'Telecom firms in danger of bankruptcy'

BANGALORE MAY 22. The RBI Deputy Governor, Rakesh Mohan, today criticised the Centre for its decision to partially roll back telecom tariffs and said that the phone companies would go bankrupt without an appropriate tariff structure.

Speaking on "Infrastructure Development in India: Emerging Challenges" at the World Bank's Annual Conference on Development Economics here, he said "we have seen huge bankruptcy in the telecom sector internationally".

The regulator had to be vigilant to ensure that the tariffs were adequate in the long-term interests of the sector while encouraging competition, Mr. Mohan said.

The Government should refrain from undercutting the regulator, he said, referring to the strained relations between the regulator and the Government.

Referring to the rollback of tariffs all the three times they were attempted since 1999, Mr. Mohan said this did not augur well for the industry as no sector could develop without proper user charges.

The country still had only 41.6 million basic telephones and 12.6 million mobile phones, he said and added that the poor were not using the telephones at subsidised user charges.

Referring to infrastructure in rural India, he said: "Large investment in rural roads is very important for agriculture growth."

Tamil Nadu, Kerala, Haryana, Punjab, and Himachal Pradesh had invested heavily on developing roads in the Seventies and Nineties and done well on all fronts.

The effective implementation of the Pradhan Mantri Gram Sadak Yojana was essential to develop rural roads to spur growth and attract private investment in cold storages, he said.

Sectors such as roads, telecom, and ports had done well after the introduction of reforms while power, railways, and urban infrastructure performed badly. The gap between cost and recovery, and transmission and distribution losses were the major problems the power sector was facing in many States, he said.

The private sector had not shown any interest in investing in the power sector. Most of the projects on developing national highways were taken up with aid from the World Bank and the Asian Development Bank, he said.

Stressing the need to give special emphasis to public-sector management, Mr. Mohan said the public agencies should collect user charges to get adequate return on investment. Low productivity, high cost, and technological obsolescence were some of the major constraints in public sector units, he said.

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