FROM BUSINESS WORLD OF 11 FEBRUARY 2006
Shortsighted
& ill conceived
Blessed by
inviting bars and beautiful beaches, Goans do not have to toil in open.
Travellers from all over the world seek out the verdant state; their money has
made Goans rich. So all arduous or unpleasant work is done by migrants. As
someone visiting Goa’s newer settlements learns as he endlessly waits outside
one of its public call offices, Tamil is the lingua franca of its construction
workers. They have close ties with their kith and kin across the Nilgiris, and
they have much to tell them. No wonder they spend heavily on trunk calls. It
must be some people such as they whom the minister of telecommunications must
have had in mind when he thought of his OneIndia plan. Far away from home,
labouring in the sun, they would invite anybody’s sympathy. The
telecommunications minister cannot give them free food or bars of soap; all he
could give them was cheap calls home. And so he has.
But while he was
doing them a favour, why did he not go all the way, and make domestic long-distance
calls free? That is the utmost he could have done for them – unless he was to
ask Bharatiya Sanchar Nigam Limited (BSNL), the public enterprise at his
command, to give everyone a prize whenever he made a trunk call. Why stop at a
Rupee? The minister could have been more generous. After all, it is not his
money. The whole point of being a minister is to spend others’ money for one’s
own political benefit.
But money does
not grow on trees. If BSNL charges less for trunk calls, it must earn less.
What is good for the migrant worker is not good for BSNL. That is why Dayanidhi
Maran took a year and a half to realize his dream of OneIndia: his satraps
vehemently resisted the idea. As it was, BSNL was charging too little for the
landline connections it was giving out, and was making losses on them. Now it
would bleed on trunk calls as well.
But for the
losses on land lines, the ministry had already worked out a solution: it was
making private telecom operators pay for them. It had forced – let us say,
forcefully persuaded – Telecom Regulatory Authority of India to impose a tax on
international calls. So those trunk callers whose calls crossed borders
subsidized those lucky landline customers of BSNL. No doubt some further
persuasion will force BSNL’s private competitors to finance its losses on trunk
calls.
That is the
first thing that is wrong with OneIndia. It worsens BSNL’s finances and its
ability to compete with such strong rivals as Bharti and Reliance. The
minister’s solution would be to make them pay for its losses. But that would be
unfair to them; there is no reason why they should have to pay for the
minister’s foibles. His foray into populism is a distortion of competition in
the telecom market. Introducing private competitors in the telecom market is
one of the most consumer-friendly things the government of India has done;
OneIndia vitiates and weakens that measure.
Further, despite
all his power and persuasion, the minister could make only BSNL introduce
OneIndia. So it is only BSNL’s customers that can take advantage of it.
Reliance introduced its own version of OneIndia some time back; but it is only
for its own customers. Thus, this bounty is available only to its customers
provided they call its other customers. Maran’s interference is dividing up the
national telecom market into insulated markets of each operator. It reduces
competition.
And what is good
for the migrant worker is bad for the PCO operator. His earnings out of each
call will fall from Rs 10-20 to Re 1. Even if his customers make calls ten
hours a day and finish each call within a minute, his revenue will be Rs 600.
He will keep only 10 per cent of it, or Rs 60. Few PCO operators will find it
worthwhile to continue in business on such earnings. Soon BSNL will face
pressure to increase PCOs’ share of their revenue. And even if it carries trunk
calls free, many PCO operators will bleed. Maran has made one of India’s most
characteristic small businesses uneconomic.
And finally,
prices are not the minister’s business at all. For the past nine years, telecom
tariffs have been overseen by TRAI. TRAI is the watchman of competition in the
telecom market; it ensures that tariffs are neither too high nor predatory. Now
that the minister has forced the public enterprise under his thumb to introduce
a predatory tariff, TRAI will have a hard time coping with its consequences.
For all these
reasons, Maran’s introduction of OneIndia is a bad idea. It is still not too
much to hope that sense will dawn: that he will withdraw it, and let
competition decide telecom tariffs. And whilst the chances are bleak, one can
still hope that the council of ministers of which Maran is a member will
persuade him out of the ill considered measure, for at least some of them are
reputed to have considerable sense.
