March 12, 2004

 Press Release

 The NDA government’s cacophony on the claims of `Shining India’ has been the shrillest with regard to `achievements’ in the telecom and the road sector. However, our study from the Communist Party of India (Marxist) on these two sectors reveal otherwise.    It is a common knowledge that the telecom sector has been the most scam prone — with huge largesse handed over by the government to private operators.  The switchover from a fixed license fee regime to a revenue share arrangement, the mute spectator role of the government as a licensor when a WLL operator was violating  the license conditions with impunity and post-facto legitimising of the violation for a pittance and finally the policy decision on the restructuring of the equity composition in favour of foreign investors in private telcos all smack of blatant favouritism.  The end  result is a  rebalancing of tariff in favour of big users and loaded against the small ones.   The road sector — more particularly, the golden  quadrilateral project reveals also certain very disturbing facts.  These two  studies on telecom and road sectors constitute the fourth and fifth of our series, "Lies, damned lies and statistics" to nail down the untruths of the  `Shining India’ campaign.

 

Is India Really Shining?

Lies, Damned Lies and Statistics

 Infrastructure: Telecom Sector

 

 Claims galore on the so called ‘achievements’ of the Vajpayee government in the telecom sector. An advertisement published on February 27, 2004 says that the total number of telephone connections have gone up to 4.75 crores in the last 5 years while it had only increased to 2.3 crores over the 50 years before the Vajpayee government assumed power. It also claims that the number of mobile phones went up from 12 lakhs in April 1999 to 2.2 crore in January 2004, showing an increase of 1,733 per cent.

The cellular boom is a global phenomenon of middle and late 1990s, driven by rapid technological change worldwide. To compare the Vajpayee government’s achievements with all the governments who ruled through the earlier 50 years on the basis of the telecom boom is as foolish as comparing the British colonial government’s ‘achievement’ with the earlier Mughal regime in replacing the bullock cart by introducing the railways in India during the mid-19^th century.  But what takes the sheen out of this childish boast is that in the backdrop of a huge technological leap in telecommunications worldwide, India has lagged behind much of the world in this field, including other developing countries like China, Brazil, Indonesia and Sri Lanka, as is evident from the comparison of teledensity figures.

 

Teledensity: International Comparison
(No. of phone lines per 100 persons of population)
Country	1995	2001
World	12.3	17.2
USA	60.7	66.5
UK	50.2	58.8
Brazil	8.5	21.8
China	3.3	13.8
Sri Lanka	1.1	4.3
Indonesia	1.7	3.7
India	1.1	3.6
Pakistan	1.7	2.4
Note: Figures include cellular, fixed and WLL.
Source: Economic Survey, 2002-03

 The slow growth of the telecom sector in India compared to other developing countries, which should have been a matter of criticism against the government has unfortunately been neglected by the enthusiasts of the telecom boom in India. This slow growth is a direct result of the pro-monopoly bias of the Vajpayee government. After foregoing Rs. 50,000 crores as license fees from the private telecom operators, the government also allowed those private operators to violate the license terms and conditions with impunity, in areas like rural telephony, network expansion targets etc. While the private operators fulfilled only 10% of their rural commitments, they were let off after paying a very small proportion of the penalty prescribed for this violation.

The government sold 45% of its stakes in the VSNL to the Tatas for a sum of Rs.2,591 crores even when VSNL had cash reserves of more than Rs.3,000 crores at the time of disinvestment. The Tatas paid less than the cash reserves of VSNL; and moreover, the Rs.2,591 crores that they spent in acquiring VSNL were actually loaned by government owned financial institutions and banks. The first step that the new Tata Management took was to siphon off Rs.1,200 crores out of VSNL for another Tata company. Thus the government lent money to a monopoly house to buy up shares of a profit making public sector Telecom Company for revenue which was less than the cash reserves of that PSU and then allowed it to milk the cash rich PSU for private profiteering.

Uncanny kindness has been showered on the Reliance too, which was allowed to introduce fully mobile services under the guise of limited mobility (WLL). The government allowed the Reliance to offer mobile services without a valid cellular license for almost two years. Even after the Telecom Dispute Settlement Tribunal pronounced this illegal, the penalty for this blatant violation of license terms was a meagre Rs.485 crores. In order to appease other private operators, particularly the cellular lobby, the revenue share of the government was reduced by 2% for all cellular licensees and another 2% for the first and second licensee, a concession of nearly a thousand crores from the public exchequer. Ironically, the cellular operators responded to this favour by almost immediately raising the calling charges for the consumers in a blatant display of cartelization.

