Sri Lanka: Road to ‘Dharma Rajya’ does not look ‘toll-free’

Posted on August 14, 2008  /  5 Comments

Central Environmental Authority Chairman Udaya Gammanpila calls the new ‘Environmental tax’ essential, pro-poor and progressive. Releasing used mobile phones and CFL bulbs to environment is dangerous, he warns, with a long list of hazardous chemicals that would perhaps put a chemistry professor to shame. He wants to collect them for recycling.  The tax money will be used to build recycling plants.

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.


  1. Dear Prof. Samarajiva,

    I need to get this clarified from you.

    You were the Director General of the Telecommunications Regulatory Commission few years back.

    1. Didn’t you foresee the incoming telecommunication towers with the potential boom of the industry and didn’t you think of introducing rules to share the towers among the telecom companies to optimize them? This could have prevented several companies installing towers in the same area. (If I am correct Mr Rauf Hakeem was trying to introduce tower-sharing before he quit the government.)

    2. The TRC could have created a map to install the towers to cover the whole country in few phases and the telecom companies could have invested money according to that plan. If this was done, by now, maybe the whole country except the war-affected region could have been covered. We wouldn’t have to complain against the taxing of towers if that was done. I am not sure such detailed planning and executing is possible under Sri Lankan laws though.

  2. Telecom technology changes very quickly, as does the market. Could anyone have predicted that Dialog, which was the fourth entrant to the market, would have 4.8 million customers within 13 years? The idea that planning years in advance can be done has been proven a failure in general (the failure of the five-year plans pioneered by the former Soviet Union, and then used by countries such as India and Sri Lanka). It is even more of a failure in competitive markets with rapid technological change such as telecom.

    So policy in such markets cannot be based on planning, but on shaping incentives (positive as well as negative). Unlike India, which foolishly prohibited sharing of infrastructure (and recently relaxed those restrictions), our law and licenses did not prohibit sharing. So a significant amount of sharing did occur. However, it is not that simple a matter to compel sharing, because it can amount to expropriation of private property. For example, by compelling the sharing of a tower that has been designed to carry 2 antenna, you may also be compelling that operator to incur the additional expense of building a new tower as his business expands. It is in this context that the creation of additional incentives for tower sharing may make sense, as I said in my Lankadeepa interview. Carrots are always better than sticks.

    It is not possible to predict the exact number of towers or their locations. The technology is such that you have cells within cells in certain areas; you have to accommodate population concentrations (which change even temporally, as in the case of Nuwara Eliya in season or a test match) and topographical features. These cannot be centrally planned, especially for mobiles. On the other hand, this kind of planning is feasible for radio and TV, where the technology is stable and the market mature (in broadcasting, coverage is what matters not listener/viewership, so the market is static for all practical purposes). The TRC tried to do this in 1999, but failed. Why?

    That is the third factor. Law and the ability to enforce it. A regulatory agency has to work within the law. This is constituted by international treaty commitments, the 1991 Sri Lanka Telecom Law, as amended, and the licenses that have been issued to the operators. The 1991 Act basically states that the regulator must assist operators in right-of-way matters; it does not give it powers to compel sharing. With a lot of skill, it may be possible to introduce sharing provisions into s. 22 spectrum licenses. We worked up a draft law that sought to address this problem in 2003; but it died with the takeover of the ministries and the dissolution of Parliament.

  3. Ten years ago, as a systems engineer at Central Bank banks not sharing ATMs puzzled me. (They don’t even now!) It envisaged it a wonderful win-win. I thought the sheer apathy of the bankers was what prevented it. I have a better insight now. (which is equally applicable to sharing telecom infrastructure)

    Human beings naturally abhor sharing; specially with competitors. We prefer single hotel rooms, instead sharing with a friend. Imagine sharing a room with an enemy!

    These are the other reason too:

    1. Assume an operator builds a tower in a virgin area. Volume is not created overnight. He needs to cover capital investment. Why should he let a competitor kill his market by sharing towers? The incentive always is to delay the second entrant.

    2. Why should tower maps of different operators coincide? Imagine A, B and C are three towns of the same highway with 10 km distance in between. The first entrant’s choice might be A and C (He may cover some environs of B). The second operator will obviously want a tower at B. (to grab the most underserved)

    If they use the same premises, retailers/bankers/doctors/groceries too can reduce their operational costs and deliver the advantages to customers.

    So why not we insist that Arpico, Cargills and Keells super too to share buildings?

    Why not we ask banks to share their regional offices with competitors?

    Why Asiri and Oasis hospitals (just adjacent to each other) duplicate facilities? Why not insist sharing? (and save environment!)

    Forget business. Can we even make one school share its play ground with another?

    So sharing towers looks good in paper. We think that will save environment and we think customers will be the ultimate beneficiaries. But it will never happen in that way – unless we ensure that the game will be fair for everybody. As Rohan pointed out it cannot be ensured in an unpredictable market.

    However, if the government bans operators building towers and forces them to lease towers build by a third party (may be government itself) it will be a different story.

  4. More on towers:

    1. CEA Chairman says more towers means an increase in the risk of lightning. This is not true. If grounded properly the towers *reduce* lightning risks (to other structures) Even if not grounded, lightning will hit only the towers. Damage will be mainly to equipment. So why government worry?

    2. CEA Chairman also says RF radiation emanated by towers is unhealthy. If this is true, the government should prevent new towers within the certain distance from another and limit broadcasts. Putting tax will not help because if everybody is ready to pay 50k they can even erect 10 adjacent towers. Does CEA compromise health of the public?

    3. Further, if RF radiation is bad – the government encourage more towers. Having two antennas on the same tower will double the radiation level!

  5. There is a partial correction to (1) above. A friend (a senior engineer at CEB) pointed out I have overlooked something. (Sorry, I learnt this stuff more than 15 years ago)

    If a tower is not properly grounded there can be a risk to humans in the surrounding area because of what we call the ‘step potential’. This happens because voltages of varying degree (highest at the tower base) are temporarily induced within a limited radius when the tower dissipates the massive electric current to ground. So there can be a voltage difference between the two legs of a human being resulting a shock.

    Will it be large enough to cause harm? Me thinks not.

    Anyway, a logical solution will be to earth the tower – not to tax it!