The IT and Communications Minister talks on controversial issues: telecom, disinvestment and the Media Lab spat. Full text.
He's soft-spoken but his barbs are sharp and his targets wide-ranging: cabinet colleagues, other politicians, corporate lobbies. In his typical style, IT and communications minister Arun Shourie talks on controversial issues: telecom, disinvestment and the Media Lab spat. An exclusive interview with Arindam Mukherjee and Alam Srinivas, excerpts from which appeared in the print magazine.
Why have you asked for another review of the telecom tariff rules?
There are anomalies in the interconnect regime specified in January. As you know there is this accessdeficit charge and see how it has been built in. The fixed line has to bear all the cost. If you look at anycategory, the entire burden is being put on fixed-to-fixed calls. This was the reason that we had to do someadjustment on the packages we (had) proposed. In the January package, they had given the standard package andevery operator had to offer that. In addition, they could offer alternate packages too. The cellular and WLLoperators were given forbearance (where they could fix their own tariff) but the fixed operators had to cometo TRAI for approval. That is certainly something that needed to be re-examined.
When we looked at the scenario, there was a consensus that the monthly rentals and pulse rates should notbe touched. But the important thing was that definition of rural areas was changed by TRAI. Because of that,of the one crore rural subscribers, 80 lakh rural areas became non-rural. Which meant that their monthlyrental would go up from Rs 50 to Rs 280. We went back to TRAI on the rural definition and had it restored.
But why were fixed-to-local rates rolled back within weeks?
There is great logic in TRAI increasing the monthly rental as there are costs involved which have to berecovered. The current costs (of PSUs like BSNL and MTNL) can be recovered in two ways. Capital expenditurehas to be recovered through monthly rentals and the rest through tariffs. Although the average cost per phoneline is about Rs 424 per month, the rental in rural areas was Rs 50, and somewhere you had to meet this (thedeficit). Till now it (the deficit) was met by high tariff on long-distance and international telephony. Those(rates have) collapsed. Where to make it up from? So we thought about three-quarters of the subscribers, andto make calls cheaper for them. Within that, for fixed to cellular, we will increase. But it's a peculiardefinition now that the common man is the one with fixed line connections, which is an absolutely contrivedone. Within this area also, contrary to popular belief, the average call duration in India was 60 second orless. Those can be safeguarded. If somebody wants to talk longer, they can pay for it. This is the thinkingbehind it.
Then, there's the migration to cellular network, which will render the existing infrastructure completelyuseless. This too has to be met in two ways: BSNL and MTNL become aggressive cellular service providers; andby crafting the regime in such a way that you will not have that much migration. In the first instance by notaccepting the two suggestions of TRAI on increasing monthly rentals and reducing pulse which would have costus only Rs. 1,500 crore earlier, now by withdrawing things, it will cost us Rs. 3,400 crore.
Now it has almost become a game. Ki aaj kya rollback karwayen; Kisse karwayen? Yashwant Sinha sekarwayen, Jaswant Singh se karwayen . .. (So, what do we get rolled back today; from whom? Should we getYashwant Sinha to do it, or Jaswant Singh? Laughs) The political class has become a pack that regularly goesafter somebody, after something. This will be very costly in the long term. BSNL was telling me that theirprofits last year were Rs 6,500 crore. With the collapse of long distance telephony, it would only be Rs 2,500crore now -- a loss, rather reduction, of Rs. 4,000 crore. Now we hope that despite lower rates, the growth intraffic will be able to make up the losses.
Why has the telecom sector always been so politically sensitive?
You will see that this is the fourth time since 1999 that TRAI's recommendations have not gone anywhere.This is exactly what used to happen to DTC (Delhi Transport Corporation) while increasing rates. As long asthe government is in the price fixation business, in power, or public transport, it becomes a political issue.While in the case of APM, petrol prices go up and down with international prices, its not such a big occasion.In all other sectors, the effort has been to put a regulator who will determine the price. That distances thegovernment of the day from price fixation. This is one of the rationale for setting up the regulator. And froman era of state control to a free-for-all competition, you require strong empires and meticulous adherence torules by all players. But our concept of a regulator seems to be very odd. On pointing it out it got attackedin Parliament and people shouted at me: "hamne hii Act pass kiyaa hai (We had passed this Act),why are you taking it so seriously? You bring an amendment; we will change it."
