EDITORIAL

Telecom sector needs credible policy template

Not private revenue generating agendas

THE irony of the Indian IT sector is best illustrated by The Financial Times, in a descriptive reportage which said the new draft telecom policy was announced by the Telecom Minister Kapil Sibal on a day the CBI raided the residence and offices of a former Telecom Minister Dayanidhi Maran in connection with the scandal in the 2G mobile licencing. Scams in the telecom sector under the UPA have disrupted the growth in one of India’s fastest growing segments.

The new policy which will come into effect by the year end, allows easier merger and acquisitions in a sector where competition, according to the telecom majors has stagnated their margins. There are 15 operators and the new policy, it is expected will allow bigger players to snap smaller players and create bigger monopolies. This has been a long standing demand of transnational operators and will open a floodgate of foreign acquisitions, and mergers further squeezing the domestic industry.

India’s mobile market with a 900 million subscriber base is the world’s fastest growing among large economies and has always been attractive to foreign investors. The new policy, however, has failed to enthuse both the industry and the consumer.

It is not that the new policy was introduced in a hurry.

There is a need for a fresh look at the telecom policy. This is the first initiative after the 1999 telecom policy of the NDA government that brought about revolutionary changes in the communication sector. The Vajpayee initiative was essentially designed to provide quality, affordable, efficient telephoney on demand. The number of connections at the time of introducing this policy was only 100 million. Now this has grown to 900 million.

It is projected that in the next few years India will boast of a billion mobile phone users and over 175 million broadband internet connections. So the industry was desperately looking for a clean up in the Communications Ministry and an effective forward looking policy template. The complaint is that the new draft is a shabbily done job, too little too late.

Remember, the Communication sector is the dynamo of our economy. Under the UPA it does not even have a full time Minister. Sibal is overburdened with too many ministries and too much politicking. He talks too much, irritates many but delivers very little. One of UPA’s past telecom minister is cooling his heels in jail, another is expected to give him company soon enough. But the mess the jailed minister created is yet to be cleared.

The Ministry should have cancelled all Raja licesces immediately after the biggest scam in India’s history was detected a year ago.  The TRAI has recommended cancelling 70 of Raja’s 122 licences for not fulfilling their licence obligations. Sibal, for reasons only he would know is however refusing to do this. By cancelling these licences, additional spectrum the industry is demanding could have been made available. But the Minister thinks, the industry can wait till 2020 for additional spectrum availability.

This is the mismatch. The UPA’s long term plans are designed to kill the sector by slow motion, policy paralysis and wanton loot.

One of the things in the draft, the consumers will be interested is the proposed free roaming and offer nationwide mobile numbers’ portability. Consumers will certainly welcome this. The industry, however is less enthusiastic, as this will mean a diminution of revenues, given that the operators will continue to pay inter-connection charges. This would end up in reworked tariff packages, straight increases in charges or the consumers will be made to cough up higher charges on some other head. Today, almost 35 per cent of the bill payed by the consumer is made up of service, customs and excise taxes. This is, like in the oil sector, the highest in the world. The industry has been arguing for a reduction in these taxes.

Ever since telecom sector was opend to private sector, telecom licencing and the policy formulation was hostage to the ruling party’s and telecom minister’s private revenue generating agenda. This will remain the biggest challenge for those wanting to clean up the sector as the final policy is readied by December.