PM’S US trip may ring in more reforms

For consumers, this is great news as costs of international calls could fall as much as 30 to 40 per cent immediately. How expensive international calls from India are can be seen from the fact that while a call from India to the US costs Rs 61.20 per minute, the same call from the US to India costs as little as Rs 20. The difference can broadly be considered to be monopoly costs/profits. With the sector opened up, costs are expected to fall dramatically.

The government has already sought legal opinion on the matter which states that it has the right to modify the licence of VSNL at any given time, provided a “reasonable notice period” is given to the company before this is actually done.

Views of the Law Ministry, Ministry of External Affairs (as this involves bilateral negotiations with countries in deciding accounting rates) and Ministry of Commerce (in order to be in line with WTO commitments) have also been sought on the issue.

According to senior government sources, this “reasonable” period may be of around three to six months. The Department of Telecommunications was earlier considering a time frame for dismantling the VSNL monopoly by 2002 — VSNL’s license expires on 31/3/2004, though — but with the PM’s impending visit to the US, there is considerable pressure to advance this date as well.

With National Long Distance (NLD) having been opened up last month, the government is now veering around to the view that even International Long Distance (ILD) should be opened up.

There is also some degree of nervousness on the success of the NLD policy announced last month as two-and-a-half weeks after the policy was unveiled, not a single company has approached the government to grant it a licence for NLD operations. Government circles believe that if ILD is also opened, it may revive interest in the long distance market.

In return for the dismantling of VSNL’s monopoly, the government is likely to offer the company a compensation package. This package may include allowing VSNL to participate in other areas of telecom and also giving it a cash compensation. VSNL has been keen to enter areas such as basic services, upgradation of its internet licence (ISP) from the present six-city licence to an All-India licence.

Says a senior VSNL official: “If the government opens up our monopoly area for other companies to come in, it is only fair that even VSNL is allowed to diversify into other telecom areas. Otherwise, it would be like tying up our hands and feet and throwing us into the deep end of the sea without a fair chance of survival.”

While the Cabinet may decide on the issue of opening up of the ILD first, the actual compensation package for VSNL may be worked out later. In the meantime, the see-saw on which the VSNL stocks perform in the share markets can be any body’s guess. It may be recalled, the VSNL was listed only last month on the New York Stock Exchange (NYSE) without any change in its licence, and if the government now decides to open up the ILD turf for free competition, VSNL’s stocks are sure to react sharply.