BSNL May Go For A Tariff Hike

The impoverished condition of the Indian telecom industry may compel the state-owned operator Bharat Sanchar Nigam Ltd. (BSNL) to increase its call and data tariffs, diverting from its primary objective of providing cost-efficient services to the Indian masses. (See IndiaWatch: BSNL May Lose Mini Ratna Status, IndiaWatch: BSNL Seeks Survival Funds and Should BSNL Return 3G Spectrum As Well?)

"We will seriously consider a tariff hike in case other operators go for it," says a senior executive of the company on condition of anonymity.

"The Public Sector Unit (PSU) firms are facing huge losses in every vertical making it tough for the government to comprehensively support the cash-strapped BSNL, which might result in a steep lift in its tariffs," says Katyayan Gupta, Analyst at Forrester Research.

TRAIs proposal of a 10-fold increase in the base prices of 2G airwaves, if implemented, will lead to an expected 30-percent tariff increase by the operators, further mounting the trouble for the common man who is already battling with a double-digit inflation. (See Trai Recommends Higher Base Price For 2G, IndiaWatch: TRAI's Proposal Hits Bharti, Vodafone and .)

Being a government body, BSNL's objective is to provide affordable connectivity to the masses. Most of the private operators have hinted that the present low tariffs are unsustainable, and that they are considering tariff hikes. If that happens, BSNL will get an opportunity to attract subscribers with its lower tariffs.

"Though BSNLs objectives revolve around providing economical services to the consumers, a no-hike in the tariffs might further worsen the situation for the company replicating the Kingfisher Airline story," adds Gupta. BSNL has been recording losses for quiet sometime now. It has been losing subscribers as well.

"The operators are trying whatever possible they can do to sustain their business in the country, which includes increasing tariffs as well. Since the ARPUs are declining on a continuous basis, it gets obligatory for the operators to put the burden on the end users," says Naveen Mishra, Analyst at CyberMedia Research.

BSNL has recently asked for a refund of INR 8,313.9 crore (US $1582.7 crore) for surrendering its Broadband Wireless Access (BWA) spectrum in 20 circles. (See BSNL Seeks to Surrender BWA Spectrum.)

Rimit Singh, Correspondent, Light Reading India