Guarantee for NLD players halved

The government approved the department of telecommunication's proposal to halve the bank guarantee for national long-distance (NLD) service providers to Rs 50 crore.

It also promised a 50 per cent cut in the bank guarantee that service providers have to pay after establishing the point of presence. Point of presence refers to the setting up of switching centres and other facilities required to start operations.

At present, NLD operators have to furnish Rs 100 crore as bank guarantee along with a license fee of Rs 100 crore. Additionally, they have to furnish bank guarantees to the tune of Rs 400 crore after establishing point of presence.

Addressing the International Cellular Summit-2004, organised by the Cellular Operators' Association of India (COAI), Union Minister for Communication and Information Technology Dayanidhi Maran said the government would rationalise the framework for facilitating an exponential growth of the cellular industry.

Maran said the cellular industry needed to address the digital divide by providing telecom facilities in rural areas where the impact would be more significant.

He also said wireless telephony had the advantage of reaching remote and inaccessible areas, of the reach of fixed-line networks.

Once the telecom revolution reached every corner of the country, steps would be taken to provide infotech-enabled services (ITES) in the rural areas, Maran said.

For applications like e-commerce and e-governance, he stressed the growth of broadband penetration.

The minister assured service providers the government would soon announce a comprehensive spectrum policy so that the growth of the sector would not be hindered.

Bharti Group Chairman Sunil Mittal said, "The reduction in bank guarantee is justified. The government should do away with the need for guarantees." He also said the government should consider increasing the foreign direct investment limit in the sector.

COAI Chairman Dilip Modi said telecom companies should not be burdened with bank guarantees.

The cut in bank guarantees, however, would not result in any reduction in tariffs, operators said.