Multiple dishes is a common sight at many Nenasalas – the ‘telecentres’ set up under the e-Sri Lanka program, funded by the World Bank. Some of them are huge – with diameters little less than 2m. Having not done a design recently, I cannot tell the prices offhand, but I do know they are expensive – one such dish (with equipment) costs few times more than the aggregate cost of the PCs and peripherals in the centre.

Why a telecenter is equipped with multiple dishes?

The reason is, sadly, poor planning. ICTA, the implementation agency changes the communication services provider frequently. Few years have elapsed since the services from the initial provider have been discontinued, but he has never bothered to remove the dishes. Why? Your guess is as good as mine. The capital expenditure has been fully included within the Rs. 90 million (US$ 900,000) amount charged to provide VSAT services to then 200 odd Nenasalas for a period of one year.

The sadder part is even with such a substantial expense these centres are not provided broadband. What they receive is 128 kbps – something not too different from dial-up.

That is when some of these centers are already within the 3G coverage areas. Out of the three above two centers receive 3G signals. Not too great, but adequate for a telecenter and certainly better than a 128 kbps link.

We will be glad to learn what Udaya Gammanpila, ex-Chairman Central Environmental Authority, (who was once worried about used mobile phones creating an e-waste issue) thinks about the environmental damage created by these non-functional dishes, even if we ignore the huge sunk cost.

One local telco CEO recently whined about being viewed as a cigarette manufacturer. “Everybody wants to tax us, as if mobiles are a product more hazardous than cigarettes. Tobacco kills, mobiles don’t; communication facilitates better living conditions and saves environment because it reduces transport. It is gross unfair both are seen in the same light.”

As Wikipedia tells us, cigarettes are a significant source of tax revenue in many localities. This fact has historically been an impediment for health groups seeking to discourage cigarette smoking, since governments seek to maximize tax revenues. It is established that higher prices for cigarettes discourage smoking. Every 10 percent increase in the price of cigarettes reduced youth smoking by about seven percent and overall cigarette consumption by about four percent.

We hope Udaya Prabhath Gammanpila, Chairman Central Environmental Authority, will take note. If you think we use too many mobile phones – yes, taxing usage is the ideal path to bring it down. If not, you are making a dangerous precedent.

Taxing mobile usage by one ministry is an ‘open sesame’ for the rest. Ministry of Health can claim mobiles cancerous. Ministry of Education will find them disrupting studies. Perhaps the ever vigilant Ministry of Women’s Affairs may link mobiles to teen pregnancies – a correlation we would have never know if not for the District Secretary of Badulla. Given the other remarks he makes, to hear IGP saying mobiles increase crime will not surprise us. Almost forgot it – Telecommunication Regulatory Commission itself thinks mobiles are a prime reason for increased terrorist activities.

Bravo! Why not all these gentlemen and ladies tax mobile usage 2% each? (After all, it is about Rs. 10 per month for many, the price of a cup of tea.)

By the way, Rohan Samarajiva, LIRNEasia’s Executive Director had been busy for the past few weeks in making his case against ‘Envy Levy’ for mobile usage. We reproduce two of his articles here to Ravaya and Lankadeepa, in case The Chairman CEA had missed them. (Udaya, please click on images to get a full view)

Article on 'Ravaya'

Article on 'Lankadeepa'

(The cartoon above by Asanga Indunil of Rivira.lk, Aug 17, 2008)

In his weekly newspaper column in the Lankadeepa, Mr Udaya Gammanpila, the Chairman of the Central Environmental Authority and the main proponent of mobile-specific taxes, has posed the question to me why the mobile sector keeps growing even as they keep loading taxes on it.   For example, the mobile subscriber levy of 10 percent of every bill was in effect in 2008 Q2.  Possibly, the 10 per cent levy on CDMA “fixed” phones was also in effect for at least part of 2008 Q2.  Yet, mobile connections grew by 43.5 per cent and fixed (primarily CDMA) by 42 per cent.

