The Hindu Business Line : STD rate cut: BSNL shoots itself in the foot

BHARAT Sanchar Nigam Ltd (BSNL) seems to have unwittingly harmed itself by slashing STD rates in mid-January. The increase in national long distance (NLD) traffic, needed to compensate it for the revenue loss of Rs 3,000 crore in the first six months, is quite slow in coming.

As per the latest estimates of the Department of Telecommunications (DoT), there has been only a 35 per cent increase in NLD traffic since the rate-cut. This is much below the expected levels of between 50 and 70 per cent.

According to official sources, BSNL currently earns close to Rs 12,000 crore from NLD calls. A 35 per cent increase in volumes if it remains stagnant over the next four months, would therefore offset the losses only marginally, putting a heavier load on its already overburdened shoulders.

They pointed out that NLD traffic as such might not increase as drastically as BSNL had expected. A point echoed by the STD/PCO booth operators' apex association - the All India Sanchar Sewa PCO Society.

As per its estimates collated from across the country, the increase in STD traffic from the booths has been quite slow on the uptake, at best between five and 10 per cent.

This, in effect, also raises doubts on DoT estimates, because the increase in STD volumes ought to be felt equally on the individual subscribers and PCO/STD booths.

As of now, none of these two estimates can be taken at face value. While the picture will be clearer only after around six months, the fact remains that BSNL is likely to be hit hard by its "gallant effort" to ward off competition from the private sector.

The officials noted that although BSNL was corporatised in October 2000, it continued to be burdened with the task of servicing unremunerative areas and was left with no option even in areas where the private fixed service providers had been operating.

BSNL's outlay on unremunerative services (rural and village public telephones) has been budgeted at Rs 5,000 crore this year and approximately Rs 3,000 crore - Rs 4,000 crore every year thereafter. The expenditure on urban uneconomic services, on the other hand, would be approximately Rs 7,000 crore per year.

Further, they pointed out, until last year, DoT was fully funding all the developmental expenditure, growing at 22 per cent per annum, entirely from internal resources. However post-corporatisation, the additional impact on BSNL is nearly Rs 5,000 crore.

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