India to remove levy that funds rural telephony

Thursday, 27 March 2008, 07:00 Hrs
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New Delhi: In a move that will trigger lower phone call charges, India's telecom regulator Thursday said it will remove a levy imposed on service providers to fund rural connectivity.

"Access deficit charges put unfair burden on new entrants and distorts market conditions," the Telecom Regulatory Authority of India (TRAI) said, referring to the technical term used for the levy, imposed since 2003.

"It is also a source of arbitrage and thereby results in grey market operations in the international calls," the watchdog said in a statement, after taking the views all stakeholders since January.

It accordingly said domestic calls will be freed from the levy - paid to state-run Bharat Sanchar Nigam Ltd (BSNL) - from April, while international calls will be freed from September.

In the interim, it said the levy on the international calls has been reduced to just 50 paise (little over one US cent) from 1 per call.

The watchdog also called for the government to pay an annual subsidy of 20 billion ($500 million) for three years to BSNL for phones installed by it in rural areas before April 1, 2002.

The levy - amounting to 0.75 percent of a telecom company's revenue and 1 per call for international services - was the result of the National Telecom Policy of 1999, that said access to telephones in rural areas was a national priority.

But finding no room for competition in rural areas, it was agreed that private players would pay the money towards their "access deficit" in these places so as to compensate the state-run company towards its social obligation.

The development invited positive reactions from the private telecom service providers, who said the savings on account of the removal of access deficit charges would be passed on to customers.

"As a leader in the telecom sector, we are committed to pass on the benefits of the relief to the customers primarily in the rural areas as desired by TRAI," said the Bharti group, the largest private telecom provider in the country.

"We welcome the move. On our part, we are committed to passing on the benefit to our customers in an equitable manner and will announce it shortly," a spokesman for Vodafone Essar said.
Source: IANS
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