In one of my first columns on the subject of mobile-specific taxes, in September 2007, a year ago, I talked about the goose that lays the golden eggs:

“According to the fable, the regular supply of golden eggs was not enough for the foolish owners; blinded by greed, they cut open the goose to get all the eggs at once. They found to their grief that there was no trove of golden eggs in the goose’s stomach; that their greed had deprived them of any more golden eggs.

I do not accuse the government of being that foolish. They are not killing the goose; their behavior is more like that of trying to milk the goose for more eggs. The end result, however, will be a stressed goose yielding less eggs than it otherwise would have.”

I did not say the goose would stop laying eggs.  From our research we know that people will not radically increase their calling if the prices come down; we also know that people will not radically reduce their calling if the prices go up.  Note that I did not say less eggs than before the taxes; I said, “less eggs than it otherwise would have.”

Now Mr Gammanpila has a response.   The mobile operators are foreign owned and enjoy tax holidays.   All that he’s doing is preventing profits from being repatriated.   He imposes taxes on the customers; the operators reduce their prices because of competitive pressures.  The customers come out even; they pay more taxes, but they pay less to the company.   The company makes less profit; less profit is expatriated; we all live happily ever after in the JHU-mercantilist heaven.   The problem is that it’s not only profits that get affected.  Capital expenditure gets cut back too.  You don’t see the results immediately; they take a few quarters to show up.   But show up they surely will.  That’s when we’ll see the slowing down of growth in the sector, and as a result, in the economy as well.

How many quarters?   Four, I’d guess.   If not I’ll eat crow.

Which reminds me of an equity analyst who predicted that the mobile industry will plateau in 2008 at 38 SIMs/100.  Based on our teleuse@BOP research, both Harsha de Silva and I disagreed (see comments).   FYI, it’s 2008 and we have 45.76 mobile SIMs/100 according to the Department of Census and Statistics.  That is 20 per cent off.

Crow is served, Mr Equity Analyst.  Do you prefer it hot or will you have it cold?

Responding to Rohan Samarajiva’s views on newly implemented Environmental levy in Lankadeepa last week, Central Environmental Authority Chairman Udaya Gammanpila calls it essential and the ‘first progressive tax’ in Sri Lanka. Assuring it does not burden public, he says any tax can be initially unpopular but the impact should be seen in long term. (Lankadeepa, August 19, 2008)

These are his points in brief:

1. If not for the Environmental levy, the government has to find money to address environmental issues by increasing either VAT or customs charges. That will raise prices in general. It is unfair. Why should villagers who have never seen a mobile phone contribute for its removal whenever they buy flour to make rotis? Instead we have introduced a tax only on pollutants. So only the culprits pay for remedial measures.

2. Mobile phone usage has drastically increased during the last few years. Now there are about 8 million mobile phones in Sri Lanka. (sic) The cost of a mobile phone was reduced from Rs. 75,000 in 1994 to Rs. 3,500. These have made the lifetime of a mobile phone shorter and more mobile phones are being released to the environment. (sic) Our intention is to build a recycling plant for e-waste. Such plants can be seen in India and Singapore.

3. Why we tax mobile usage? Because it is one commodity the prices have fallen during the last 15 years. In 1994 an incoming call was charged at Rs. 20 and outgoing at Rs. 30 per minute. Today incoming is free while outgoing is Rs. 4-5 per minute. How can one allege us insensitive to Cost of Living?

4. Before complaining about these taxes one should note their actual impact. 90% of Sri Lankan mobile subscribers are pre-paid. The average revenue per unit of a prepaid account is Rs. 360. Let us assume it to be Rs. 500. Two percent of that is Rs. 10 per month. That is all we ask to protect environment. Is this adequate even for a cup of tea?

5. Atmospheric pollution in Sri Lanka is too high. The tax on motor vehicles is meant to control this. Vehicles are taxed only if they pollute. If they run on electricity or water (sic) no levy is applicable. The levy is proportionate to the level of pollution. Vehicles such as buses, lorries and three-wheelers are exempted on Cost of Living considerations.

6. CFL bulbs solve one environmental problem, but their release to environment causes another. So we need to collect the used CFL batteries for recycling. A Denmark company has agreed to setup a recycling plant if we ensure enough input. We believe taxing 3% on non-CFL bulbs will make CFL bulbs more popular.