The political class is not willing to give up its ability to interfere. The consequences of thisinterference is affecting the sequence in parliament on TRAI regulations. They will suppress the fact, ignorethe fact, that for bulk of the consumers, things had become cheaper. TRAI's recommendations have not beentaken on board. Those resources are required, exactly for things we are agitating about. BSNL does not get anymoney from the plan. They get only Rs 4 crore while they require Rs 29,000 crore. So the really private sectoris the public sector and it is private to every itinerant minister; every Member of Parliament, everybodyoccupying any position in the state apparatus has a say in the management of the public sector. I get letters(30 to 40 a day) from members of parliament requesting transfers of CGMs and officers. They regard it as theirright.
They never give any developmental suggestions?
None at all. The only developmental suggestions are: "increase the tower in my area", or"make a BSNL guest house in my area." The consequence is that in the long run the country has to payfor this. If everybody is going to attack everything, it will be difficult for the government. Look at thebanking sector reforms, apart from bailing out the co-operative banks, nothing has moved. Labour, full stop.Power, full stop. Disinvestment, at least a semi-colon; Telecom, a rollback. Centre-State finances, nothing.Planning and finance commission to relate allocation to performance, nothing. On any change that is proposed anew pack forms to oppose it.
Does this political pack have ruling party constituents too?
Yes, from all over. It does not have to do with political parties. It has to do with political class as awhole across party lines and nobody is bothered about people's benefit and the fiscal situation a year, twoyears, five years from now.
Why not a common policy for all players across technologies...?
There are now different problems in the telecom sector. Look at BSNL and MTNL. If the political classcontinues the process of suborning these large firms, they will become a VSNL. Their value will erode veryrapidly. Then this sector will become the power sector in which, with all the attempts of successivegovernments, no investment is coming forward. The second set of problems is in regard to lobbies. There arevery powerful lobbies and every lobby in India has access everywhere. And they are preventing free competitionfrom coming in and the state apparatus gets dragged into their fight.
This was the case during the licence-quota regime period. So also today, the skill of many Indianentrepreneur is not their ability to outcompete their rivals in the market but their ability to use the leversof the state to keep the rivals down and out. The ultimate solution would be a single universal licence inwhich you pay for what part of the spectrum you are going to use and then provide any service through anytechnology. On that I have started work but given the power of lobbies, I do not know what will come of it.
The third problem is that instead of focussing on the enormous prospect of growth in this sector,everybody's attention is focussed on keeping the rivals down from their existing position. Look at ourteledensity figures and the growth in demand and people's yearning for newer technologies which is visiblefrom the growth of cellular telephony in India over the last five years. But people are not seeing that. Theyare only using the state to keep things down, keep competition down.
The problem is also that many of the firms are in financial problems and very soon we will see that theirdifficulty will burst into the open. And then the whole plea will be to give another bailout (to them) becauseof the exposure of financial institutions in this sector. You remember Keynes' theory of probability that if Iowe you 10 pounds, I should be worried, but if I owe you 1 million, you should be worried?
Each of these problems is regarding institutions but one of the problems is that licences areservice-specific and technology specific. You can provide something called limited mobility! And it's called anew concept. It's a 1950s concept! That you can provide mobility but only limited mobility through thistechnology and not that one.
Will we have a new telecom policy?
In a sector where technologies are changing so rapidly, we should not think of policies as frozen for alltimes. The model in this sector should not be (that of) the Indian constitution with its 370 articles. Itshould be (like) the American constitution with only 14 general articles. The rest is legislation rule making,(which) keeps changing and everybody must have the confidence that when the changes are made it will not bedone for collateral purposes. They will be done by open discussion; this is the reason, and this is why we arechanging it.
I have a list of 10 things on which changes are required in the telecom sector and in each of these, I havebegun work with professors from IITs and IIMs, financial institutions and others. I don't want individualthings to come up in this sector. Everybody should see a new perspective in this. For instance, it should becombined with releasing of more of spectrum for telecom. That requires work with a defence force because ofthe signalling problems.
On that, experts are working on what kind of things are to be done for modernising signalling requirementfor defence forces by rationalisation, using filters and digitisation of the equipment. That may take 3-4years. That work has to go on simultaneously. Maybe when everybody sees more spectrum has become available,they will turn their sights to the future. And all these changes should be brought about.
But that'll take time. What happens in the interim period?
TRAI has issued a statement that they will review the anomalies in the IUC regime and in the next few daysthey will issue a consultation paper on that. TRAI will also be monitoring and one of the advantages ofcompetition is that each player will be monitoring others. I don't know about enforcement. I will look to TRAIfor intellectual inputs but we will not continue to dictate it. I really believe it is very necessary for thecountry to have proper respect for regulators.
Does your agenda include giving more teeth to TRAI for enforcing its recommendations because that is onearea where it's handicapped?
That has not really come up as yet. Even before the birth of TRAI, people had begun shooting. It is not theoperational question just now.
