9th Five Year Plan (Vol-2)

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Transport and Communication
Transport || Postal Sector || Telecom Sector || Information and Broadcasting || Information Technology || Tourism


7.2.1 Telecommunication is one of the prime support services needed for rapid growth and modernisation of various sectors of the economy. Although the sector has grown rapidly in recent years, its growth needs to be accelerated further in the Ninth Plan. It is equally important to accelerate structural changes in this sector in line with trends in other countries to ensure that the telecommunication services are not only made available on the scale needed to sustain rapid growth in the economy as a whole but also that the quality and cost of these services come up to the requirements of a modernising economy.

Eighth Plan Review

7.2.2 The two basic thrust areas of the Eighth Plan were rapid expansion of telecom network and its transformation into a modern and efficient system. Provision of an additional 75 lakh Direct Exchange Lines (DELs) and installation of 3.09 lakh Village Public Telephones (VPTs) were among the major targets fixed for the Eighth Plan. With the announcement of the National Telecom Policy in May 1994, it was estimated that 100 lakh DELs will be required to be provided during the Eighth Plan to make available telephone on demand by 1997 and cover all the villages by public telephony by March 1997. The private sector was envisaged to play an important role in achieving this objective. However, due to various constraints, the provision of basic telecom services by the private operators is yet to take off.

7.2.3 The performance of the Government sector in achieving the targets has been quite encouraging. Against the target of creating an additional net switching capacity of 93 lakh lines, the achievement has been 109.58 lakh lines i.e. 17.8% more than the target. Similarly, in the case of providing new connections, about 87.33 lakh DELs have been provided against the target of 75 lakh DELs, the achievement being about 16.4% more than the target.

7.2.4 As a result of the Mid-Term Review, the original targets fixed for trunk capacity (TAX) and optical fibre system were substantially enhanced from 2.72 lakh lines to 7.0 lakh lines and from 20000 route kms to 40000 route kms respectively with a view to improving the long distance connectivity. The achievement has been 9% higher than the target in the case of TAX capacity and 15% higher in the case of optical fibre cable.

7.2.5 Rural connectivity was one of the major objectives of the Eighth Plan. According to the original Plan target, 3.09 lakh villages were to be covered by March 1997. On the basis of the Mid-Term Review, the target was increased to 3.38 lakh Village Public Telephones (VPTs) due to increase in the number of villages from 5.76 lakhs to 6.05 lakhs. Assuming a significant contribution by the private sector, the National Telecom Policy (1994) had revised the target to cover all the 6 lakh villages by March 1997. As the provision of basic services by the private operators did not take off as envisaged, the achievement of the target was limited to the extent of resources available with the Department of Telecommunication. The progress in this regard has been such that only about 57.2% of the target could be achieved. Paucity of funds and delay in the supply of equipment were the two important factors responsible for the situation. All other important targets have been achieved during the Eighth Plan. Details are in Annexure 7.2.9.

7.2.6 On the financial side, the performance of the public sector with regard to resource mobilisation has been quite encouraging. Internal resources contributed about 80% of the anticipated Plan expenditure against the target of 70 percent. Against an approved outlay of Rs.25,137 crore, the likely expenditure is estimated to be Rs.27480 crore (at 1991-92 prices). The telecom sector has fared better than expected with regard to the extent of reliance on budgetary support for financing Plan expenditure. Against the targeted budgetary support of Rs.390 crore, the actual utilisation is expected to be Rs.109.42 crore, i.e. less than 0.4% of the total outlay against the approved level of 1.5%.

7.2.7 An outlay of Rs.23946 crore was approved for the Department of Telecommunications including the Mahanagar Telephone Nigam Limited (MTNL) with internal and extra-budgetary resources constituting 99.6 per cent of the approved outlay. The performance of the Department in respect of internal resource generation has been very encouraging as the achievement was 25% more than targeted (at 1991-92 prices). However, its performance in respect of resource mobilisation through bonds has not been satisfactory as only 65.6% of the target could be achieved. Unfavourable conditions in the capital market were primarily responsible for this situation. The good performance in internal resource mobilisation more than compensated the shortfall in market borrowings (bonds) and the actual expenditure Rs.26102 crore was about 10% more than targetted (at 1991-92 prices). The Table 7.2.1 gives the details:

           Financing pattern - DOT  and  MTNL 
                                            (Rs. Crore)
           Approved      As % of    Actual      As % of
            outlay        total   Expenditure    total
 IR        16556.00       69.14    20677.45      79.22
 Bonds      7026.00       29.34     4612.15      17.67
 Others        0.00        0.00      712.44       2.73
 BS          364.00        1.52      100.07       0.38
Total:     23946.00      100.00    26102.09     100.00

7.2.8 The performance of the public sector undertakings in the telecom sector has been a mixed one. The two service organisations, viz. Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited ( VSNL), have performed quite well. But both of them have enjoyed monopoly position in their respective areas. The same has not been true for the equipment manufacturing units, i.e. ITI Ltd. and HTL Ltd., whose performance has been adversely affected, as a consequence of the policy of deregulation, liberalisation and competition. From a profit-making unit in 1993-94, ITI Ltd. has become a losing concern for the third year in succession. The surplus generated by HTL Ltd. is only marginal and it may go the ITI Ltd. way, if the present situation continues. The main factors adversely affecting the performance and profitability of these companies are:-

i) significant decline in the prices of telecom equipment;

ii) surplus manpower/large overheads;

iii) high cost of production/lack of modernisation and

iv) high interest liability.

