The Indian Techonomist: bulletin

Copyright (C) 1995, Rishab Aiyer Ghosh (
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Partial re-tendering of Indian telecom bids likely

September 19, 1995: India's telecom privatisation programme is the biggest in the world, so confusion is not unexpected. The tenders for nationwide basic telecom services, which attracted bids worth a total of $82 billion, are now the main source of confusion. Two bidders, HFCL and Reliance, managed to carve up 14 of the 20 regions available. HFCL bid $27 billion for nine of the best; Reliance bid $15 million for five poor regions. As the privatisation process was intended to further competition, this is not acceptable.

In an exclusive interview to The Indian Techonomist today, Telecom Secretary R K Takkar indicated that a partial re-tendering is likely. He did insist that no decision on caps - limits on the number of licences per company - will be taken until the return of the Communications Minister later this week. But he was willing to discuss the "hypothetical", but probable, case that caps would be imposed, or that the highest bidder would renege on its commitments. He made it clear that "if no one [else] matches the highest offer" - in case the highest bidder itself opts out - then the government "has no option but to re-tender."

HFCL, with a 1994-95 turnover of under $35 million, is widely considered ready to back out of its bids - three times as much the next highest bids - in some regions, even though the company denies this loudly. In most cases, the other bidders are almost certainly not going to match HFCL's bids. Retendering, at least for the regions that pose problems, appears to be the only way out.

Speaking about the tenders for cellular services, opened on August 5th, Mr Takkar clarified that, contrary to what has been reported elsewhere, the cap of two in profitable A circles is not yet decided. The Minister for Communications, Sukh Ram, had made a statement about this cap just before leaving the country for medical treatment three weeks ago, and it has lead to much speculation. Mr Takkar said that the government has prepared a study of the effects of these proposed caps, about which an actual decision will be taken upon the Minister's return.

Mr Takkar also said that the government was preparing legislation making the Telecom Regulatory Authority of India (TRAI) a statutory body. An amendment to create the body under government prerogative powers was withdrawn last month following opposition in Parliament. Mr Takkar said there would be no major problems with creating a statutory TRAI immediately - either in the next session of Parliament, or by executive order rather than after a two-year trial period as originally planned. There will still be scope for future modification of the authority, including its merger with the proposed Indian Broadcasting Authority.

Mr Takkar said that the government hopes to award contracts for cellular services by the end of this month, although basic services may take longer. He said that the government had made it clear to Parliament that the setting-up of the TRAI and the granting of licences were not connected, as the government retains the licensing role and will be the contracting party. Mr Takkar stated that as the Supreme Court had vacated a stay order on the telecom tenders, the government would go ahead, although it would, of course, be subject to any future Court ruling.