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H. Kaushal

THE early planners were convinced that the country can prosper only if there is development and growth in the villages. Thus, the farm bias of the initial Five Year Plans. The Department of Telecommunications (DoT) was responsible for formulating policies to optimise telecom connectivity across the country with the available resources. Initially, no targets were set/publicised for rural connections, for all the talk of India living in its villages and that all effort should be made to connect them with modern means of telecommunications.

The National Telecom Policy for the first time declared that some six lakh villages would be provided telecom connections by March 1997. On that date, however, the DoT was able to hook up only about 40 per cent of the target villages. The horse of rural connectivity was flogged to justify the different treatment, in terms and tariffs, for the DoT compared to private operators. The DoT, it was contended, should not be equated with private operators as it had the Universal Service Obligation of maintaining uneconomical rural connections. This line was continued with though the terms of private operators' licence agreements included installing and maintaining rural telephones in their areas.

Market developing agencies pointed out that another reason for achieving full rural connectivity was to open/develop rural markets. The potential of the rural market could not be fully exploited unless the retailer/customer in the villages could be reached through a telephone.

It was obvious that village telephones would not only generate revenues from outgoing calls but also through incoming ones, though indirectly. It was, thus, pleaded that the economic viability of a rural connection could not be measured on the same lines as an urban telephone.

Special rural telephone exchanges were designed and transmission equipment to connect them to nearby towns was procured. All possible cost-cutting measures were tried to keep the installation costlow. Pressures to improve the rate of providing connections to the villages resulted in figures being inflated, but the worst culprit was the poor serviceability of these telephones.

Another nail in the coffin of rural telecom services was driven by Ms Mamata Bannerjee, who insisted on absurdly low tariffs. This pushed the already uneconomical rural connections further into the red. Today, private service providers claim that cost-based rental should be almost Rs 10,000 a month. But they can charge a maximum of Rs 70. On the other hand, an urban subscriber, who is much cheaper for the operator to connect, needs be charged no more than Rs 250 a month.

Similarly, the ratio of installing a rural public telephone and an urban PCO is 5:1; a rural PCO would cost around Rs 50,000 to install. The tariff of yesteryear left a substantial cushion between cost and charges for long-distance calls, and this revenue could compensate for the losses incurred on the rural subscribers. This route of loss-neutralisation was available only to the DoT/BSNL, which handled both long-distance and local/rural traffic.

As private operators did not have access to long-distance calls or revenues from them, they did not take rural connectivity obligations seriously. A USO fund was set up through a levy on the revenues of the telecom operators. All operators are required to contribute 5 per cent of their annual revenue towards the USO fund. Many claims have been made on this fund. One purpose of the USO fund was to compensate telecom operators for providing unviable rural connections. BSNL was not covered under this compensatory arrangement as it had the long-distance traffic to cross-subsidise.

Private operators have not discharged their responsibility of providing rural connections. From 1997 they have installed 1,450 telephones (till May 2002) though they were required to put up 1,02,699 telephones. This works out to a compliance level of 1.4 per cent. Private operators now want to be relieved of this contractual obligation or be paid Rs 300 crore from the USO fund. The DoT, perhaps rightly, does not want to release any money from the USO fund for providing services which were part of the terms of the licence. But it has not cracked the whipeither . A comparison shows that the DoT had installed 2,60,727 village telephones by1997. The DoT/BSNL added two lakh connections thereby taking the linked villages to over 4.7 lakh. Now, taking a cue from the private operators, BSNL has claimed Rs 1,000 crore for providing village connections. The BSNL argument is that long-distance tariffs have had to be drastically reduced, leaving no scope for covering unviable rural telephone losses. The BSNL management thinks that the company could go sick in a couple of years, unless it is compensated for the loss-making rural connections.

Over one lakh villages still do not have a telephone. This is surely a matter of shame. The aim of 100 per cent rural connectivity can be achieved if the private operators are made to fulfil their promise. These villages remain unconnected even as the DoT and the private operators argue about support from the USO fund. The DoT needs to decide about what to do; how much support it will give public and private operators; and what action they will take against defaulting operators. This is certainly a situation where a quick decision will be in the interest of the country.

Second, TRAI should re-examine the tariff for rural subscribers. There is little justification for keeping the tariff so low that it becomes an obstacle to growth. Two rates could be considered, one that will be applicable for initial period of, say, five years and another that will come into force after this period..

Adequate inducement can be given to rural subscribers initially and withdrawn thereafter. There is no justification in assuming that poverty exists only in the rural areas and that the revenue earned from urban subscribers should be diverted to rural subscribers indefinitely. The operators should mount aggressive campaigns to educate the rural user, but the tariffs should (after an initial period) be brought in line with costs.

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