7.2.9 The value-added services witnessed a healthy growth during the Eighth Plan. For Radio Paging and Cellular Mobile Telephone services private operators were given licences through a system of tendering. Radio Paging service was expected to be available in most of the cities throughout the country by the end of 1997. Licences have also been issued to 36 companies for operation of Public Mobile Radio Trunked Services (PMRTS) in 80 cities on the basis of proposals invited in January, 1995. For the operation of E-Mail, Voice/Audiotex and 64 Kbps CUG domestic Data VSAT service using INSAT satellite system 16,38, and 13 licences have been issued respectively. These services have become operational on a commercial basis in many areas of the country. Cellular Mobile Telephone Services have already started in four metropolitan cities with two operators in each city. In other telecom circles 33 licences for 18 circles have been issued to 13 companies since December,1995. Out of 33 licensees, 22 have already started their services in more than 50 cities/towns with a customer base of more than 1 lakh. Six licences have been issued in the six States of Andhra Pradesh, Mahrashtra, M.P., Rajasthan, Gujarat and Punjab. Internet services are being provided in about 20 cities at present by DOT and VSNL. The public data network "INET" has been extended to 95 cities, out of a total of 105 major cities planned for the INET. A high-speed satellite network called HV-NET has started operating which provides 64 Kbps data and voice communication capability from any point in the country. Integrated Services Digital Network (ISDN) has been started in 9 cities. More than 200 international leased circuits have been provided for software export.

Present Status

7.2.10 The basic telecom services network has expanded from 1 lakh connections at the time of independence to 178 lakh Direct Exchange Lines (DELs) as on 31.03.98. It has witnessed a consistently high growth of 16-17% per annum during the last decade i.e. 1987-97. The growth was further accelerated to more than 20 per cent during the Eighth Plan. During 1997-98, the growth rate was still higher at 22.4%. However, the growth in the waiting list has been equally impressive growing from 12.87 lakh in 1987-88 to 27.06 lakh in 1997-98. During the last five years, the waiting list on the average has been about 26.5 lakh. Viewed in the context of requirement and population size of the country, the rapid expansion seems moderate as reflected in the low telephone density of 1.84 (March, 1998) against the world average of 12. The main features of the present telecom network are :

  • More than 23400 telephone exchanges working in the country.
  • A network of more than 178 lakh telephone connections with about 20% of the total connections working in the rural areas.
  • STD/ISTD facility is available to more than 90% of the subscribers.
  • A network of about 4.28 lakh PCOs in urban areas.
  • Availability of variety of services such as Mobile Radio Telephone, Radio Paging, Facsimile, Data Transmission, Integrated Services Digital Network (ISDN) etc. to cater to the business and other needs of customers.
  • Cellular services are available in 4 metro cities and all other Circles except Andaman and Nicobar Islands and J and K.
  • Six licences for basic services have been granted for six States of M.P., Andhra Pradesh, Gujarat , Rajasthan and Maharashtra. Two operators M/s Bharati Telenet Ltd. in M.P. and Hughes Ispat Ltd. in Maharashtra have started providing services.

7.2.11 The telecom sector has witnessed some fundamental structural and institutional reforms in the past decade. Telecom equipment manufacturing was completely deregulated in 1991. Value added services (including cellular services) were thrown open to private sector participation in 1992. Basic services were opened to private participation in 1994 by dividing the country into 21 Telecom Circles and allowing one private operator per Circle to compete with DOT. An independent Telecom Regulatory Authority of India was set up in 1997. A new Policy for Internet Service Providers (ISPs) was announced in 1998 allowing independent service providers to enter the sector ending the earlier monopoly of VSNL. Reorganization of DOT separating policy making function and service provision and corporatisation of DOT’s operational network are two major institutional reforms which need to be implemented.


Internet is a rapidly growing international ‘network of networks’ and easy access to the Internet is an important element in international connectivity. The new Internet Policy announced by Govt. of India aims at the widest possible access to this facility at affordable prices. Provision of Internet service has been opened to the private sector with liberal terms to ensure quick growth. The salient features of the Policy are :

