Oct 3, 2008

India - TRAI removes rural levy on incoming international calls

Five years after the access deficit charge was introduced in the country – to compensate the state-owned Bharat Sanchar Nigam Ltd (BSNL) for its expenses on fulfilling social obligations — the Telecom Regulatory Authority of India has decided to completely remove the levy.While the charge was abolished on all domestic telephone calls in April, it has now been taken off for incoming international long distance calls as well in line with the earlier announced plans. BSNL officials claimed that TRAI’s decision will make it difficult for the company to sustain its rural obligations. The company has filed an appeal with the Telecom Dispute Settlement Appellate Tribunal seeking a stay on decision to abolish ADC. Fund for subsidy ADC was a levy imposed on operators to collect a fund that could be used to finance the subsidy being offered by the Government to rural telephone subscribers. The mechanism was introduced in 2003 by the telecom regulator despite strong opposition from the private players. The PSU has received more than Rs 15,000 crore over the five years.The money collected through this levy was passed on to BSNL since it owns most of the fixed telephone lines in rural areas. TRAI’s move to abolish the charges on incoming ISD calls will not have any direct benefit for Indian consumers. However, this will help the Government address the problem of illegal calls, since a zero ADC means lower arbitrage for grey market operators. Private operators pay 50 paise a minute to BSNL on incoming ILD calls. Some of the private operators were earlier caught routing their incoming ILD calls through illegal exchanges to avoid payment of this fee. Grey market accounts for about 25 per cent of the Rs 16,000 crore ILD market. Companies such as AT&T, Cable & Wireless, Sprint and Verizon, which bring in international traffic into the country, will benefit.

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