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The Department of Telecommunications (DoT) has stepped into traditional Telecom Regulatory Authority of India (TRAI) turf. It has initiated the controversial process of issuing policy directives to TRAI on access deficit charges (ADC) and other issues.

Recently, it asked the authority to consult the communications and IT ministry before it took any step to revise the ADC amount, or the manner in which ADC is calculated. In doing this, DoT has managed to pre-empt TRAI from announcing new ADC estimates –­ a contentious issue that was up for its annual review in September.

TRAI had earlier indicated that it was considering reducing the total ADC amount and would possibly recommend a change in the way the charges were being calculated. According to industry sources, it was considering halving the total ADC amount from the present Rs 50 billion, though TRAI officials maintain that the total quantum of ADC that would accrue to BSNL would continue at Rs 50 billion.

The ministry categorically stated that it would not agree to lowering the ADC amount accruing to BSNL to below Rs 50 billion as it would impact its rural rollout.

ADC was introduced in 2003. Since then it has been revised once. As it stands today, ADC is calculated on a per-minute basis for every call. A levy of Re 0.30 per minute is charged for every local and STD call on a private network. For ISD calls, the levy is Rs 2.50 per minute for outgoing calls and Rs 3.25 for incoming. The amount collected is passed on to BSNL to compensate it for providing rural telephony.

Dayanidhi Maran, minister for communications and IT, is reported to have stated that, "ADC is a subsidy for BSNL's past operations in rural areas. It is not for future operations as there is the Universal Service Obligation Fund for that." He further added that, "if rural telephony gets affected due to a reduction in ADC, the ministry will have to intervene". In the last ADC revision, BSNL claimed it had suffered losses of about Rs 12.5 billion annually, and that this would affect its rural telephony operations.

In August, DoT had written to TRAI, proposing to issue policy directions on ADC. It sought TRAI's views on the move, as required by law. The minister reportedly wanted ADC to be recovered as a share of the operators' revenues, instead of being charged on a per-minute basis.

Following up on this, DoT issued a policy directive to TRAI stating that ADC would be levied on the basis of percentage share of the annual revenue and not on a per-minute basis. This would reduce national long distance (NLD) call tariffs by at least 10 per cent and benefit more than 100 million subscribers of fixed and mobile telephony. It further added that no ADC would be levied on revenues generated from rural subscribers paying regulated tariffs.

On the international calls front, the directive stated that the ADC on revenues earned from ISD calls would be higher than that on NLD calls and that access providers would be allowed to negotiate termination charges for international calls terminating/originating from their networks.

While the ministry is in the process of drafting a new telecom policy, which is due later this year, and will cover issues like spectrum allocation, third-generation services and ADC, Maran's current move on ADC has kicked up a lot of dust. It is being seen as a personality clash between the minister and TRAI chief, Pradip Baijal.

The telecom industry is, by and large, viewing the current intervention as an interference with the independent functioning of the telecom regulator, which could undermine investor confidence. This is despite the fact that the TRAI Act allows the government to issue policy directives.