The Hindu Business Line : Re 1 from March 1

This is like robbing Peter and paying Paul. The Government has cut down the free calls to nil and enhanced the rentals to compensate for the probable loss in providing telecommunication to rural areas at affordable cost. After all, the enterprise as a whole cannot make losses, it has to make profits to sustain and expand.

Subbalakshmi, Madurai

Physical accessibility to places is difficult yet. This problem should be solved by providing comfortable commutation facilities, improving the existing roadways, railways, waterways and airways at affordable rates.

T. V. Jayaprakash, Palakkad, tv.jayaprakash@rediffmail.com

The Government's decision to start One India scheme is welcome. But it is doubtful if it will attract new customers. In fact, high fixed charges could discourage people from opting for the scheme. But this is a new beginning, which will definitely boost our economy. The private operators will have to come up with some more attractive schemes to compete in the telecom sector.

Sham Sunder Gupta, shamsunders@sify.com

An effective, well-knitted communicaton system will foster solidarity and help sort out problems and erase ill-feelings. The patriotic spirit will grow.

S. Sivasankaran, Senior Manager (Retd), Canara Bank, Salem

As the economy grows and competition sets in, such moves by various service providers are inevitable; however, in this particular instance, it is the Communications Minister who has taken the lead. Appreciation is due to him for his long-term vision. What needs to be ensured is that the tariffs are not increased subsequently, as normally happens. It is hoped that the overall telecom market will grow as a consequence.

S. Krithivasan, SBI, s.krithivasan@sbi.co.in

A person making 1612 metered calls for two months (with 100 free calls) will be charged Rs 2,214 (Rs 500 (rent) + Rs 500 (for the first 500 calls @ Re 1) + Rs 1214, for rest @ Rs 1.20 per call). In the present context, the charge will be Rs 2,212 (Rs 600 (rent) + Rs 1,612 @ Re 1 per call). What is the difference in charge?

Rooparchana, rooparchana@vsnl.net

The Re 1 call from March 1 is a big leap forward. And the Union Minister for Communication deserves praise for his "One India" vision. It should be extended to other sectors.

As those who are not benefited by the new scheme have the option to continue in the old one there should be no grudge. What else do we get for Re 1 these days? It is hoped that the telephone service will reach the remotest areas of the country and serve growth.

A. Jacob Sahayam, Thiruvananthapuram, jacob_sahayam@yahoo.co.in

On the face of it, the Re 1 call from March 1 appears attractive and cheap. BSNL and MTNL are issuing full-page advertisements in the dailies. These are nothing but sales gimmicks by the two corporate telecom giants. Now differential slabs for measurements of the units and rental charges have been prescribed.

If one does simple arithmetic and compares the previous scheme with the present one, one can easily find out how much is being lost in the new One India plan. Had the DoT continued the free calls and done away with the monthly rental charges, only then it may have been called a truly progressive step for the benefit of the subscribers.

S. Nallasivan, Tirunelveli, nallasivan_s@sancharnet.in

With this move, it seems that BSNL and MTNL have become proactive players rather than reactive. In the post-liberalisation era, telecom has joined the ranks of intensively competitive domains, such as banking, insurance and broadcasting, among others. These are domains where private and government-backed players are struggling to survive and stay ahead. The present move is aimed at increasing the STD traffic as well as bringing back more than 30 lakh subscribers who had surrendered their fixed line phone.

The reason is that the share of STD calls as percentage of the total outgoing minutes of usage per month per subscriber has gone down and now stands at 17 per cent. So, the move can backfire if increase in revenue is not as per expectations. The move can be observed from different stakeholders' viewpoint in the telecom sector, such as BSNL/MTNL, customers including fixed line users, PCO/STD booth owners, and private telecom operators.

BSNL as well as MTNL will immediately lose revenue on account of lower tariff. The fixed line telephone user has to shell out more in the form of monthly rent and that too without freebies offered right now. This will affect him unless his usage is substantial enough to pay for the increased rental; any caller from a PCO/STD booth can talk for longer periods without feeling the pinch; PCO/STD booth owners will be hit; and finally private telecom operators may have to come up with a new plan on the lines of the One India for which they'll be fully equipped. The war between telecom operators will become more intense which will make the telecom domain even more competitive and, thereby, benefiting the ultimate consumer.

Anil Kumar Angrish, Senior Teaching and Research Associate, Department of Pharmaceutical Management, NIPER, Mohali, anil_angrish@yahoo.co.in

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Responses to Sticklish Issues dated February 6

LIC holds a large chunk of the top market caps. It also represents government interests in companies such as ITC, L&T etc., which have no identifiable promoter. LIC's holding in 20 companies alone is worth more than Rs 42,000 crore. It is the only entity in the country which is in a position to make large purchases when FIIs sell because of the large corpus that it manages plus the fact that it manages long-term savings. LIC's total assets are worth more than Rs 5-lakh crore.

The corporation has pumped Rs 11,000 crore into the equity market in the current financial year to date and expects to make a trading profit of Rs 5,000 crore through its investment portfolio, which is good news for the policyholders who can expect to partake in the returns through a higher bonus as the rise in equity investments is expected to more than compensate the decline in fixed income yields.

Investment in LIC is done as per the norms prescribed by the Government under the LIC Act and the Rules and the Insurance Regulatory and Development Authority. It should maintain the debt-equity proportion in its total investments. In the short-term, the variation will not be much and can be adjusted by setting off the gains in some with the losses in others due to so many business and non-business factors falling beyond control. Long-term investments require constant review. It is assumed that the review committee is analysing the fluctuations in individual investments and if found economically unviable they are disposed of and the resultant funds invested in quality schemes/stocks.

We should not gloat over the fact that assets worth Rs 30,000 crore have scaled up in value in the equity market. This is due to the bull run currently raging in the equity market with FIIs pumping in funds. The current trend is to opt for unit-linked products. The policyholders can choose whether the units should go into balanced debt or equity funds. LIC feels that 35:65 ratio of unit-linked and conventional policies would lead to healthy business.

T. S. Sundareswaran, Consultant, New Delhi

As a part of the continuous process of portfolio reallocation, LIC has booked profits in the stock market rally and at the same time moved into government securities in recent past. LIC's investment book was expected to rise in 2005 due to stock market's northwards movement.

On the operating front also, LIC has performed well by increasing income through alternative channels. Right now, bank assurance alone reflects the strength, as LIC has entered into pact with 34 banks across the country to sell its products. So, on the investment front too, the institution has to achieve set targets which is possible through booking profits from rising value of equity portfolios.

Kusum Angrish, Officer, ICICI Bank, Chandigarh, kusum_angrish@yahoo.co.in

The rise in the market value of LIC's equity portfolio over and above the book value is attributed to movement in equity indices, i.e., Nifty and Sensex. As an institutional investor in equity market, LIC has an exposure of about 10 per cent of its total assets. In 2005, the exposure to the equity market increased from 8 per cent to 10 per cent.

Profit booking is a natural process when the market value is ensuring returns equal to or above expectations. As rising equity indices are not a permanent phenomenon, profit-booking also ensures recovery of investment to some extent. No doubt, indices have risen substantially in 2005, but precautionary measures have been adopted.

Though LIC has increased its exposure to the equity market last year, it has also made provisions of around Rs 17,000 crore during last three years to raise the solvency margin from 100 per cent to 125 per cent, whereas the LIC Act, 1956 provides for 100 per cent.

Anil Kumar Angrish, Senior Teaching and Research Associate, NIPER, Mohali anil_angrish@yahoo.co.in

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