The Hindu Business Line : Unclear still on ADC

NATIONAL AND INTERNATIONAL long-distance calls should become cheaper as the Telecom Regulatory Authority of India's order reducing the Access Deficit Charge (ADC) — the levy towards defraying the cost of operating uneconomic lines — rings in from February 1. Yet this is no New Year largesse for consumers as what is being conceded is really something they were entitled to in the first place. By its own admission, TRAI has said that due to an exceptionally large increase in call minutes, the reimbursement towards the ADC when computed in terms of a rate per minute ought to be reduced. The latest announcement, then, merely formalises this long-recognised tariff principle.

Welcome though the announcement is, it is unfortunate that TRAI has left unaddressed the core issue of the size of deficit that has built up to maintain the infrastructure for operating uneconomic lines, in both urban and rural areas. There is no rationale for keeping the ADC sum unchanged at Rs 5,340 crore. In October 2003, TRAI had arrived at this amount based only on historical costs from BSNL's financial statements, after suitable adjustments, amounting to 10 per cent of telecom sector revenues. The latest TRAI order sticking to this figure is a flawed assessment. If narrowly targeted to, say, meet only the rural service obligation, there is substantial scope to scale down the ADC amount. Going by its sharp reduction in mobile tariffs and the tough bargaining with VSNL for international calls in mid-2004, it is obvious that BSNL can use its considerable market power to good effect. And from its financial performance in 2003-04, it is clear that BSNL has the financial wherewithal to keep the competition well engaged. Unless the ADC is worked out on a fair and rational basis and accounting separation is strictly enforced for BSNL/MTNL, this whole exercise will be futile.

After making out an elegant case for a switch to the revenue-sharing regime in its Consultation Paper in June 2004, TRAI backtracked on this proposal on protests by BSNL and fixed line operators. This paper had even argued for a reduction in the ADC to Rs 1,400-3,400 crore, based on a revenue-share percentage of 2.2 to 5.3. As opposed to the ADC based on a call-by-call basis, there are numerous advantages in switching to the revenue-share regime. It will eliminate the incentive for misreporting different categories of calls, remove the incentive for the flourishing grey market and make the collection mechanism fairly straightforward. Despite these advantages, TRAI prefers to compute the ADC on the per-minute basis, with all its inherent drawbacks.

To top it all, TRAI has also indicated that it will begin soon a new consultation process on various issues such as the ADC amount for BSNL. The promise of a fresh review only prolongs the uncertainty on the ADC front, though workable solutions are readily available to the regulator. By avoiding the ADC computation on an objective basis and postponing a switch to the revenue-share set-up, TRAI may end up delaying the smooth transition to a full-fledged Universal Service Obligation Fund regime over the next two-three years.

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