MTNL chairman and managing director S Rajagopalan told The Financial Express that the climb in revenue would reduce the instance of cross-subsidisation and leave the company less vulnerable to cost pressures. The telecom PSU is expecting a net profit of more than Rs 1,500 crore in the current fiscal ending March 31.

"At present, the cost per line is Rs 4,000 per annum and present day rentals account for only Rs 2,280 per annum of this amount, the increased rental will bring in Rs 3,000 per line per annum, thereby reducing the burden on us," said Rajagopalan.

While he expressed satisfaction at other features of the proposals, Rajagopalan sounded a word of caution on the domestic long-distance front. "DoT will have to immediately increase the number of long-distance circuits," he added. Theaugmentation in the network capacity will lead to higher volumes and better revenues, he said.

This assumes importance, given the fact that TRAI proposals aim at increased usage as a fall out of the reduced long-distance charges. But, the existing number of circuits catering to long distance will not be able to cater to the increasing number of callers and cause problems and shortfalls in revenue.

Rajagopalan added that the full benefits of the reductions would not be felt unless the long-distance sector was opened up to competition. He added that the increase in rentals would not lead to reduced demand in the metro circles. "Whenever any increase happens in prices, the initial reaction of consumers is adverse and may lead to a small dip in demand," Rajagopalan added. But, this will be temporary and improve later on, he added.

Stating that the projected revenue increase would only happen given certain elasticities of demand, he expressed happiness over TRAI's attempt at reducing cross subsidy and easingthe burden on rural subscribers.