7. Tower tax is meant to encourage telecom operators to share towers. That has no effect on Cost of Living.

8. The money collected will be credited to a special environmental fund. Ministers of Finance and Environment have to annually report on this to the parliament. This ensures tax money will be used solely for environmental protection purposes.

(We open the discussion to our readers.)

Not everybody agrees.

Talking to Sunday Observer, Chartered Accountant cum Tax Consultant N.R. Gajendran, Partner, Gajma and Co. claims the Green levies have been introduced to cover the Government’s expenditure on the SAARC Summit and the Provincial Council elections. Revenue proposals, says he, should be made through the budget and not as interim proposals.

“A mobile phone is not a luxury item. A tax on the phone will be an added cost to low and middle income earners. Consumers will have to pay for the tax on new telecommunication towers”, Gajendran emphasises. 

Levies on mobile phones, telecommunication towers, use of non CFL bulbs and petrol vehicles came into force from August 1 under the Environment Conservation Levy Act No. 8 of 2008. Under that all communication towers will be charged Rs. 50,000. A levy of 2 per cent of the monthly Bill will be imposed on mobile phones, Rs. 3 will be charged on non CFL bulbs and there will be a levy of Rs. 100 on motorcycles and Rs. 300 on cars per annum. CEA targets a revenue of Rs. 500 – 800 million annually from the taxes.

Rohan Samarajiva, Executive Director of LIRNEasia now takes the issue to local language media. In an interview given to Lankadeepa he questions the effectiveness of the proposed levy in reducing environmental pollution.

Such wise words were not always heeded.

Four new levies, reported Financial Times today, will come into force this month under the Environmental Conservation Levy Act No. 8 of 2008.

All communication towers will be charged Rs 50,000, according to the Central Environmental Authority (CEA) Chairman Udaya Gammanpila, who explained it was done to ‘induce telecommunication companies to share the towers’.

Sharing telecom towers is good, but if Mr. Chairman thinks that happens just by forcing them to pay for erecting towers, he is wrong. Had cost been the issue, sharing would have already happened, given the high cost of tower erection – from leasing the land to bribing authorities of all levels. Further if the CEA’s concern was reducing the numbers it could have been done more effectively working together with Telecommunication Regulatory Authority of Sri Lanka (TRCSL). That is how it happens in other countries. They could have learnt from the recent attempts by Bangladesh Telecommunication Regulatory commission.

Perhaps TRCSL is too busy with monitoring porn. So this will levy be eventually paid by the mobile and CDMA subscribers.

If that is not enough, mobile phones will further be levied two percent of their monthly bills. (Even without this mobile users pay 26 cents as tax for every Rs. 1 usage – the ratio among the highest in the world) The funds such generated will supposedly be used to build an e-waste recycling plant. Says CEA Chairman: “Currently we do not have such a facility and users dispose of their old mobile phones improperly, causing damage to the environment.”

We anticipate CEA Chairman to be better informed than we are in environmental matters. All we know is used mobile phones are not an environmental concern in Sri Lanka. Recycling firms confirm it is only rarely they find a mobile phone discarded. When Dialog Telekom initiated an island-wide drive to collect used mobiles (with attractive cash prices) they could not gather even a hundred.

So we can only assume if at all another recycle plant is needed, it is for the other forms of e-waste. Parts of all types of electronic goods including televisions, radios, washing machines, refrigerators, air conditioners, sound systems and computers are being added to the environment in bulk. We fully agree. That is the environmental concern.

However almost all of these are luxury goods while mobile and CDMA phones are increasingly used by the poor. So why should poor pay for clearing the e-waste of the rich? Why not impose an environmental levy on all electronic goods?

May CEA Chairman please explain?

It appears that the JHU has a vendetta against the 6 million plus mobile users in Sri Lanka. They originated the idea of taxing mobiles to pay for government expenses (an amended law to this effect was enacted in September 2007); and now they want to impose another tax, this time in the name of the environment.

Why not on fixed phones? On computers? On cars?