VSNL sources said that while the cut in renewals was one way of facing competition, the international telecom carrier would also have to ensure that it did not lose fresh business to its rivals. VSNL has about 250,000 Internet accounts.

Renewal for 100 hours will now cost Rs 2,400, against Rs 3,000 earlier, while the tariff for 250 hours and 500 hours will be Rs 5,200 (Rs 6,500) and Rs 8,000 (Rs 10,000) respectively.

A cut in the Internet-subscription charges is being proposed, and the issue is likely to be taken up at the VSNL board meeting to be held later this month.

It is learnt that the VSNL management may settle for a 15 per cent cut tobring it on a par with rival Mahanagar Telephone Nigam's (MTNL's) Internet rates. The logic is that VSNL would not like to spark off a rate war now. The company would rather wait for the private-sector Internet-service providers to do it.

On the other hand, a section of the VSNL top brass is keen to go in more aggressively with a cut of 20 per cent, as this coupled with enhanced service standards could be turn the tables on MTNL, which has made it clear that it will not hesitate to cut charges further. MTNL had launched its services in February with a 15 per cent lower subscription charge than VSNL.

But some engineers of the company feel that rather than going in for rate cuts, VSNL should aggressively market the quality of its services.

"These officials feel that the service standards are being enhanced and additional features added, all of which are enough for VSNL to retain its market share. Rather than cutting charges, investments should be made in further marketing the services and adding morefeatures," said an official on condition of anonymity.

VSNL's acting chairman-cum-managing director Amitabh Kumar declined to comment on the proposed rate cuts.

In a statement issued on Friday, Kumar, however, said that the renewal discounts were a step towards VSNL's commitment of providing cost-effective and high-quality Internet services to its customers.

The renewal-discount scheme will not be available in conjunction with other schemes like the Flexi-hour scheme. It will also not be available for Shell and student accounts.

VSNL's Flexi-hour scheme allows customers to sign up for a low-duration account, and extend the same on expiry of the period (within the year) to a higher duration account by paying the difference in subscription charges.

VSNL is slated to soon re-launch its Internet system on a world-class platform which, among other things, will offer on-line renewals and other automated facilities.