Sunil Jain: Maran dials a wrong number

RATIONAL EXPECTATIONS

Over the past few months, the ministry of power has been trying its best to cut the state-level regulators to size, and now the same thing is being done by the ministry of communications to the telecom regulator, Trai""indeed, while the letter from the ministry to Trai has been readied, the file is still doing the rounds between the ministry and the Prime Minister's Office.

In a sense, the directive to Trai under Section 25 of the Trai Act was only to be expected, given just how Telecom Minister Dayanidhi Maran and Trai Chairman Pradip Baijal haven't been seeing eye to eye on a lot of matters.

First, Maran talked of the need to move to an IndiaOne single tariff even though this was Baijal's domain; when Baijal gave his recommendations on spectrum allocation, Maran said he'd exceeded his brief; when the ministry tried to protect BSNL/MTNL's turf by incorrectly insisting that the Virtual Private Network (VPN) service offered by private internet providers was a new one for which an entry fee of Rs 10 crore had to be paid and on which the effective licence fee was around 18 per cent of the revenue, this was done without the legally mandated recommendation of Trai""indeed, while lease rentals have fallen dramatically, MTNL charges competitors like Sify 3-5 times the amount! Now that Trai has said only a nominal entry fee and no annual licence fee is required, we have to see if this is accepted.

In keeping with the ministry's decision to protect BSNL at all costs, the Section 25 directive's timing is not coincidental since it comes at a time when Trai was reducing the access deficit charges (ADC) paid to BSNL.

Under Section 25, the government can tell Trai to do certain things "in the interest of the sovereignty and integrity of India, the security of the State" and other such lofty causes.

In the case of ADC, it is true there is a national security angle in the sense that when Reliance Infocomm was engaged in its ADC-avoidance game, it did this by changing the caller-IDs on phones, making it difficult for security agencies to figure out where phone calls came from.

So, if the ministry was directing Baijal to abolish the ADC or at least ensure there was no arbitrage advantage in masquerading international calls as local ones (the ADC payable on a local call is zero, it is 30 paise for an STD one, while that on an international call it is Rs 3.50 per minute), it would have been justifiable, but since the ministry wants the ADC to continue, it couldn't invoke "national security".

So, the ministry's legal advisor came up with gobbledygook like "ours is a sovereign socialist secular democratic republic state and our Constitution promises to secure to all its citizens social, economic and political justice.

Article 38 of the Constitution provides that the State shall strive to promote the welfare of the people ... the proposed directions to TRAI under section 25 of the Act ... appear to be a step in accordance with the aforesaid provisions of the Constitution ..."! By the way, in no place does Section 25 talk of directions of the basis of so-called public interest or social justice.

While this column has blamed Baijal for the ADC mess, for creating an arbitrage opportunity by putting differential ADCs on different types of calls, Maran seeks to increase this arbitrage!

Indeed, egged on by this column perhaps (!), Baijal was in the process of both reducing the ADC as well as moving to a single ADC revenue-share rate (once you pay just one ADC rate for all calls, there's no benefit in pretending an international call is a local one).

The directive, on the other hand, says Trai should move to a revenue-share ADC (which it is anyway), but that this should be graded, lower on STD calls and higher on international ones.

Indeed, the directive is that "the percentage ... may be fixed in such a manner that the total contribution of ADC from international traffic ... should constitute approximately the same amount of ADC which is being contributed at present with a view to reduce the burden on domestic sector".

So if the ADC on STD calls remains at the current 30 paise or falls while that on international calls is set in such a way that the effective ADC is around Rs 3.50 per minute, the arbitrage will increase as will the theft.

Interestingly, to justify the higher international ADC, the ministry's seven-page note cites the high termination charges in countries like Saudi Arabia and conveniently forgets areas like the US, where termination charges are a mere 35 paise.

Allowing Maran to issue such a directive will choke off whatever good work the regulator is doing, indeed will reverse the course of reforms in the sector. But since Maran is a UPA ally, presumably the PMO won't dare to stop him from issuing the directive.

suniljain@business-standard.com