  • Any Indian company is eligible to be licensed as an ISP. The foreign equity permissible is capped at 49%.
  • Licence period would be 15 years. No licence fee for the first five years and Re. 1 per annum for subsequent years.
  • Separate licence will be issued for each service area. For this purpose, the country has been divided into separate service areas in three categories viz. :
    • Category ‘A’ Service Area – whole of India
    • Category ‘B’ Service Area – 20 territorial Telecom Circles, Metros – Delhi, Mumbai, Calcutta and Chennai and four major cities – Ahmedabad, Bangalore, Hyderabad and Pune.
    • Category ‘C’ Service Area – in secondary switching areas of DOT.
  • A company may obtain any number of licences. There shall be no limit on number of licences that can be granted to a company in a particular area.
  • Performance Bank Guarantee (PBG) of Rs.2 crore for Category ‘A’ Service Area, Rs.20 lakh for Category ‘B’ Service Area and Rs.3 lakh for Category ‘C’ Service Area to be submitted along with application for each service area.
  • International connectivity would be through gateways of DOT, VSNL or authorised public/Government organisations. Private ISPs are allowed to provide gateways after obtaining security clearance. Direct interconnectivity between two separately licenced ISPs shall be permitted.
  • Establishment of transmission links – Private ISPs can obtain transmission links on lease from DOT, licenced Basic Service Operator, Railways, State Electricity Boards, National Power Grid Corporation or any other operator especially authorized to lease such lines. ISPs may also establish their own transmission links, provided they are not available from authorised sources and subject to permission of authority.
  • ISPs will be free to fix their own tariff. However, the TRAI may review and fix a tariff at any time.
  • Telephony on the Internet is not permitted.

Ninth Five Year Plan

Policy Framework

7.2.12 Telecommunications is a prime support service needed for rapid growth and modernisation. It is also one of the fastest growing sectors in India and has immense potential for growth. The telecommunication activity is commercial in nature and people are willing to pay for it. Of all infrastructure sectors, it is perhaps the best suited for private sector participation which would help to create a competitive environment and improve the quality of services to consumers. Deregulation and competition are key elements in telecommunications reforms all over the world and will be a guiding principle to the evolution of policy in this sector in the Ninth Plan and beyond.

7.2.13 Telecommunications is a potentially profitable sector and service provision by the Government sector should continue to be financed solely by internal and extra-budgetary resources. Budget support would be restricted to financing the monitoring and regulatory mechanisms only till they become self-financing. In exceptional situations some supplementation of the resources of the Department of Telecommunication (DOT) could be considered for providing services in unremunerative areas. To ensure efficiency of operations and effective competition with the private sector, the service provision function of the DOT will have to be performed purely on commercial lines. Necessary steps in this regard would be taken during the Ninth Plan. The organisational/institutional changes envisaged for the Government sector are discussed in detail under the head `Problems and Strategy'.

7.2.14 The public sector will continue to play a dominant role in the provision of basic telecom services during the Ninth Plan . Out of 237 lakh new connections envisaged to be provided during the Ninth Plan, the Department of Telecommunication and MTNL are expected to provide 185 lakh additional connections. The Department would ensure the provision of necessary infrastructural facilities for the development of the telecom sector at the required pace. This will include creation of necessary facilities required for the smooth functioning of operations by the private sector both for the value-added as well as basic services, including inter-connectivity.

7.2.15 Private investment is also expected to play a major role supplementing the efforts of the public sector in expanding capacity and also providing competition within the system. In the area of value-added services, the private sector would continue to play a dominant role. The quantum of investment by the private operators would basically be determined by the rate of return on such investments - both basic as well as value-added services. Necessary steps would be taken to streamline policy so as to remove the various bottlenecks to ensure effective participation and adequate investment by the private sector.

7.2.16 The National Telecom Policy has envisaged that India should emerge as a major manufacturing base and major exporter of telecom equipment. The manufacturing capacity of the indigenous industry is small in relation to the other major operators in the world and exports constitute a very small proportion of the total production of telecom equipment in the country. Promoting exports as a thrust area and development of Indian multi-nationals should be among the major goals. To achieve this objective, the Ninth Plan would aim at removing the various constraints relating to transfer of the latest technology, access to cheap international finance, joint ventures with foreign companies, rationalisation of custom and import duties on inputs and development of a strong industry-sponsored R and D base.

7.2.17 The annual production of telecommunication equipment in the country is estimated to be about Rs.5000 crore (1996-97). The requirement of the telecom equipment during the Ninth Plan is expected to be about Rs.90,000 crore, including about Rs.27,000 crore of direct imports of finished products. The domestic production is expected to be about Rs.62,000 crore during the Ninth Plan. Sufficient production capacities have been created in the areas of switching, transmission and terminal equipments to meet the Ninth Plan requirements though the domestic units have generally not been competitive in price in the global market conditions. Sufficient capacities are required to be set up in the new and emerging areas of V-SAT equipment, Wireless in Local Loop (WILL), DLC systems, Cellular phones, radio pagers etc.

7.2.18 The Wireless Planning and Coordination (WPC) Wing, set up in 1952, is the national radio regulatory authority to ensure orderly utilisation of radio frequency spectrum and Geo Stationary Orbit (GSO). It is supported by the Wireless Monitoring Organisation (WMO) in this activity. With the opening up of the economy the number of players and services in the telecom sector is bound to increase manifold. Therefore, the Organisation would have to be strengthened and modernised to enable it to perform its regulatory functions effectively. The Government cannot afford to endlessly fund the massive investment needed for the modernisation efforts of the Organisation as the outlay of WMO is funded entirely through budget support. The internal resources of WPC/ WMO are mainly in terms of revenue collected from royalty, licence fee and examination fee. Recently, WMO has started charging the wireless users for services rendered other than of a regulatory nature such as removal of interference problems, radio noise measurements etc. These revenues are expected to increase substantially over time. The Ninth Plan should aim to make WMO self-financing.

