DEVELOPMENT: Privatisation Will Get More Indians Connected

By Ranjit Devraj Reprint | | Print |

Ranjit Devraj

NEW DELHI, Jan 17 2002 (IPS) - Simi Joseph calculates that she can save 10 percent of the meagre 300 U.S. dollars she earns every month working as a nurse, thanks to the halving of long distance telephone rates that the Indian government ordered this week.

“There are months when I have had to spent more than 50 dollars on phone calls,” says Simi, who left behind a large family in southern Kerala state, more than 2,500 km away, to work at a hospital in the national capital.

Simi is not aware that the government has been forced to reduce its high tariffs because of stiff competition from private telecommunication companies. These firms have been making deep inroads into a sector that has been a government monopoly for longer than anybody can remember.

“All I know or really care about is that the calls I make to my family in Kerala from a local call office, once or twice a week, now cost half of what they used to,” explains Simi.

Her joy is shared by fellow nurses from Kerala, Santini Babu and Judy Kurien who, until last week had to wait until almost midnight before they could avoid exorbitant peak-hour rates to make affordable calls home. Most nurses in the capital come from highly literate Kerala.

In spite of being nurses and on call, none of them has her own private telephone since it still takes several months and hefty bribes to get one installed.

What really prised open the government’s monopoly on long- distance calls was an announcement made a month ago by privately-run cellular operators, which offered long-distance calls between hand-held phones at rates almost half of that charged on land lines run by the government.

India’s Telecom Minister Pramod Mahajan admitted that the new rates were intended maintain competitiveness and that he expected a price war to ensue between the government and private players.

A director in the government’s department of telecom (DoT), D P S Seth, admitted that the entry of cellular operators into the national long distance (NLD) sector would cost his public-sector, telecommunications corporation at least 15 million dollars in annual revenues.

DoT, which boasts of 30 million subscribers, now faces competition not only from cellular operators but from private land-line companies which are being allowed into India’s NLD sector for the first time as part of the government’s ambitious privatisation plans.

But Seth predicted that it will be some time before private operators make any significant dent in the whopping two billion dollar surplus that the government earns from long distance callers across the country. “It is too early to say anything,” he says.

Few in the bureaucracy are happy with the government’s acceleration of the privatisation of the telecommunications sector, though no one wants to be seen publicly criticising the policy for obvious reasons.

A former top bureaucrat predicted that the reduction in tariffs will largely benefit affluent urbanites at the cost of India’s large rural communities, members of which still have to walk miles to reach the nearest telephone.

Losing the surplus would only mean that DoT would now have less funds available for the massive ongoing work of providing telephone connectivity in rural areas, where the bulk of India’s billion-plus people live, says S M Agarwal, former government telecommunications bureaucrat.

“Thus far, with the surplus it earned the department of telecom (DOT) was installing five million new telephones a year (the largest number in any country except China), 40 percent of which were in small town and villages at rates affordable to poor users,” Agarwal explains.

According to Agarwal, this performance has been possible only because of the government policy of cross-subsidising connectivity in rural areas, where investment in telephones brings poor financial returns and where profit-driven privateers are hardly likely to venture into.

But there are signs that many are getting impatient with such arguments, especially when DoT’s legendary inefficiency is widely blamed for why India has lagged far behind China when it comes to increasing telephone density.

“India and China started out with about five million telephone connections each ten years ago and look at where China is today,” says Ashok Jhunjhunwala, who is attached to the prestigious Indian Institute of Technology (IIT) in southern Chennai city.

The number of telephone users in China hit 317 million in November last year, compared to India’s present 40 million users.

Jhunjhunwala points to the phenomenal growth of cable television connectivity mainly because it was completely unregulated by the government, and is today the preferred choice for Internet users, rather than the government’s unreliable telephone lines.

“Privatisation of long distance traffic alone will not guarantee greater efficiency. In fact by speeding up privatisation, the government is only sidestepping the issue of efficiency improvement,” Agarwal points out.

According to him, DoT would have been better off investing in the technologies that are giving private players an edge such as digital network management techniques.

Says Mahajan: “This is one war in which no one is asking for a ceasefire and everyone is using the latest technology to fight.” This time, he added, the real winner would be the consumer.