GOVERNMENT: Which Mess Do I Clean up First?

As the head of India’s public sector disin vestment efforts, Arun Shourie
has just one big task–giving away government control in PSUs in a way that
benefits all stakeholders. And despite all the complexities involved in the
process, and the pulls and pressures from all quarters, Shourie proved himself
quite successful. Even his staunchest critics agree to that. However, will it be
the same for him in his new role as union communications minister? While no one
can question the fact that Shourie represents an endangered species of ministers
known for their integrity, transparency and above all, deeds not words, the
world of Indian telecom is most likely to throw up more complex challenges for
him.

For one, Shourie’s predecessor Pramod Mahajan has not left an heirloom that
would generate envy. Allegations of favoritism have been flying thick and fast.
Perhaps no other country in the world has a telecom industry as mired in legal
wrangles as India. Moreover, shenanigans of politicians and murky corporate
rivalries have been too overwhelming in the sector. Worse is the fact that TRAI
is not seen as an independent and effective regulator but as an appendage of the
government that is often subjected to ministerial whims. This has resulted in a
situation where operators have been spending more time on regulatory and legal
issues than on fine tuning their business. The end result has been low investor
confidence.

Perhaps Shourie has been well aware of all this. That is why he began his
innings at Sanchar Bhawan by assuring full transparency in all decisions and
deals and asking corporate lobbies to stay away from influencing the government
decision making. Given his reputation, that would not be a tall order. However,
as competition intensifies in the industry, given the reputation of some of the
players in the game, Shourie would have to live with lots of pulls and pressure.

Shourie must begin with strengthening the regulatory edifice by restoring the
credibility of TRAI and giving it more teeth so that it can act independently
and impartially in times of need. There is a need for reconstituting the TRAI
and getting professionals in the body. But before that Shourie must get the
Communications Convergence Bill passed with amendments to make TRAI really
autonomous and independent.

There’s also a need to remove the confusion with regard to the proposed
merger of BSNL and MTNL. He has already said that he would be studying the
proposal to merge the two state-owned companies. Shares of MTNL have jumped
since he took over from Mahajan as communications and information technology
minister. The company’s shares had taken a beating after Mahajan had said the
two companies would be merged.

The new minister should also ensure that there is no further erosion in the
value of BSNL and MTNL, and they remain competitive. An unhealthy BSNL or MTNL
is neither in the interest of the country nor that of the industry. At present,
ad hoc moves rule the roost in both the organizations. They have not been
aggressive enough in taking on the competition.

It is ironical that while on one hand the government has often been
vociferous in its support for ‘affordable’ mobile, its own operators have
been lying low on this front, thus doling out Reliance and Tata Indicom a major
advantage.

While several issues will be competing for the new communications minister’s
attention, four of them demand urgency. These are: raising of the ceiling on FDI
in telecom services; unbundling of the local loop owned by BSNL and MTNL;
pushing broadband access as a matter of government policy; and promotion of
rural connectivity. Removing the bar on foreign investment is essential in
context of the fact that restrictions make the cost of capital high. A delay
here could prove detrimental to the growth of the industry as it requires
massive investments. Unbundling is important from the standpoint that it could
not only bring in moolah for the state operators but also foster competition.
Broadband is important for the success of e-governance. In fact, both MTNL and
BSNL should be encouraged to take broadband to as many homes as possible. As for
rural connectivity, the minister has already made his mind clear that operators
who run way from their obligation would penalized. However, he would do well to
expand the scope of rural connectivity beyond VPT and look at ways and means of
bringing a more comprehensive access to rural areas so that the benefits of
connectivity with regard e-governance, access to new markets and education reach
rural homes.

Ravi Shekhar Pandey