RBI deputy governor critical of telecom tariff roll back

Friday, 23 May 2003, 07:00 Hrs
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BANGALORE: The centre's decision to roll back telecom tariffs has not found favour with noted economist and Reserve Bank of India (RBI) deputy governor Rakesh Mohan.

According to him, the "government must restrain from undercutting the regulator" since telecom companies could go bankrupt without a viable tariff structure.

Mohan was delivering the keynote address on "Infrastructure Development in India, Emerging Challenges" at the World Bank's annual conference on development economics here.

He said the Telecom Regulatory Authority of India (TRAI) should ensure service providers did not resort to predatory prices while guarding "against the road to bottom".

He clarified that he was speaking as an economist and not as an official of India's central bank.

The roll back of tariffs, effected thrice since 1999, did not augur well for the industry because no sector could develop without proper user charges. With just 41.6 million basic telephones and 12.6 million mobile phones, the motive for reducing the rates could not the welfare of the poor, he said.

Mohan linked collection of user charges and better tax compliance as essential ingredients for increasing investment in the country.

Pointing out that the tax to GDP ratio had come down and was just below 2 percent, he said: "We need to raise the tax-GDP ratio by two to four percent in the next five to 10 years."

Turning to infrastructure, Mohan said "overall savings and investments have stagnated and we see the reflection (of this) in investment in infrastructure," adding that expected investments had not taken place in the private and public sectors.

Public sector investments were lower by 30 percent than projected. However, that of the private sector was lower by 10 percent and was slowing down even further.

"The private sector has indeed responded but it would have responded more if the conditions were corrected," he maintained.

He said the roads, telecom and ports sectors had done well compared to the disastrous performance of the power, railways and urban sectors.
Source: IANS
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