Another major undue favour that the Government provided to the private operators was in delaying the launch of MTNL and BSNL’s mobile services. Even after delaying this for more than 4 years, BSNL is poised to become the leading GSM mobile service provider. It is understandable that had the BSNL been allowed to launch its services earlier, the telephone connections would have increased manifolds by now. While the total number of telephones provided by all the basic private service providers till March 2002 was 1.07 million, the BSNL and MTNL have added 22.98 million telephones between 1997 and 2002, which is more than 20 times the number of telephones added by the private service providers during the same period. Out of this total, the BSNL had provided approximately 2.06 lakh village public telephones as against merely 8,000 by the private service providers. It is obvious therefore, that in order to expand the telecommunications network across the length and breadth of the country, the public sector needed to be strengthened. However, the government’s preoccupation was with the protection of huge monopoly rents accruing to the private operators than having any commitment towards a massive expansion of the telecommunications network across the country.

In spite of the promise of the National Telecom Policy (NTP) 1994 (which allows private participation in basic services) that it would lead to connecting all Indian villages by the year 1997, even one third of the Indian villages are not connected to the telecom network today. Even worse, the pace of rural telephony has slowed down and the rural to urban teledensity ratio, which stands at 1: 10 today, is rapidly worsening. The Vajpayee government’s policies on the other hand have sought to enhance profits for the private players and privatise the public sector. Moreover, their telecom policies have discriminated against low-end consumers by reducing the pulse rate and number of free calls and increasing the rentals for the landline connections. 

 

Is India Really Shining?

Lies, Damned Lies and Statistics

 Infrastructure: Roads

The BJP is projecting road construction, particularly national highways, to be the biggest achievement of the Vajpayee regime. Numerous advertisements in the month of February 2004, highlighted the golden quadrilateral project and 4-laning of important segments connecting the four metros and other state capitals. While not denying that expansion of national highways have taken place during the latter half of this government’s tenure, it needs to be noted that official statistics suggest that between 1997-98 and 2000-01 the addition to the length of national highways was only 8,137 kms as against 15,542 kms added between 1994-95 and 1997-98. Out of this 11,145 kms were built between 1996-97 and 1997-98 alone, i.e. during the tenure of the United Front government.

Length of National Highways
(In kms)
1994-95	1995-96	1996-97	1997-98	2000-01
34,058	34,298	38,445	49,600	57,737
Source: Economic Survey, 2002-03

 

 The government’s drive towards building and developing national highways was kickstarted during the last phase of its tenure (obviously keeping the elections in mind) after a long phase of considerable slowdown in highway construction during the early and longer phase of its tenure. The data on the actual results of the recent construction drive achieved on the ground is yet to be released by any reliable official source. The figures peddled by the government of kilometers of national highways being built in single day are not backed by any reliable source. 

Funding Arrangement for NHDP-I
(in Rs. Crores)
External Assistance	Cess/Market Borrowing	NHAI SPVs	Annuity	Toll
16,846	7,862	2,000	1,902	1,690

 The funding arrangement for the National Highway Development Project (NHDP) as mentioned in the Economic Survey 2002-03, also raises some concern. There is an overwhelming reliance on external assistance and market borrowing for this project which is bound to create extra pressure on the debt repayment burden in the future. Like many other projects in India, it is not unlikely therefore that the project gets abandoned mid-way after the elections for the want of funds, since over 55% of the funding is from external sources.

The tragic end of Satyendra Dubey and the glaring insensitivity shown by the highest administrative office — the PMO — has cast a very serious shadow of suspicion on the quality of construction.   Similar instances are also coming up elsewhere, but somehow the government has managed to hush them up. Only when a proper audit takes place the issues of irregularities committed can come to light, particularly in terms of the foreign contractors’ compliance  on technology and capital infusion with the contractual obligation. 

The State governments under the Vajpayee regime have been squeezed of resources citing the requirements of austerity. As a result, infrastructure which comes under the purview of the state governments, like the state roads networks have suffered immensely. It needs to be understood that the state roads are used by a much larger proportion of the population than the national highways. The focus of the NDA government being exclusively on the high visibility Golden Quadrangle project, other vital components of the roads network have received insufficient outlays.