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ADC regime to end by '09

September 20, 2005 16:49 IST

The Telecom Regulatory Authority of India has mooted a three-stage process to do away with the ADC regime by 2008-09. This is despite pressure from the communications ministry not to further revise the access deficit charge.

As per the three-stage process, the regulator intends to reduce the ADC kitty to less than Rs 5,600 crore (Rs 56 billion) in 2006-07, and lessen it further to Rs 2,007 crore (Rs 20.07 billion)s in 2007-08, before dissolving it altogether.

ADC is a levy imposed on operators to fund BSNL's rural operations. According to Trai, about Rs 5,600 crore was currently being raised as ADC, of which, over 90 per cent was collected from private operators.

The regulator feels that after the ADC regime is dissolved, the Universal Service Obligation funds will have to be used to sustain BSNL's rural operations as subscribers could not be expected to fund both the schemes.

Justifying the move, the regulator said revising ADC was necessary as competing operators could not be expected to wait forever for BSNL to undertake a rebalancing exercise and to subsidise the PSU for its fixed-line operations during this period. "This would inhibit growth, competition and level playing field in the sector," they said.

Citing international practices, the regulator said ADC had been withdrawn in most countries a few years after its introduction as it was found to be inefficient and anti-competitive.

Trai has informed the Department of Telecommunications (DoT) that in the first stage (2006-07), the existing practice of levying the charge on all long distance and international calls on a per-minute basis would be replaced by a revenue-share scheme.

"Trai, in its consultation paper issued on March 17, 2005, had proposed ADC as percentage of annual revenue of operators and is moving in that direction. Hence, no direction from the government is necessary," Trai Chairman Pradip Baijal said in a letter to DoT.

According to Trai, the aggregate gross revenue (AGR) of the telecom sector will stand at about Rs 1,09,000 crore (Rs 1,090 billion) in 2007, from Rs 81,000 crore (Rs 810 billion) in Febraury 2005, and therefore, the first stage of revision will see ADC fall to less than 5.1 per cent of sector's AGR, from 6.9 per cent under the existing regime.

The second revision in 2007-08 would make ADC less than 4.1 per cent of the AGR, which would be Rs 137,000 crore (Rs 1,370 billion), Trai added.

  • As part of a three-stage process, the ADC kitty will be reduced to Rs 5,600 crore in 2006-07, Rs 2,007 crore in 07-08, and then done away it.
  • ADC had already been withdrawn in most countries as it was found to be inefficient and anti-competitive.
  • Joji Thomas Philip in New Delhi