The Hindu : `Tax on phone rentals, a heavy burden on subscribers'

Online edition of India's National Newspaper
Saturday, Mar 22, 2003

Southern States

Southern States - Tamil Nadu-Chennai

`Tax on phone rentals, a heavy burden on subscribers'

By N. Ravi Kumar

CHENNAI MARCH 21 . It is a jarring ring for telephone subscribers. Even as their protest against the TRAI recommendations grows louder, the State Government in its budget for 2003-04 imposed a 12.5 per cent tax on telephone rentals, including for mobile phones.

An additional burden for the consumers, today's announcement by the Finance Minister, C. Ponnaiyan, comes weeks after the Union Budget decided to hike the service charge on phone bills from five to eight per cent.

Though the levy, which according to the budget speech "will come into effect from today", might lead to some rebundling of the mobile phone tariff structure, none of the telecom service providers are likely to bear even a part of it.

While a decision by the BSNL Chennai Telephones is awaited, other major telecom service providers including RPG Cellular, AirTel and Tata Teleservices are set to pass the burden, but not before their finance and marketing professionals take a closer look at the proposal.

Chennai Telephones, which has a subscriber base of around 10.5 lakh fixed lines, "would wait for an instruction from its headquarters on whether to pass it on", a senior official said, admitting that the move might even lead to surrender of connections. Their bi-monthly rental of Rs.500 would attract Rs.62.50 tax.

"The burden will affect all the subscribers, but the impact will be heavy for individuals,

households and the small and medium enterprises", a senior executive of Tata Teleservices said. Under the standard tariff package for the company's WLL-mobile the monthly rental is Rs.200, while the rent on its WLL fixed lines is Rs.250 for a month. The decision comes at a time when the focus of the telecom industry is on improving the tele-density, he added, the issue of rebundling pertained more to the mobile telephony sector.

Senior executives of RPG and AirTel, however, pointed out that it was difficult for them to evolve a package without a fixed commitment (cost component). Simultaneously, they did not rule out the possibility of their unbundling many of the existing packages which includes the cost of free calls and value added services such as caller line identification.

Noting that it was too early to comment, sources in AirTel, which had a subscriber base of over two lakhs, said the rentals on the post-paid schemes offered by company range from Rs.349 to Rs.1,699.

The telecom industry, added a senior official of RPG, was likely to soon represent to the State Government against the levy as the popularity and usage of mobile phones is just picking up among the middle-class.

The levy, however, was expected to further increase the popularity of pre-paid cards, which already accounted for over half of the subscriber base of the GSM service providers.

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