The Telecom Regulatory Authority of India has suggested abolition of the existing practice of levying Access Deficit Charges on private operators, a move that could hit the revenues of state-owned telecom major Bharat Sanchar Nigam Ltd.
The regulator, in a consultation paper, has suggested that ADC should be abolished by April 1, which, many say, could make telecom services more affordable.
ADC is a levy paid by private operators to BSNL, which the public sector undertaking uses for offering services in rural and non-profitable sectors. The total ADC provided to BSNL till date stands at around Rs 31,500 crore (Rs 315 billion).
Initiating the consultation process, Trai has called for comments from the industry on ADC abolition. As an alternative, it has suggested that the government could look at supporting BSNL from the Universal Services Obligation fund.
The total ADC funding for 2007-08 is expected to be to the tune of Rs 12,500 crore (Rs 125 billion), it said.
According to a Trai release, ADC was rolled out as a temporary support during the transition period of BSNL and was necessary to support its network in rural areas. "The idea of instituting ADC was not to make the incumbent perpetually dependent on support, but to allow it time for adjustment during the period of transition from a monopolistic environment and era of government funding and cross-subsidisation to a competitive business environment," it added.
ADC was introduced as a time-bound measure and later it was decided to abolish it in 2008-09. It should be replaced or merged with Universal Service Obligation regime from 2008-09, Trai said, adding the regime came into effect on May 1, 2003.
Trai added that it was essential to deliberate on these issues as support to rural services and making them affordable for the rural masses was of vital importance.
The phasing out of ADC will result in savings to service providers, lowering of entry barriers in rural areas and making telecom services increasingly "more affordable without the need to disturb the existing policy of forbearance on mobile tariff", Trai said.
According to an analyst, the abolition of ADC will hurt BSNL, especially at a time when the company is looking at an IPO.
