1. THC_CTMSS359_Sept071 Reforms in Power & Telecom Sectors Comparisons & Contrasts & The Way Forward BY * Information Technology Adviser, Government of A.P * Director, Center for Telecom Management & Studies * Chairman, Pragna Bharati (Intellect India), AP * Former Chairman & Managing Director Videsh Sanchar Nigam Ltd., Bombay T: +91 (40) 6667-1191, 2784-6137(O) 2784-3121® F: +91 (40) 6667-1111, 2789-6103 (O) Hanuman.chowdarya@tcs.com thc@satyam.com Talk @ Institution of Engineers, Hyderabad : 2 nd Sept 2007

2. THC_CTMSS359_Sept072 Reforms in Power & Telecom Sectors Comparisons & Contrasts Conventional Wisdom-Natural Monopoly Undermined by technology and Consumption Volumes Visions of Inventors & Liberalisers “We will make electricity so cheap that only the wealthy can afford to burn candles” - Thomas Alva Edison “Cities, countries and continents will be connected and people will talk to one another from anywhere, any time, to anyone… - Alexander Graham Bell Ghar Ghar mein radio; Gaon gaon mein telephone – Dr T.H.Chowdary We will make telephony cheaper than a post card – Dhirubhai Ambani Haath Haath mein (cell) telephone; Goan Gaon mein Internet Kiosk - Dr T.H.Chowdary 2/16

3. THC_CTMSS359_Sept073 Purpose of Reforms Purpose of Reform: Increase supply, Invite investment Cost-oriented pricing Differential pricing (Rural/urban; industrial/commercial/domestic) Control of Cross-subsidies Quality improvement Customer Choice?

4. THC_CTMSS359_Sept074 Power: Characteristics & Issues Single consumer- SEBs PPAs, “ sovereign” guarantees Fuel costs & energy prices Metering: Time of day prices Prepaid consumption Citizen Charter - Quality of Power Penalties, Compensation and Damages Cost Discovery/ Admissibility Board of Directors Accountability Consumer Involvement in Regulation Captive Power- Bulk Consumers 8/16

5. THC_CTMSS359_Sept075 Energy Consumption KWH/person/year NorwayJapanUSABrazil 120,00052,00097,00014,000 RussiaChinaIndia 6,20013,0004000 World Av: 2,328 Source: Department of Energy USA (quoted in Bhavan’s Jounal, 31/8/07)

6. THC_CTMSS359_Sept076 Electricity Capacity & Generation 1980-811990-912004-052007 MW 33,40074,7001,37,5001,50,000 An increase of 2.1 times between 1991&2007. In the same period telephones increased 44 times

7. THC_CTMSS359_Sept077 Gap Between Demand & Supply Power: 2005-06 peak demand90,119 Mega Watts 2005-06 peak demand met80,631 Mega Watts Shortage10.5% In A P peak touched189. 3 mln units on 21/8/07 May go to200 mln A P Transco wants o buy400MW from private power traders In telephones supply capacity is more than demand (except for the PSUs – BSNL & MTNL)

8. THC_CTMSS359_Sept078 Significant Legislations: Electricity Electricity Act 2003 (intrduced competition & protect consumer investment power for all) Electricity Regulatory Commissions Act 1998 A P Electricity Reforms Act 1999 ( A P got: World bank Loan $ 210 mnl) DFID £ 28 ($ 56 mln) A P GENCO A P TRANSCO (& Discoms)

9. THC_CTMSS359_Sept079 Rural Electrification Bharat Nirman Rajiv Gandhi Grama Vidyuteekaran Yojana- lunched April 2005 Rural Electricity Corporation Experiment of Taluka/Mandal level Discoms in1990s (Anakapalli, Rajampet) Failure?

10. THC_CTMSS359_Sept0710 Per capita consumption of electricity (kwh/person/year)in India 1950196070809020012006 15.634.883.5138.5238408520 Tele-density 195019942007 0.0250.8021 Power Consumption: Increase: 33.5 times Tele-density increase: 840 times

11. THC_CTMSS359_Sept0711 Villages Electrified/ telephoned 1947507090200320072012 1500306174,000471,000494,000534,000587,000 Villages electrified : 82% [325 times] Villages telephoned (2007): 92.3% [6000 times]

12. THC_CTMSS359_Sept0712 Corporatisation Rural Electricity Corporation Power Trading Corporation Power Grid Corporation Power Finance Corporation all Central PSUs State PSUs (Genco & Transmission companies) Pvtes: BSES, Tata, AES, RPG, AEC, SEC …plus Genco Telecom Corporations: BSNL (2000) & MTNL (1986) 41 P-Telcos (1995 to date)

13. THC_CTMSS359_Sept0713 Electricity Regulatory Commission CENTRAL: –Tariff of Gencos owned or controlled by Union Government –Gencos (Pvte) which generate & sell power in more than one state –Inter state xmission of energy State Electricity Regulatory Commission(s) [Captive Power imposed cess/tax)!

