Policy Fallout of Fixed Minimum Recharge

If the necessity for minimum recharge leads to connection lapses, those who need direct benefit transfers could face difficulty accessing them.

Telcos such as Bharti Airtel Ltd are now demanding minimum spends from customers to continue using their networks.

As a Mint report suggests, the move comes a year after Trai cut interconnection usage charges. These charges are effectively subsidies. If they are set at high levels, larger networks can use the money collected from other networks to cross-subsidize their own customers. But if they are set too low, or abolished, prices of retail services inch up. As it turns out, this has happened for customers who are at the bottom of the pyramid. Customers who earlier paid next to nothing for an active mobile connection, now need to do minimum recharges. Ironically, prices have come down drastically for all other segments.

This could have policy implications. The Narendra Modi government’s direct benefits transfer (DBT) push is built on the JAM (Jan Dhan-Aadhaar-Mobile) trinity. If the necessity for minimum recharges leads to some of those at the bottom of the pyramid letting their connections lapse, those who need DBTs the most could face difficulty accessing them. – Live Mint