Sankhya Vahini Case Study

Submitted By:
Naveen Shekhar Chetiwal (32151)
Kalyana Krishna (32128)

Summary of the Case at hand before getting into the details

Name of the Project: Sankhya Vahini

Company executing the Project: Sankhya Vahini India Limited (SVIL)

Aim of the Project: To build a broadband fiber-optic network oriented primarily toward educational
institutions (To build 25,000 kms of backbone network and increase the internet speed from the
existing 34 Mbps to 2.5 Gbps and above).

Nature of the Project: collaboration between Department of Telecom (DoT) of India and Inter
University Network (IUNet) to be set up by Carnegie Mellon University of USA.

Start of the Project: Through an MoU signed on September 5th, 1998 between DoT and CMU

Proposed Share Capital: Rs.1,000 Crores

Equity Holding in %: IUNet--------------------49%

DoT--------------------45%

Ministry of I.T.--------2%

Educational Institutes--------4%

Principal Designers:

V S Arunachalam: He worked as a Scientific Advisor to the Union Defence Minister of India.

Recipient of Padma Vibhushan, Padma Bhushan Awards and the Shanti Swarup Bhatnagar Prize for
his research work. Working with CMU at the time of MoU.

Dr. Raj Reddy: Working with CMU and a Member of President Bill Clinton's Advisory Team on IT
at the time of MoU.

Key Person from the Indian side:

Mr. Chandra Babu Naidu, Co-Chairman, PM's Task Force on IT

Troubles for the Project:

1999: Pramod Mahajan, Minister of Communications and IT launches an Investigation into the deal.

2000: Telecom Watchdog, a consumer group files a PIL against the execution of Sankhya Vahini

2002: The Government formally announces the cancellation of Sankhya Vahini Project
Question 1: Do you agree that SV’s demise was primarily due to “vested industrial
interests”, as alleged by Arunachalam? Explain.

Ans: Yes, going by the details of the SV’s demise, it appears to have been primarily caused due to
‘vested industrial interests’ though the other factors like Political Clashes, Security Concerns and
Procedural Lacunae have also played their role.

Evidences of External Hand:

1. Sankhya Vahini was formally buried by the Govt. Of India in 2002. At the same time,
various Indian industrial conglomerates like Bharti, Hindujas and Reliance have stepped up
their activities in the domain of providing broadband connectivity.
2. Telecom Watchdog’s six pleas to the court did not involve IUNet or CMU. Hence, it was
thought that the petitioner would demand an affidavit from the government to clarify these
issues. But these reliefs were not insisted upon, and may perhaps be seen as corroborating
Arunachalam’s accusation.
3. After IUNet's withdrawal, Pramod Mahajan stated that the government would implement the
project on its own and that it was looking for a private partner. By that time it was well
known that corporate houses such as Reliance and the Hindujas have evinced interest in
getting into the business of building national-level Internet backbone infrastructure.
4. Reliance Communications was set up as Reliance Infocomm in 1999 and from 2000 onwards
laying of optical fibers started in Maharashtra, Gujarat and Andhra Pradesh. Reliance
Infocomm was inaugurated in 2002 and first of interconnect (POI) was established in New
Delhi in same year. Also in that year, Reliance Communications commissioned their 1st optic
fiber backbone. The above example further substantiate the allegation made by Arunachalam.

There are some other factors indicating that there was a strong influence of an external
hand:
1. The public interest litigation had dragged longer than it should have, partly because the
Government’s lawyer had often failed to show up in court.
2. DoT was using the litigation as an excuse to drag its feet on implementation, although the
High Court had not issued a stay order against the project.
3. Instead of filing an affidavit in response, the government issued a one-line statement saying
that in the wake of IUNet’s withdrawal, it is pulling out of the project.

Also the initial opposition to the project was because of power struggle between DoT and
MIT.
Question 2: What should the GoI ideally do to accelerate broadband penetration in
India, keeping in mind the mistakes done in the case of SV, and the
subsequent growth of broadband services offered by BSNL, Airtel, etc.?

Ans: To accelerate broadband penetration in India, the first thing the Government should do is to
learn from the mistakes committed in the Sankhya Vahini Project.

Following are the Learning’s:

➢ Any Future Broadband Project should not be approved without inviting competitive bids from
other companies, as done in the Sankhya Vahini project.
➢ IT Taskforce is primarily an advisory body to the Government. It does not have the executive
authority to approve of any joint venture. So, the Govt. Should ensure that the Taskforce
remains that way and that it does not encroach on the executive powers of the Telecom
Commission as it did in the Sankhya Vahini project.

➢ Before assigning a Majority stake to a private player in a joint venture, the Govt. Should
ensure that the private player brings in a significant amount of resources.

➢ The Government should also ensure that there is transparency in the crafting of ICT policy

The Government should also address the following issues:

➢ Taxes in India are around 35 per cent, compared with 2.5 percent in some Asian countries. In
the long term, this may restrict potential growth in the telecoms sector as reduced margins
leave inadequate capital for re-investment in new networks, especially in rural areas.
➢ BSNL Rural Broadband Plans are available at subsidized rates. A 1 GB Data Transfer Plan @
512 Kbps speed will cost the rural folks mere Rs 150 / month and the differential will be
compensated from the universal Service Obligation fund by the Government. The
Government should launch similar programmes in as many areas as possible in India.
➢ Initiatives like e-Choupal: Today 4 million farmers use e-Choupal to advantage – bargaining
as virtual buyers’ co-operatives, adopting best practices, matching up to food safety norms. ,
e-Choupal leverages the Internet to empower small and marginal farmers. The government
should encourage other private players also to take up initiatives like this.

Some Ideal Projects taken up by a few State governments:

APSWAN, Project in Andhra Pradesh: This service enables seamless connectivity among
departments as well as among the various offices of each department. Apart from providing a reliable
platform for departmental information systems, the availability of this network acts as a catalyst for
departments to offer convenient citizen services across the state. Further this project enhances the
speed of decision-making.

Projects in Kerala:
➢ A recommendation of the State Advisory Council on IT, to the Government, was to earmark 3
percent of the budget of the State exclusively for IT applications.

➢ It had also recommended that participation of employees at all levels should be involved in IT
implementation efforts in Government.

➢ 'PC FOR EVERY HOME' scheme has been launched by the Kerala State Electronics
Development Corporation, as part of an effort to achieve PC penetration.
 ➢ Information Kerala project inter-linking all the local bodies of the state orientation
programme for all the elected representatives of the panchayats in the state is being planned to
facilitate them to understand the potential of IT.

The Government of India should take the above examples as role model and should encourage other
states to implement such projects by offering incentives.
References:
http://www.hindu.com/thehindu/fline/fl1824/18241040.htm

http://www.indianexpress.com/ie/daily/20000504/ied04039.html

http://www.telecomindiaonline.com/indiantelecomhistory.pdf

http://www.flonnet.com/fl1711/17110950.htm