Govt disconnects VSNL monopoly on ISD

Govt disconnects VSNL monopoly on ISD
ENS ECONOMIC BUREAU

NEW DELHI, SEPTEMBER 6: On the eve of the Prime Minister's visit to the US, the government today decided to end the monopoly of Videsh Sanchar Nigam Ltd (VSNL) on international telephone calls (ISD) from April 2002, advancing it by two years. The opening up of International Long Distance (ILD) comes three weeks after the government opened National Long Distance (NLD) or STD calls also for private operators.

As reported by The Indian Express on September 5 the decision to advance the ending of VSNL's monopoly and open international calls for private participation ahead of the PM's departure for the US, was taken after a meeting of the Cabinet Committee on Economic Affairs (CCEA) here today.

The exact parameters for entry of private companies in the field of ILD will be decided later after consultations with the Telecom Regulatory Authority. But the PM will be able to announce the new ILD Policy during his US visit for any American companies waiting to be impressed.

The consumers are expected to benefit from the new policy, since costs of international calls are expected to fall by as much as 30 to 40 per cent. At present a call from India to the US costs Rs 61.20 per minute, while 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.

In return for dismantling VSNL's monopoly two years ahead of the scheduled date of March 31, 2004, the government has also worked out a compensation package for VSNL.

The package will allow VSNL to enter into the National Long Distance (NLD)sector. As a gesture of compensation, VSNL will be reimbursed the Rs 100 crore-entry fee. VSNL will not be required to pay the Rs 400 crore performance bank guarantee (PBG) till such time that it retains its public sector status. This clearly means that if after disinvestment the government share in VSNL drops below 51 per cent, these sops will not be available to the company.

The government will also reimburse VSNL for the revenue share paid by it to the government for operating NLD services in the country for the first five years beginning from April 1, 2001.

The package of compensation offered to VSNL for ending its monopoly ahead of schedule also includes an `A' category licence for internet service provider (ISP) operations. VSNL currently offers internet access in six cities and the `A' category licence would enable the public sector firm to offer the service across the country.

The government has also appointed Solomon Brothers as consultants if any additional component of compensation is required to be extended to the VSNL. The consultant is expected to submit its report within two weeks.

Subject to assessment by the consultant the government has made provisions for some extra compensation for VSNL. First, it would also consider giving the revenue share paid by the new international long distance operators (ILDOs) to VSNL for a period of two years from April 1, 2003.

Second, international traffic generated by state-owned MTNL and Department of Telecom Services (DTS) would be routed through VSNL, provided VSNL guarantees `best customer treatment' to these operators.

VSNL to offer STD services

Permission to enter NLD to provide STD services
Rs 100 crore entry fee for NLD to be reimbursed to VSNL
Rs 400 crore bank guarantee for NLD not to be charged from VSNL
Revenue share for NLD paid to govt would be reimbursed for five years from 1.4.2000
VSNL to get Category `A' all-India ISP licence