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Tariff re-revision to cost DoT Rs 10 billion

This is assuming that there will be zero price elasticity of demand.

According to departmental estimates, the total revenue loss from implementing the new tariffs is around Rs 18-20 billion in the first year.

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While implementing the Telecom Regulatory Authority of India tariffs would have caused a revenue loss of Rs 7.25 billion (exclusive of cuts in leased line rentals), the additional revenue loss will raise this figure by Rs 10 billion.

This is based on estimates that around 10 million subscribers or almost 50 per cent of the 20 million plus DoT customers will stand to gain from the decision to retain rentals and call charges for rural and urban low users at current levels.

Low users, billing less than 200 calls/pulses monthly, themselves constitute around 46 per cent of the total customer base.

In rural areas, the rental increases for low users are Rs 20 per month, while the increases in urban areas are between Rs 20-60 per month.

For the purpose of calculation, it is assumed that at least a third of the subscribers are from metros, which have the majority of exchanges over 100,000 (where the increase is maximum).

This is in keeping with national data where subscribers from the four metros constitute approximately a third of all subscribers.

Therefore, the decrease in rental in rural areas will result in reduction in annual revenues to the tune of Rs 1.63 billion.

In addition, the revenue loss from urban subscribers will be another Rs 2.3 billion. Therefore, the total loss on rentals alone will be to the tune of Rs 3.93 billion.

In addition are losses from retention of call charges at 0.60 paise per pulse slab in rural areas and the 0.80 paise per pulse slab in urban areas and the retention of higher free call levels.

Given that these subscribers make around 10 per cent of the total metered calls, this also affects revenues.

However, the DoT definition of the low user subscriber differs from the TRAI definition. According to DoT, subscribers making up to 200 calls/pulses per month are low users.

Under the TRAI definition, this includes all callers making less than 500 calls/pulses per month. Under the TRAI definition, an additional 21.3 per cent of the subscribers would get the benefits given to low users.

- Compiled from the Indian media

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