7.2.19 The Telecom Regulatory Authority of India (TRAI), set up in 1997, is the apex organisation responsible for ensuring quality services and value for money to the consumers. The interests of the consumers as a group are protected by TRAI. For individual grievances, a consumer can approach a Consumer Forum. The three main areas of concern regarding the quality of services have been billing, fault repair and redressal of other grievances. An appropriate mechanism ensuring fool-proof and time-bound solution to the problems arising in the above three areas needs to be devised. Computerisation and use of appropriate technological inputs would have to be an integral part of the strategy for ensuring quality services.

7.2.20 For international connectivity, Videsh Sanchar Nigam Ltd. (VSNL) has a monopoly position till 2004 A.D. Keeping in view the ensuing competion in overseas communications, the VSNL has to be strengthened adequately so that it can compete effectively in a totally liberalised scenario. With rising tele-density and high penetration of services both in rural and urban areas, the demand for international telecom services is expected to increase manifold during the Ninth Plan. The strategy for development of VSNL has to be guided by the fact that the Company has been selected as one of the `Navratnas', which is to be developed as an Indian Multinational.

7.2.21 The Mahanagar Telephone Nigam Ltd. (MTNL), which provides basic telecom services in Delhi and Mumbai, has till now enjoyed a monopoly position. In the Ninth Plan, it would be facing competition from the private operators. The quality of service and efficiency of operations would hold the key for its future growth and survival. The development strategy of the Company during the Ninth Plan should be guided by these two factors. To enable MTNL to prepare itself for the competition, it is essential to give full functional freedom to it with regard to raising and deployment of resources, including access to international capital markets, choice of technology, strategic alliances/joint ventures with leading international players and redeployment and realignment of the work force. Recently, the Company has been accorded the `Navratna' status which is expected to help it perform better.

Objectives and Targets

7.2.22 The National Telecom Policy 1994 outlined the basic framework for the future development of the telecom sector in the country. The stated objectives of the policy were : to provide telephone on demand, to achieve universal coverage, to ensure world standard in the services, to enable the country emerge as a major manufacturing base for telecom equipment and exports and to protect the defence and security interests of the country. Keeping in line with the basic spirit of the Policy, the major thrust during the Ninth Plan would continue to be on expansion, modernisation and improvement in efficiency. The major objectives envisaged for the Ninth Plan are :

  1. Universal coverage or telephone on demand;
  2. Universal and easy accessibility;
  3. World standard services to the consumers at affordable prices;
  4. Demand-based provision of existing value-added services and introduction of new services;
  5. Exports of telecom equipment and services as a major thrust area;

The detailed goals envisaged in pursuance of these broad objectives are given in Annexure-7.2.1. The National Telecom Policy itself will be reviewed and modified to reflect experience gained thus for and the rapid technological changes which characterise this sector.

7.2.23 The objective of universal coverage of basic telecom services is envisaged to be achieved by providing telephone on demand. It has been observed that the actual registered demand, reflecting the waiting list at any point of time, does not indicate the true demand for the basic services. There is a large element of latent demand, which has led to ever increasing waiting list along with sustained high growth of network expansion and provision of new connections. Taking into account the changing structural composition of the economy, the composition of telecom services and the relative tariff rates, a constant review of the demand projections for the basic services would be called for. As on 31.3.1997, the telecom network had 145.33 lakh Direct Exchange Lines (DELs), with a waiting list of 28.87 lakh. The demand at the beginning of the first year of the Ninth Plan is estimated to be 174 lakh DELs. It is projected to grow to 360 - 380 lakh DELs by the terminal year i.e. 2001 - 2002 and 818 lakh DELs by 2007. Thus, 186 - 237 lakh additional DELs would have to be provided by the Government and the private sector during the Ninth Plan to achieve the objective of providing telephone on demand in Ninth Plan and 437 lakh additional DELs during the Tenth Plan. The Department of Telecommunication, including MTNL, is expected to provide 185 lakh new connections and the remaining 52 lakh DELs are envisaged to be the private sector's contribution. Similarly, Govt. sector is envisaged to provide 285 lakh DELs in the Tenth Plan, the private sector expected to contribute the remaining 152 lakh DELs.

7.2.24 Rural connectivity would be one of the major thrust areas during the Ninth Plan. Out of about 6 lakh villages, 3.01 lakh villages have been provided with telephone facilities so far (31.03.98). The remaining villages would be covered by the year 2002 through the joint efforts of the Department and the private operators. According to the guidelines issued for the entry of private operators into basic services, 10% of the total connections to be provided by them in each circle will have to be in the rural areas. Tentatively, a target of providing 2.39 lakh Village Public Telephones (VPTs) has been kept for the Department of Telcommunication for the Ninth Plan. Any shortfall in the contribution by private sector would be made by increased efforts by the Govt. Deptt. of Telecom would ensure that financial requirements of the programme are fully met. As the present technology i.e. analogue MARR system used for providing VPTs is not dependable, DOT would initiate necessary action to introduce new suitable technologies like Wireless in Local Loop (WILL), satellite based phones etc. at the earliest.

