STD/ISD licenses.

While the first two cellular firms paid Rs 3,750 crore each as license fees, the government used the much lower fees paid by the fourth operator, Rs 1,633 crore, as the benchmark, arguing that the first and second operators had already recouped their costs as they had a six year head-start in the market. Well, surely the same logic should be applied now, to lower the fees for STD/ISD licences?

Thanks to the desire to protect BSNL, the government also refused to move on the original plan, a few years ago, in which consumers like you and I could simply dial an access code from our phones, to decide which STD carrier we wanted to use, and then make our calls.

So, while using my MTNL land line to call Mumbai, I could dial a code, say 123, to use the Reliance network to carry the call from Delhi to Mumbai, instead of BSNL. While only BSNL benefited from this earlier, today the move is also benefiting Bharti and Reliance who could also lose captive customers if this was allowed.

This, more than anything else, is the reason why PSUs need to be privatised. It’s high time we stopped hurting a billion Indians to protect 1.6 million employees in manufacturing PSUs.


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