The Index
Emcee
Half-baked Net policyThe new Internet policy announced with much fanfare by DoT has earned it praise, possibly for getting its act together once. But those showering encomiums on it have perhaps failed to visualise the contradictions and pitfalls in this policy. Internet usage will increase by providing unlimited access coupled with further reduction in access cost. In the US unlimited usage is available at $20 per month (Rs 760) while in India, a subscriber has to shell out Rs 3,000 for 100 hours. Inspite of the earlier steep charges, which was Rs 15,000 per 500 hours, nearly a million users jumped onto the Net in a short time. With this reduction, many more will join. But why has access time been limited? In its wisdom VSNL seems to be ignoring the trends about Net growth. With this retrograde decision, DoT will not only limit technological benefits, but also nullify the enormous cost advantage of telephone calls via the Net. Does DoT have a mandate to protect VSNL from genuine competition? The
whopping bank guarantees are sure to affect the spread of services to smaller cities. For a provider planning to operate in the 5 metros, Rs 1.25 crore will be the total bank guarantee for the first year of operations. Afterwards, at the end of 5 years annual fees equivalent to the current bank guarantee will be charged. As a result ISPs will operate only in areas that generate sufficient ROI. Although this makes business sense, what about the dire necessity to provide connectivity to smaller centres? What about cities that have scores of educational and research institutions? Who is to bear the burden of providing access in these areas? The new policy has given ISP's freedom to fix tariffs, but subject to Telecom Regulatory Authority of India's (TRAI) directions. The regulatory body would be free to intervene to review or fix a tariff which would then be binding on all licensees. ISPs would need to generate enough revenues to keep afloat. This measure may lead to a situation of constant conflict between
ISPs and TRAI. It is imperative for policy makers to desist from their natural urge to over-regulate and quickly reconcile with the fact that the Internet cannot be regulated. Rising yields The table is ample proof that yields in the government securities have been steadily increasing lately. Initially, the RBI's contention was that the rise in yields would be limited to short-term yields, but the table clearly indicates that long-term yields too have been affected. Not only due to the recent spike in interest rates as a consequence of the RBI's measures on the rupee but much before them. Clearly, those income fund managers who kept their funds in cash in anticipation of higher interest rates made the right call. The credit policy announced in October 21 1997 had reduced the bank rate from 10 per cent to 9 per cent per annum. This led to a general reduction on yields in government securities, but not for long. The table speaks for itself. Power companies The sharp spurt in the price ofmajor power stocks- BSES (up 7.69 per cent or Rs 12.45 and 2.79 per cent or Rs 3.1) and Tata Power- is more of an aberration than anything else. It has absolutely nothing to do with the "defensive" nature of power stocks. The returns for the power stocks are linked to the bank rate at the beginning of the year or April 1. The hike in bank rate by 2 percentage points from 9 to 11 per cent (if the rate remains unchanged till April 1, 1998), will result in distributable profits of the utilities for 1998-99 being up from 14.7 per cent to 16.3 per cent. Since the impact of the bank rate has already been factored into the stocks, there is little scope for further rise. Corrigendum: In the analysis of Indo-Rama it was mentioned that for purpose of calculating managerial remuneration, depreciation is calculated at WDV rates specified in schedule XIV of the Companies Act. In fact, it is calculated as per rates prescribed by I-T Act.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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