7.2.25 To ensure easy and smooth long-distance connectivity, a target of creating additional 18 lakh lines of trunk capacity (TAX) is proposed for the Ninth Plan. As long-distance connectivity is still the monopoly of the DoT, the entire capacity would be created by the Government sector. The optical fibre system would be the mainstay of transmission expansion during the Ninth Plan. A target of 1.4 lakh route kilometers of optical fibre system is proposed for the Ninth Plan.

7.2.26 The other major targets envisaged for the Department of Telecommunication for the Ninth Plan are :

  1. One Public Call Office (PCO) for every 500 population in urban areas;
  2. Provision of adequate number of PCOs in public institutions like hospitals, shopping centres, educational institutions etc.
  3. STD PCO for every 10 kms. on the national highway;
  4. STD facility to all exchanges by the year 2000;
  5. Digital connectivity to all exchanges upto SDCC level;
  6. Packet Switched Public Data Network (PSPDN) to cover all District Headquarters (DHQs).

7.2.27 Connectivity from public places and in an emergency is quite poor and accessibility is quite difficult. This is specifically true in the case of hospitals, educational institutions and highways. Depending upon the size and the number of persons that may require the facility at a particular point of time, adequate connectivity in the form of PCOs would be ensured during the Ninth Plan. To illustrate, the major hospitals in the capital should have adequate number of PCOs in the emergency, OPD wards and one PCO in the corridor of each ward. The option of operating these PCOs on franchise basis or as "pay phones" should be an integral part of the strategy to improve accessibility and connectivity in this area. Besides ensuring substantial improvement in accessibility, it would also become a major source of employment in the telecom sector.

7.2.28 The value-added services are being provided by the private sector. These are envisaged to be provided on demand during the Ninth Plan. The demand for existing and new value-added services, as projected by the Working Group on Value-Added Services, is given in the Annexure 7.2.5.

7.2.29 Services like distance education and tele medicine would be of immense help to the common people living in rural and remote areas. An integrated project for creating the basic infrasturcture for the provision of value-added and other telecom services in rural areas is envisaged to be taken up on pilot basis during the Ninth Plan. It is proposed to take up this pilot project in two districts each - one developed and the other backward - of the four States i.e. Punjab, Orissa, Kerala and Maharashtra.

Science and Technology

7.2.30 Research and Development (R and D) would be accorded a higher priority during the Ninth Plan. The R and D effort in telecommunications has mainly been confined to the Government sector i.e. the Centre for Development of Telematics (C-DOT) and in-house research in the public sector undertakings. A strong industry - sponsored R and D effort is a pre-requisite for making the Indian firms competitive internationally both in the provision of services as well as in equipment manufacturing. Well-funded and result - oriented R and D has to be an important part of the strategy to achieve the goal of developing Indian multi-nationals in both these areas. With a view to ensuring the provision of adequate resources for this activity, it may be necessary to earmark a percentage of the turnover of the companies in the organised sector for R and D.

7.2.31 Due to the fast changing technology in this sector and the existing technological gap in relation to the developed countries, India will have to rely on transfer of technology in a big way in the near future. In this context, strategic alliances with leading international companies will have to be an integral part of the over-all exercise of technology transfer.

7.2.32 Software has become an important input in the telecom sector particularly for the switching equipment. It is crucial that India's competitive advantage in software is exploited to the fullest extent for this purpose. The country's expertise should be particularly relevant in areas such as network management systems and design of specialist chips.

7.2.33 The R and D effort would have to be diversified. Besides technology development, it should focus on services, systems, processes and markets. This will give the relevant user orientation to R and D activity. The R and D effort in telecommunication would be more effective if it is multi-disciplinary in character. The telecom sector involves some of the most sophisticated concepts in economics, social sciences and management, amongst other disciplines.


7.2.34 The Centre for Development of Telematics (C-DOT) is the main public sector agency engaged in the research and development activities in the telecom sector. The focus of its activities is on finding comprehensive solutions appropriate to the telecom network requirements of the country. The C-DOT has been a leader in the development of rural switching systems i.e. Rural Auto Exchanges (RAX). During the Eighth Plan, it has developed low capacity rugged digital switching systems. These are ideal for rural conditions as they are capable of operating in non-airconditioned environment with simple maintenance procedures and operational back-up. For urban and semi-urban applications, the C-DOT has developed a family of digital switching systems ranging from 1500 lines to 40,000 lines. In the area of transmission, its main achievements have been the development of low capacity digital radio technologies for interconnecting rural and urban exchanges, satellite system for digital multiplexers and optical communication systems.

