The new telecom policy is about services, not revenue, write Shayam Ponappa and Anupam Saronwala
So what are we talking about? Losing Rs 1,443 crore to gain Rs 3,500 crore? The operators will pay Rs 2,245 erore by January 31, 2000, under the new telecom policy: Together with revenue sharing at, say, 15 per cent this is likely to be of the order of Rs 3,500 erore
Good decisions are hard to make and good outcomes harder to come by. For a government trying to build telecommunications infrastructure, the new telecom policy must have been a difficult decision with populist sentiment baying for the entrapment of operators and elections coming up.
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What the new telecom policy attempts to do, although not with admirable clarity, is set the goal of widely available, quality services at affordable prices. This was done when Parliament was in session. Remarkably, it was done by setting up a working group whose recommendations went through some level of public consultation, with some 17,000 responses received. The decisions now result from what was set in motion then. Several myths have, however, come to be associated with the policy.
First, the purpose of reform. From all the fulmination on the subject, one might conclude that the purpose of telecommuiiications reform is to collect revenues for government, and not to provide widely accessible services of good quality at reasonable prices.
But the aim is actually to enable the build-up of essential facilities and services in the public interest. So that we can catch up from two phones per 100 people (Brazil has 10, China 10, Malaysia over 18, much of Europe over 50). The primary aim is not money for the government's kitty.
Second, loss of licence fees. You can only lose what you have or are likely to get, not what there is no hope of getting. It is interesting that those who least understand numbers shout the loudest about the loss of fees (unless they are intentionally misleading the public).
The fact is most operators overbid, with the government leading them on. Events over the last two years showed that companies will risk default and litigation rather than pay. What could actually have been collected if there were no revenue sharing is the amount of the guarantees of Rs 1,850 crore, less those who would pay licence fees, plus the amount realised from the sale of foreclosed assets. (Then again what might have to be paid out by the government it some operators sue and win would be the amount of damages claimed.)
The estimation is not a trivial exercise, as some might be led to believe. To see this in context, consider what the operators will pay by January 31, 2000, under the new telecom policy: Rs 2,245 crore. That is much higher than the Rs 1,700 crore in the Budget that there is such a hullabaloo about. Together with revenue sharing at 15 per cent (the interim rate until the Telecom Regulatory Authority of India sets terms with retrospective effect from August 1999), this is likely to be of the order of Rs 3,500 crore. The fee waiver that the critics are going on about is Rs 1,443 crore (with no waiver for metro operators) for six months.
So what are we talking about? Losing Rs 1,443 crore to gain Rs 3,500 crore? With foreclosure under the 1994 telecom policy, collection would be Rs 1,850 crore (the guarantees), less the amount for operators who would pay some fees, taking the total to perhaps Rs 2,500 crore. So is it losing Rs 2,500 crore to gain Rs 3,500 crore that they are complaining about? Or is it about what might happen over the longer term?
Third, the long-term impact on government revenue.
The calclilation of benefits from a market-oriented policy in the public interest that will unshackle telecommunications is not simple. The motivation for the new revenue-sharing regime is that there will be a much greater build-up over time with lower prices. In principle, this could make far much larger collections by the government over 20 years than a high share on a smaller