What is the Media Lab controversy all about? You seem to have a penchant for walking into controversies.
I don't know why these things are coming. It really subsided in three days. This whole thing finished inMarch and nothing happened after that. Then it started with this story in a daily that the IT portfolio wasbeing shifted to someone else. That seemed to have encouraged somebody here or there, ki yeh bhi ek BabariMasjid hai (that this is another Babri Masjid)... ek dhakka aur do... (give it another push.laughs) and you can push him out. So a statement was issued by this gentleman Negroponte that this newminister is not interested in rural development. And Mr. Negroponte who is spending a lot of time betweenGreek islands and Switzerland apart from Boston is more interested in rural development!
But anyhow, the sequence is that it was a good project started with very good intentions. It had twoobjectives, one was that the association with MIT Media Lab would acculturate our IITs in more result-orientedresearch and IT for rural development. But whenever these things regarding rural development comes up, I amreminded of a Laxman cartoon when Charan Singh became the prime minister and everything (the buzz) was ruraldevelopment. It depicted a village banner that said: "National seminar on the aerodynamics on the serviceof rural development."
The main structure of the project was that there would be a main office and a board of directors with MIT(representatives), one or two Indian entrepreneurs, and those of the Indian government. The premise was thatresearch would be done through the five IITs. The first year's allocation was Rs 65 crore. I hadn't paid muchattention to that. But one day there were four phone calls to my office saying, "Has the minister clearedthe file...?" And files don't wait here long so I thought, what was the great anxiety? So I asked them tobring me this file and I discovered that the proposal was that I must immediately sanction a payment of $ 5million -- almost Rs 25 crore -- so as to maintain the exclusive relationship with MIT. I was led to believethat otherwise the word Media Lab Asia cannot be used.
I wrote why should I issue $5 million for a name? Supposing we give the money to the IITs, wouldn't they dobetter research? So a revised proposal came in saying okay if this is not feasible why not give them $1million in a year, just for the name. I thought you should be known by the work you do. What's in a name? Whyshould we give $1 million? So I asked for the agreement with MIT and the legal advisor Shardul Shroffconfirmed that Media Lab Asia was the name of an Indian company and MIT had no right over it. And to give them$5 million for this name? Why not give that much money to the IITs to develop content? I wanted to know who'sdoing the research? I'll have meetings with them to know what is their experience. And other than IIT Kanpur,the IIT representatives said they had gained nothing. One said they received two emails from them. Anothersaid they had got a phone call from Delhi to schedule two lectures for them. The third said we had never hadanything (with MIT).
Then they (MIT) wanted to have a meeting with us. And they came up with much stronger words. I was alsoastonished to see that the salary scale of the core staff was phenomenal. The salary of the head of Media LabAsia was 15 to 19 times -- not per cent -- that of Dr. Kasturirangan who manages the entire space programme ofIndia. I said the project should continue but no exclusive relation with anything like MIT. Because maybe theresearchers you want to collaborate with are in Stanford, or in Europe. So (one should) keep that flexibility.Also, if you have project-specific collaboration, then there should be well-defined deliverables. In themanagement of the research programme, Indian scientists, who are more acquainted with Indian conditions, haveto be more associated rather than these jet-set entrepreneurs -- academic entrepreneurs -- whose main skillsseems to be in grilling us to give money.
We informed MIT that the agreement will not be renewed beyond March 31, 2003. Actually the agreement lapsedin October (2002) but was extended till March. There were several emails saying, don't cut this withoutdiscussions. And that so and so is a very big man and he is likely to throw a tantrum. I said please look atthe door, it is always open. If he raises his voice one decibel level, it is easy to throw him out. But we hada very cordial meeting. We explained that because all these expectations that had been held out because of theassociation of these big names by which all this money should have come, nothing came in.
How much money was actually spent?
About Rs. 35 crore. When the Lab was set up, an exhaustive list of corporate sponsors was given.
Did none of them give any money?
Maybe Tatas gave something but none of the others did. That was an important indication. Persons who wereon the board, Mr (Azim) Premji left. Mr. Narayanmurthy himself did not contribute. And all these SunMicrosystems, Microsoft... nobody came forward.
What did they tell you? Was it a question of money...
(Huge shrug) Anyhow, I'm sure it was done in good faith. But they didn't cough up. Anyway, if it hasto be a government-funded project as it was turning out to be, then you can't be way out of line ofgovernmental scales. How do I justify these with CAG tomorrow? Then I was told that the CAG does not come inbecause this is a Section 25 company. Then in Parliament I will be shouted down and told that section 25 wasjust a device to get it out of the CAG, CVC etc.