7.2.35 During the Ninth Plan, the C-DOT plans to enhance its 256p RAX, both in technology and in features, so as to make it most contemporary. It will also help in increasing the size of the export market. In the area of switching, the other major projects envisaged during the Ninth Plan include :

  1. Developing a large switch with a capacity of providing connectivity to 1,00,000 subscribers and associated trunks and Busy Hour Call Access (BHCA) of 1.5 million;
  2. Providing necessary support functions for deployment of intelligent network services in the field, including service switching functionality in the local exchanges and toll exchanges;
  3. Undertaking a project to design and develop Service Control Points (SCP), Service Management Systems (SMS) and Service Creation Environment (SCE) to make service provisioning very fast and to offer services as desired by the customers. The system shall facilitate the service provider to be different from network provider/operator and
  4. Developing ATM technology-based Broad Band ISDN (B-ISDN) family of switching systems.

In the area of transmission, the major projects envisaged during the Ninth Plan include :

  1. Undertaking extensive work on optical switching systems relating to Optical; Line Terminating Equipment, Synchronous Digital Optical Network and Photonic Amplifiers;
  2. Developing personal wireless communication systems based on different technologies;
  3. Developing high speed optical network and
  4. Developing high speed satellite systems for cell transportation.

Implementation and Delivery System

7.2.36 The public sector would continue to play a dominant role in the provision of basic services during the Ninth Plan. An effective and streamlined monitoring system is vital to ensure proper and timely implementation of the policies and the Plan targets for the public sector. This would call for the setting up of a monitoring mechanism, whereby the progress of various projects in the public sector is jointly monitored by the DOT and the Planning Commission. An Empowered Committee, headed by the Secretary, DOT with members from Telecom Commission, Ministry of Finance, Planning Commission, Ministry of Environment and Forest and Ministry of Programme Implementation, has been constituted for this purpose. This Empowered Committee would monitor and review the progress of implementation of all important projects.

7.2.37 For improving the quality of telephone services provided by the Department of Telecommunication, some of the basic parameters need to be monitored regularly. The quantitative targets of quality improvement envisaged during the Ninth Plan are :

Targets of Quality Improvement
  Sl.No.        Parameter                                 1996-97                   2001-2002
                                                                    Achievement              Target
       i)     Fault/100 stns/month                            17.2                        9.5
      ii)    Trunk Efficiency %                                80.6                      85.0
     iii)    Local Call completion                            55.7                      65.0  
             rate (Live)
     iv)    STD Call completion                             39.2                      50.0
             rate % (Live)

7.2.38 The overall implementation of the programmes in the telecom sector would be looked after by the Deptt. of Telecommunications. This would include overall policy formulation including licencing. DOT would also oversee the overall coordination between private and Govt. sector including the public sector companies. The Telecom Regulatory Authority of India (TRAI) would look after the various functions pertaining to regulation including ensuring compliance of terms and conditions of the licences, protecting interests of consumers, revenue sharing arrangement between operators, disputes between licensor and licensee etc.

Financing the Plan

7.2.39 The value-added service is one of the two main components of the telecom services. Under the prevailing policy, these services are to be provided by the private sector on demand. The necessary funds required for the provision of these services are envisaged to be mobilised by the private sector. The Govt. will initiate new policy measures to ensure that the required funds are available to the private operators at affordable cost.

7.2.40 With the opening up of the provision of basic services to the private companies, private sector funds are envisaged to play a significant role in financing the provision of these services. Assuming an additional demand of about 237 lakh lines during the Ninth Plan, funds of the order of about Rs.1,00,000 crore may be required for meeting the target of providing telephone on demand. The estimate is based on the prevalent cost of Rs.45,000 per line. The exact requirement of the funds would depend upon the technology to be used and other factors like the price of the equipment, duty structure etc. The Government sector comprising the Department of Telecommunication (DOT) and the Mahanagar Telephone Nigam Limited (MTNL) is expected to meet the bulk of the additional demand by providing about 185 lakh new connections. As in the Eighth Plan, the entire requirement is envisaged to be financed out of internal and extra budgetary resources generated by the DOT and the MTNL. However, to compensate the Government sector for bearing the responsibility of providing telecom services in the unremunerative areas like villages, remote, hilly, tribal and other areas, adequate budgetary support may have to be provided. Sharing a part of the licence fee could be one of the alternative mechanisms to achieve this. Budgetary support to the Govt. sector would be restricted to monitoring and regulatory mechanisms till they become self-financing.

7.2.41 The outlay requirements of the two PSUs engaged in the provision of service i.e. Videsh Sanchar Nigam Limited (VSNL) and Mahanagar Telephone Nigam Limited (MTNL) are envisaged to be met entirely out of their internal and extra budgetary resources. The two telecom equipment manufacturing units i.e. ITI Ltd. and HTL Ltd. are facing severe financial problems as a result of deregulation and competition from the private companies including the MNCs. The financing pattern for these two companies during the Ninth Plan would basically be determined by the revival package ultimately agreed to by the Government.

Special Focus Areas

7.2.42 In the special focus areas, the plans relating to i) National Capital Region (NCR); ii) North Eastern Region (NER); and iii) Tribal Areas will receive high priority.

