TRAI Recommends Rs 600 Crore interim subsidy for BSNL’s losses on rural land lines

Vide its letter No.402-26/2011-I&FN dated 5-3-2012 addressed to the DoT Secretary, the TRAI recommended an interim subsidy of Rs 600 crore to BSNL for compensating the losses on its rural landlines installed prior to 1-4-2002.

BSNL requested for a subsidy of Rs 2580 crore per year stating that

(a)    For rural wire-lines, installed before 1-4-2002, the existing cost of operations are high in comparison with revenue accruals;

(b)   It does not make business sense for BSNL to maintain these high cost rural lines at very high net loss unless it is financially compensated by the Government;

(c)    Rural wire-lines are key to broadband adoption in rural areas. Terefore the TRAI is requested to recommend to DoT for provision of continued support to these rural DELs ( Direct Exchange Lines) installed before 1-4-2002.

BSNL also requested that pending final recommendation, the TRAI may consider issuing interim recommendation for an adhoc amount as interim relief.

The TRAI has considered this request for interim relief. Keeping in view the urgency of the matter and considering that it would take some time to issue a consultation paper and that time would also be taken for the consultation process, the Authority recommended that a subsidy of Rs 600 crore be given to BSNL purely as adhoc measure. Keeping in view of the fact that at this stage it may not be possible for the Government to obtain any additional funds for this purpose through the normal budgetary process, the Authority recommended for a subsidy grant of Rs 600 crore from USOF ( Universal Social Obligation Fund). The TRAI has further stated that this amount of Rs 600 crore and the source i.e., the USOF are purely ad hoc arrangement and the final recommendations in this regard will be made by the Authority after due consultation process, i.e after consulting the private telecom operators and other interested parties.

All the mobile services providing companies including the BSNL are contributing 5% of their revenue every year to the USOF. The USOF is intended for providing compensation to the services run by the telecom operators in loss making areas in the interest of the society, as a social obligation. The unutilized fund in the USOF is estimated to reach Rs 36000 crore by 31-3-2013.

For the past three years, from 18-7-2008 to 17-7-2011, BSNL was given a subsidy of Rs 2000 crore per year from USOF to comensate the losses on the rural landlines installed prior to 1-4-2002. In the said recommendation of the TRAI recommending this compensation of Rs 200 crore per year for 3 years, the TRAI also stated that the Central Government, after seeking a recommendation of TRAI, on review, may continue the reimbursement at the same rate or at a lower rate beyond the three years, for a period decided by the Government from time to time.

Therefore in any case, the final recommendation from the TRAI now after completing the consultation process will not be for an amount more than Rs 2000 crore per year.

It is to be noted that earlier the BSNL has been receiving the compensation for the losses on its landlines in the form of ADC (Access Deficit Charge) paid by the private telecom operators as a certain per centage in the revenue on each call originating from their customers to the BSNL land line customers. But due to the pressure from the private telecom operators, this was gradually reduced and was totally abolished with effect from July 2008. It is also to be noted that the license fees paid by BSNL to the Government was reimbursed by the Government to BSNL to compensate for the losses incurred on the rural landlines. The reimbursement was 100 per cent for the years 2001-02 to 2003-04. It was reduced to 2/3^rd of the license fee for 2004-05 and 1/3^rd in 2005-06 and stopped completely there after.

In the year 2005-06, BSNL received ADC of Rs 3304 crore , and License fee reimbursement of Rs 583 crore. And a reimbursement of Rs 1766 crore from USO fund,that is, a total compensation of Rs 5653 crore. But the License fee reimbursement was totally stopped from 2006-07 and the ADC was stopped completely from July 2008.

While BSNL is incurring an operational expenditure of Rs 702 per month per one rural landline, its revenue is only Rs 58 per line per month. Therefore the loss on rural landlines per year will be around Rs 10000 crore per year. But even the BSNL management has been claimining only Rs 2580 crore only per year as the compensation on the rural landlines. It is very meager compared to the actual loss.

Therefore the real issue for the survival of the BSNL is to get the full compensation for the losses incurred by it on the rural landlines which are maintained as a social obligation and not as a business. The compensation, as per the TRAI, cannot be more than Rs 2000 crore and even for deciding the quantum with in this limit, it  has to consult all the private operators and others who are totally opposing any compensation to BSNL. A determined struggle is required to pressurize the Government to save BSNL by paying adequate compensation to BSNL for the losses incurred by it on the landlines.