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Friday, May 09, 2003

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BSNL investment

It was surprising to hear the Minister of Communications stating in the Parliament that BSNL requires a massive investment of Rs 29,000 crore in the next five years, and that if the rates are not revised where will the money come from. One wishes that the MPs had pointed out that the money has to come from the market place, and not from the existing consumers.

They should have told the Minister that the main reason for corporatising BSNL is to raise resources from the market like the private sector telecom companies do. When the interest rates are low and the standing of BSNL is good its capital expenses can easily be met by floating bonds, and by borrowings. When will the Government give up the concept of "cost plus" for fixing tariffs?

BSNL seems to have done very little to cut down its costs and improve its margins. Without a fundamental change in the mindset, it will be very difficult for the company to face competition. There is no reason to reduce the number of free calls at this stage, and it will only result in people surrendering their telephones and switching to mobile phones instead.

S. Rajagopalan


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