I National Capital Region

7.2.43 Providing modern telecom facilities in the whole of the NCR at par with those provided in the National Capital Territory of Delhi is one of the major strategies to decongest Delhi. The plan for infrastructure development for telecommunication in the NCR should aim to provide the following :

  1. to make telecom facilities available on demand in the entire NCR at par with Delhi;
  2. concessional tariff on telecom facilities in Delhi Metropolitan Area (DMA) towns as   compared to the National Capital Territory of Delhi.

7.2.44 The number of working connections (DELs) in the NCR towns was 4.37 lakh as on 31.3.97. It is estimated that telephone demand would be 12.27 lakh as on 31.3.2002. Thus, 7.89 lakh new connections would have to be provided during the Ninth Plan to achieve the objective of telephone on demand in the region. In the NCR towns, all the exchanges will be of electronic type and all the modern telecom facilities like cellular, paging, voice mail, videotex etc. will be made available in the entire NCR.

II North Eastern Region

7.2.45 The North Eastern region, being a sensitive border area and underdeveloped, would continue to be accorded special attention for the development of telecom facilities. Due to its difficult topography and landscape, the role of telecommunication is no less important than physical communications. Under the new initiatives announced by the Prime Minister for the North Eastern Region, all the Central Ministries/Departments have to earmark at least 10% of their budget for specific programmes in the North Eastern States. Efforts should be made to create necessary facilities during the Ninth Plan to provide fax facilities upto the block level as recommended by High Level Commission for tackling the backlog in basic minimum services and infrastructural needs. Keeping in view the special needs of the region for more reliable telecom network, all sub-divisional headquarters would be connected.

III Tribal Areas

7.2.46 The need for an efficient and reliable telecom network in the tribal areas could hardly be overemphasised. Therefore, a more vigorous effort would be taken in these areas. The DOT would provide a total of 7.44 lakh new telephone connections in the tribal areas during the Ninth Plan. The details in this regard are as follows :-

                                             Tribal Sub-Plan - Telecom
           Items                              Eighth Plan                          Ninth Plan
                                           Target         Achvt.                       Target
   (i) Switching Capacity     307300      511682                      930000
  (ii) Direct Exchange        240000        392340                      744000
(iii) VPTs (nos.)                  25000          24527                       118192
(iv) Earth Stations                     21                33                             200

Problems, Strategy and Action Plan

7.2.47 To ensure free and fair competition and efficiency of services, the three functions of policy making, regulation and service provision have to be separated from each other and performed by independent entities. The regulatory function has already been separated from policy making and service provision by setting up the TRAI. However, the Department of Telecommunication continues as the policy maker and as one of the service providers in the area of basic services. To take the reforms programme to its logical conclusion, policy making including licensing, has to be separated from the operational wing of DOT. For service provision, the DOT in its present form of a Departmental undertaking has many constraints which affect its efficiency vis-a-vis private sector operators which are run purely on commercial lines. These constraints relate to quick decision making regarding the choice and introduction of new technology; determining optimum size of manpower; its composition and realignment; mobilisation of resources including market borrowings and strategic alliances with private sector including joint venture with leading international companies. To overcome these problems, the Deptt. of Telecommunications would be reorganized separating the policy making function from service provision. The operational network of DOT would be converted into a single corporation. Review of the role of Telecom Commission shall be an integral part of such restructuring. Necessary action would be initiated immediately and the entire exercise completed during 1998-99.

7.2.48 The private sector participation in basic services is yet to take off as desired, though it was opened to the private operators in 1994 with the announcement of National Telecom Policy. Out of 21 Circles in the country, service provision by the private sector has started only in two Circles so far i.e. M/s Bharati Telenet in M.P. and M/s Hughes Ispat in Maharashtra. Private sector projects are perceived to be non-viable due to non-availability of finance at affordable cost, high incidence of licence fee and various implementation problems like Right Of Way (ROW) for laying telephone cables. Similar problems are being faced by operators of value added services. Except for cellular operators in metro cities, operators of various other value added services are stated to be facing financial problems. A comprehensive review of the present Policy is called for to ensure effective private sector participation. Ensuring adequate rate of return on investment to the private operators has to be an important part of the strategy. It would also require a comprehensive review of the terms and conditions of the licencing policy including the licences already issued. Recognising the urgent need to sort out these issues/ problems on priority basis, the Government has set up a Group on Telecommunications under the Chairmanship of Deputy Chairman, Planning Commission. The Group would make recommendations on :

  1. Proposed New Telecom Policy;
  2. Issues relating to existing licensees of basic and cellular services and suggest appropriate remedial measures within the framework of new Telecom Policy and
  3. Issues relating to TRAI.

7.2.49 Though private participation has been permitted in basic services, provision of long distance services, i.e. inter-circle connectivity continues to be a monopoly of the DOT. All over the world liberalisation in the area of long distance services has generally preceded liberalisation / privatisation of local services. Under the present policy, the monopoly of the DOT in the area of long distance services is to be reviewed in 1999. Similarly, the monopoly of VSNL in providing international connectivity is also due for review in the year 2004. To ensure world class services at competitive prices, this segment of the telecommunication sector would also have to be thrown open in due course. The necessary action towards review of the present policy of domestic long distance connectivity would be initiated at the earliest and the new policy implemented by 1999 end.


