"For effective and meaningful competition in the long distance segment which will benefit the consumers, further rebalancing will be necessary. Rentals would also have to be increased to make them cost-based," Plan panel said in the draft mid-term appraisal of ninth five year plan.

Telecom tariffs were rebalanced by the former Telecom Regulatory Authority of India (TRAI) in May 1999 whereby rates for long distance telephony were reduced against an increase in the rentals and local calls.

This had led to loss in revenue to both Mahanagar Telephone Nigam Ltd (MTNL) and Department of Telecom Services (DTS).

The former TRAI led by Justice S S Sodhi had said that even after the first phase of rebalancing of tariffs, the long distance rates would be much above costs.

Telecom tariffs, prior to first phase of rebalancing, especially the basic services were highly imbalanced as these were guided by the principle of revenue generation and cross subsidisation, panel said. The panel said that fixation of cost-based tariff would be crucial for providing level playing field to the private players in the long distance telephony. The panel said that due to implementation of revised tariffs last year, the cumulative loss to DTS during the ninth plan was estimated to be about Rs 6,700 crore. In 1999-2000, DTS is likely to incur revenue loss of about Rs 2,000 crore.

The Planning Commission is, however, of the view that this loss must be balanced against the gain to consumers and to the economy from the provision of telecom services atreasonable charges.