Abandon all hopes of getting a private telephone line soon
That's another nail—not that any more were really needed—in the coffin of the common man's hope of securing a telephone connection on demand by April1997, as promised by the Communications Ministry. India's privatisation of basic telephone services is in real danger of getting derailed or deferred indefinitely. With it may be shattered the nation's grand National Telecom Policy (NTP) of May 1994, which envisaged coverage of the entire country by the telephone network in the next two years.
Because of new—and high—reserve prices or benchmarks of the minimum licence fee fixed by the Department of Telecommunications (DOT), telecom companies were already not keen to make fresh offers for the telephone circles put up for rebidding. And withOpposition parties using the telecom imbroglio to scout for political points in the coming Lok Sabha elections, telephone companies are now even more uncertain about the wisdom of rebidding.
"As it is we were wondering about the ways and means to recast our bids in view of the new high reserve prices," says a top executive of one of the bidding telecom companies. "Just then began the fracas in Parliament over the basic telecom tender, further adding to the disquiet and confusion that already prevailed on account of the frequent change in rules by the Communications Ministry."
With private sector participation, by 1997, DOT envisaged a total of 16 to 17 million connections to reach 28 million by the year 2000. During the Eighth Five-Year Plan period (1992-97), 10 million more fixed telephone lines were to be given: 7.5 million by the DOT and 2.5 million by private telecom companies.
The present telephone density in India is about 0.8 to 0.9 per 100 persons as against the world average of 10 per 100 and lower than many Asian countries. Till March 1995, DOT had given 4 million new telephone lines, taking the total countrywide connections to nearly 10 million. The pending demand is, however, 2.5 million and is growing at an average of 15 per cent per annum.
On its own, DOT is capable of only adding a maximum of one million lines a year, saysMrityunjay Athreya, chairman of the tele-com restructuring committee, 1991, which evolved the agenda for telecom reforms. However, Telecom Commission Chairman R.K. Takkar claims that DOT has the capability to add 3 million additional lines in 1995-96 and 4 million more in 1996-97, to be well within the NTP goal of 17 million lines by April 1997. Athreya dismisses this claim, contending that without private sector participation, the country would have, at best, 12 million connections by April 1, 1997. This would fall way short of the NTP objective of 17 million lines by 1997 to provide telephones on demand.
Private sector participation in basic services is hence absolutely essential not only for India to achieve the NTP objectives but also for economic development itself. As the Ministry of Communications itself observes in its perspective plan for 2000: "There is a definite co-relation between the growth of the economy and the availability of telecom facilities."
While summing up the perspective plan, the Communications Ministry notes: "There is a tremendous interest in Indian telecommunications among both Indian entrepreneurs and multinational companies. It will be our effort to translate thisinterest to build up a modern telecom infrastructure in the country in the '90s to lay a solid base for leaping into the 21st century."
Famous last words? With the political deadlock over the telecom tender and the reluctance of bidders to play ball with the Communications Ministry's game of checking out how much more money it can raise, a modern telecom structure appears a far cry. For some years at least.
And now for a closer look at the immediate problem confronting telecom companies. They contend that the reserve prices for the 13 circles that are being put up for rebidding are very high. They also point outvarious anomalies in the calculation of reserve prices. They say that the growth in direct exchange lines (DELs) is calculated in an illogical manner, the cost per line is not based on realistic estimates, and revenues taken per DEL per month are higher by some 30 to 40 per cent than the average for the various circles as per statistics of DOT itself. Also, access charges to DOT networks and operating expenses have been computed at a lower rate than is the case in actual operations. The overall effect has been to give an exaggerated estimate of revenue and unrealistically low estimates of costs, resulting in profit margins which in practice are not sus-tainable. Which explains why reserve prices for the circles are placed so high.
Top telecom executives are questioning the very basis and logic of fixing the reserve prices. They note that in the tender document, the classification of circles into A, B and C categories was done on the basis of projected revenue, profits, current number of telephone lines and future phone population. Then how is it possible for the A category Gujarat circle to have a reserve price of only Rs 3,369 crore, less than half of that of the reserve price of Rs 7,880 crore for Kerala (B circle)? Again, Andhra Pradesh, which is also an A category circle, commands a reserve price of Rs 4,035 crore, almost half of Kerala and less than that of West Bengal, a B category circle.
Meanwhile, the Karnataka and Rajasthan circles, which were also to be included in the second round of bidding, have been kept out of the coming retendering. The bids for these two circles are being re-evaulated in detail, says Takkar.
So far, DOT had accepted bids for only five circles, though licences are still to be awarded for these. The circles for which bids have been found to be reasonable include Delhi, Haryana, Uttar Pradesh (West), Orissa, all four won by Himachal Futuristic Communications Ltd ( HFCL) and Maharashtra, bagged by Hughes Ispat. And now comes the Supreme Court decision.
The 13 circles where fresh bids have been invited (and the Court has permitted the Government to invite and process tenders for these), as the first offers were not considered reasonable by DOT, include Tamil Nadu, Madhya Pradesh, Himachal Pradesh, Uttar Pradesh (East), Assam, Bihar, the North-East, Andaman & Nicobar Islands (eight circles) in which the DOT's Tender Evaluation Committee found the first bids to be "very much below the reasonable levels", as well as in Andhra Pradesh, Gujarat, Kerala, Punjab, and West Bengal, the five circles out of which HFCL pulled out following DOT's cap of three circles. None of the other bidders in the HFCL-vacated five circles agreed to match HFCL's bids, forcing DOT to place them for rebidding along with the other circles.
Though this should have given enough indications to DOT about the fate of the fresh round of bidding, quite strangely, Takkar is still optimistic that telecom companies will bid enthusiastically. The last date for submitting bids for the 13 circles is January 1. "From our market intelligence, we haven't come across any evidence that the interest of bidders has gone down," he asserts.