           Revolutionary changes are taking place in the telecom sector all over the world driven by rapidly changing technology which is reducing costs and increasing the scope for competition. As a result most countries are moving away from the traditional model of telecommunications being viewed as an integrated public sector monopoly to a de-regulated environment in which the sector is opened up to competition from private investors.

            Models for telecom reforms vary across countries but a basic approach common to most models is to distinguish between three functions : policy making, service provision and regulation. The provision of services can be organised to allow for competition from the private sector service providers. The shift from a monopolistic structure to a competitive one must be the central objective of long term reforms in this sector. As competition is increased and private players are allowed to enter, the regulatory function must be so organised to provide assurance to private operators of fair treatment at the hands of the Government, especially where the policy envisages competition with existing public sector suppliers.

The position regarding telecom reforms in India can be summarised as follows :

  • The regulatory function has been separated and assigned to the Telecom Regulatory Authority of India (TRAI). It is essential to ensure that TRAI is seen to be a credible and independent regulator with powers necessary to assure fair treatment for new private entrants.
  • The service function has not been fully separated from the policy making function since both are combined in the DOT except for MTNL and VSNL being corporate bodies. It is necessary to separate DOT’s service network into a separate corporation which, together with VSNL and MTNL will be public sector service providers distinct from DOT.
  • Competition within the area of service provision also needs to be optimised. The present policy allows competition between MTNL/DOT and one basic and two cellular service operators in each of the four metros and 20 other Telecom Circles in rest of the country. However, inter-Circle connectivity is a monopoly of DOT which is due for review in 1999. International connectivity is a monopoly of VSNL until 2004.
  • Internet services have been recently opened up to private investors ending the monopoly of VSNL in this area. However, ISPs are not permitted to provide voice telephony. This restriction needs to be examined in the context of the trend of convergence witnessed in the telecommunication sector.
  • Indian Telegraph Act, 1885 is archaic and totally outdated. It needs to be repealed immediately and replaced by a new legislation that takes into account the vast advances in technology and the present and future requirements of the industry.
  • A basic problem in the Telecom sector is the unbalanced nature of the tariff. Local calls are heavily subsidised by overcharging on long distance and international calls. The TRAI is expected to submit its recommendations for a rational tariff structure. Over the longer run, telecom tariffs must reflect the relative cost of providing services. Cross subsidies benefiting particular segments should be kept to reasonable levels.
  • Experience thus far suggests that the policy framework needs review in many respects. The operational problems faced by cellular and basic service providers need to be examined and suitable corrective action taken to ensure effective competition from these sources. A comprehensive response to these problems needs to be worked out through a New Telecom Policy which will build on the existing policy and also seek to address problems of the future.

7.2.50 The success or failure of deregulation will largely depend on how well the TRAI functions. It has to be made truly autonomous and self-financing to ensure its effective functioning. As it will have to handle complex issues of a multi-disciplinary nature, it needs to be supported by a team of highly qualified professionals from different fields like economics, law, telecommunication, business administration and finance.

7.2.51 Under the present Policy, value-added services are provided by the private operators on franchise basis. For cellular mobile services and radio paging, only two private operators are permitted in each circle. If the frequency spectrum permits, the number of operators could be increased to ensure greater competition. Following the principle of ensuring level playing field to all the operators, the public-sector companies also need to be permitted to provide value-added services. Necessary action in this regard would be taken during 1998-99.

7.2.52 The National Telecom Policy has envisaged that India should emerge as a major manufacturing base and a major exporter of telecom equipment. The manufacturing capacity of the indigenous industry is small in relation to the other major operators in the world and export constitutes a small proportion of the total production. Development of Indian multi-nationals in this area should be our goal in the Ninth Plan. The non-availability of the latest technology, poor R and D base, non-adoption of exports as a strategy of growth and limited access to international financial markets for cheap finance are among the major constraints to the achievement of this goal. The Ninth Plan should endeavour to remove the bottlenecks by initiating necessary policy changes. This may include encouraging joint ventures, rationalisation of custom and import duties on inputs and development of a strong industry-sponsored R and D base.

7.2.53 The two PSUs i.e. ITI Ltd. and HTL Ltd. have developed sufficiently large capacities for the manufacture of various types of telecom equipments. Infact, ITI Ltd. is the single largest Company in the telecom equipment manufacturing sector in the country, both in terms of turnover as well as employment. These two Companies have also developed over the years necessary technological capabilities and have sufficient skilled manpower. However, as a consequence of the policy of deregulation, liberalisation and competition, their performance has been adversely affected and they are struggling for growth and stability. The existence of healthy, strong and efficient public sector companies provides the necessary cushion/check against the MNCs. The ITI Ltd. and the HTL Ltd. have an important role to play in this regard. These two Companies can also play an important role in realising our goal of making India a major manufacturing base and exporter of telecom equipment and developing Indian Multinationals in this area. The two Companies have to be made efficient and competitive to play their due role in the changed scenario. This would call for their revival and restructuring, including providing the necessary funds for capital restructuring and allowing them to go in for strategic tie-ups with leading international players.

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