14. THC_CTMSS359_Sept0714 Regulation PowerTelecom CERC SERCs TRAI& TDSAT Telecom Regulation is continuously improving; promoting competition; company & consumer friendly. Power Regulation: No impact anywhere TRAI & TDSAT’s mandate creatively extended to cover cable TV & DTH TV

15. THC_CTMSS359_Sept0715 Power& Telephone Growth Rates 199620062007 PWR cap95.1 MW143 MW150MW Telephone12 mln150 mln220 mln Growth between 1996&2007 Power: 1.6 Telephones: 19.0

16. THC_CTMSS359_Sept0716 Reforms in Power  Electricity Boards become Corporations  No change in ownership & control and personnel  Populist, welfarist, direction  loss, theft, collection - Seemingly out of control  Regulation: State & Central - not yet benefited consumers Impact imperceptible 6/16

17. THC_CTMSS359_Sept0717 Telecom Outcomes From “Apply, apply - No Reply” To bounteous supply We now have 240mln phones, 85% mobiles – far in excess of 11 th plan target Teledensity increased from 0.9 in 1994 to 21% now (2007) Telephones work during rains and floods and storms – New Technologies OF cables and Wireless

18. THC_CTMSS359_Sept0718 Telecom Outcomes contd.. Cell-phones are now mass consumption appliances. Their prices came down to one-tenth to one-fifteenth in eh last 10 years 85% cell subscriptions are prepaid - no billing; revenue before costs/ service! - Users control expense Affordability increased 15 fold sine 1951; 6 fold in the last decade Electricians, drivers, plumbers, carpenters, masons, welders, street-vendors; mazdoors have phones! 600k/650k villages have telephones

19. THC_CTMSS359_Sept0719 Telecom Outcomes Demonopolisation brought New technologies Capital costs came down (by 90% from Rs.40,000/line to less than Rs.4,000/-) Prices came down ( by 97% for ISD calls 90% for others) Myriad new services ( on the cell-phone-digital cameras, Internet Access) 90% reduction for global tele-links; enabling India’s software companies to be competitive spread to Tier II cities [like Visakhapatnam, Mangalore, Coimbatore.....]

20. THC_CTMSS359_Sept0720 Telecom Outcomes Demonopolisation brought contd.. BPO, KPO & software companies enabled to be born & remain competitive due to drop in band-width price & bandwidth even in II tier cities E-governance, e-procurement, e-education, anytime, anywhere banking; e-public relations India becoming R&D & design center for the world eg. Satyam’s digital car

21. THC_CTMSS359_Sept0721 Affordability of Telephone 195119942007 Revenue/LineRs. 625Rs.10,000/cRs. 5000 Rev. PCI+2.51.00.12 Affordability PCI = 20 times rise Tel. Svce.Price

22. THC_CTMSS359_Sept0722 Affordability of Electronic Devices: Ratio of Price of Device to Per Capita Income 1951197419942007 Radio2.00.50.020.005 TV SetNA1.91.20.37 Year’s Telephone Service 2.51.0 0.12 PCNA 6.00.75

23. THC_CTMSS359_Sept0723 Telecom Outcomes Demonopolisation brought contd.. We are the lragest(7.5 mln cell phones / month) market in the world-larger than China (5 mln/m) Rs. 90,000 cr of private investment came into the sector P-Telcos are investing about Rs. 40,000/yr Telecom revenues are Rs. 1,10,000 cr/yr

24. THC_CTMSS359_Sept0724 Size of Power& Telephone companies India is the 6 th largest producer & consumer of electricity India’s is the 3 rd largest (after China, USA) telephone system and 2 nd largest market in the world ( after China) Power consumers: 90 mln Telephone subscribers: 220 mln Telephones are consistently exceeding the targets for growth Electric power generation capacity target for 1992-97 : 40,000 MW Achievement: 17,000 Telephone provisions exceeding targets & imagination.

25. THC_CTMSS359_Sept0725 Comparison/ contrasts TelecomPower ProductivityIncreased 5 fold in BSNL P-Telcos: Better than EU and US because of a new business model ( no. of phones/ employee) Only a little increase Profitability45% of revenues are surpluses Losses Cross-subsidiesOnly BSNL’s rural phones are subsidised Agriculture &”poor” are subsidised

26. THC_CTMSS359_Sept0726 Comparison/ contrasts TelecomPower Customer Choice-Enhanced -None Prices -Going down -Going Up Quality -Improving -No Difference Investment -Copious -A little ( domestic/foreign) Growth -Tremendous -A little 11/16

27. THC_CTMSS359_Sept0727 Down side of Telecom Liberalisation Indian equipment manufacture almost dead Indian R&D – reduced to “nominal”; hardly any user Indian contribution to network construction Low-end; labour intensive (towers, batteries, A/C; shelters, trenching & cable –laying…) All network equipment imported/India Assembled Indian R&D personnel creating IPR for foreign owners ( i/c Chinese!)

28. THC_CTMSS359_Sept0728 Reforms in Power & Telecom Sectors What must be done in Regulation:  Revamp body to make it consumer-caring  Build expertise/ capacity  Fill with talents  Avoid civil servants, ex-monopolists  Make Appointments Transparent  Constitute Regional & National Consumer Councils  Publish Consultation Papers  Assist Research by Consumer bodies & Professionals  TRAI to have offices in State capitals  Fund consumer bodies to build them into counter wailing power against companies 16/16

29. THC_CTMSS359_Sept0729 What we should aim at Power to be in Union jurisdiction upto District Level [generation and transmission] Corporatise & Privatise Power Companies - State to Disinvest Privatise BSNL & MTNL and break up BSNL into State-wide Companies

30. THC_CTMSS359_Sept0730 Dhanyawad: Thank You