Time to stop rural telecom subsidy to BSNL, let it compete with private operators

Telecom Lead India: Indian telecom market is going
through a tough phase and offering Rs 600 crore subsidy to the state-run BSNL
will reduce its efficiency in wireline market. In order to ensure level playing
field for mobile operators, it is time for the government to rethink on
subsidies to support public companies. Wireless has already replaced wireline
as the choice of masses in rural areas.


To revive the business of loss-making state owned telco,
TRAI has recently recommended a subsidy of Rs 600 crore to BSNL, which would
help the teleco in maintaining rural wireline connections installed before
April 1, 2002.


In India, rural wireline subscription is constantly
plunging. It dipped by 1 percent in January taking the total rural wireline
base to 7.67 million, whereas rural wireless subscription is increasing at a
healthy rate. In January, rural wireless subscriber base stood at 312.62
million at 1.64 percent monthly growth.


For the same month, BSNL’s wireline subscriber base
declined to 22,752,984 from 23,003,744 connections.


Not only in rural areas, but in urban area also, wireline
subscription is declining. In January, total urban wireline subscribers base
dipped by 0.86 percent and stood at 24.72 million.


Companies like BSNL should be free from the government
support to show efficiency as without the support there will be level playing
field for such state owned enterprises.


However, BSNL said It does not make business sense for
BSNL to maintain these high cost rural lines at very high net loss unless it is
financially compensated by the government.”


Furthermore, the telco added that financial support by
the government will be the key to broadband adoption in rural areas.


The Department of Telecommunications ( DoT) had sought
TRAI’s recommendations regarding continuation of support from Universal Service
Obligation Fund (USOF) towards the rural direct exchange lines (DELs) on expiry
of Rs 2,000 crore per year subsidy on July 17, 2011.


“Keeping in view the urgency of matter, considering
that it would take some more time to issue a consultation paper and that time
would also be taken in consultation process, the Authority recommends that a
subsidy of Rs 600 crore purely as an ad hoc measure may be given to BSNL,”
TRAI said in a statement.  


The regulator said that at this juncture it may not be
easy for the government to obtain any additional funds for this purpose through
the normal budgetary process and hence it recommended that a subsidy grant of
Rs 600 crore may be made from USOF to BSNL.

TRAI added that the grant and the source (USOF) are
purely ad hoc arrangement and final recommendations would be made after due


Earlier, BSNL had also received Rs 2,000 crore from USOF
for a period of three years from July 18, 2008 to July 17, 2011 on phasing out
of Access Deficit Charge ( ADC) for sustaining its loss-making landline
business across rural India.


However, following the expiration
date, BSNL had sought further financial support of Rs 2,580 crore per
year from USOF for meeting the deficit arising out of commercially
non-remunerative rural wireline services for DELs installed before April 1,


Danish Khan
[email protected]