Friday, April 25, 2008

India - passing on savings with the end of ADC

Telcos must cut phone tariffs: Govt

The government on Thursday warned telecom service providers of action if they failed to pass on the benefit of withdrawal of levy to consumers.

The levy (Access Deficit Charge), that was paid by private operators to state-owned BSNL for taking up rural telephony, has been wiped off with effect from April 1 this year.

Replying to supplementaries during Question Hour, Telecom Minister A Raja said the phasing out of ADC by sector regulator TRAI would lead to a gain of between Rs 500 crore to Rs 1000 crore (Rs 5-10 billion) to the private firms like Airtel and Vodafone.

The spirit behind TRAI's decision was to benefit the consumers and call tariffs should be reduced, he said.

If the gains are not passed on to consumers, we will take action," he said. Benefit to private operators must reflect on (telephone call) tariffs, he said. He, however, did not elaborate on the action the government may take.

The response was to the allegation by Amar Singh (SP) that companies like Airtel and Vodafone had formed a "cartel" and were profiteering from withdrawal of ADC.

Expressing concern over the impact the withdrawal of ADC will have on Bharat Sanchar Nigam Ltd (BSNL), Raja said the loss to the state-owned firm would be compensated from the Universal Obligation Fund (USO). India does not follow a policy of tariff fixation and rather is governed by the concept of forbearance and market forces.

He, however, said the government was not entirely in agreement with this concept and "if necessary the matter can be taken up with TRAI."

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