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TRAI rolls back 27.5% inflation-linked tariff hike for non-DAS areas

MUMBAI: The Telecom Regulatory Authority of India (TRAI) has rolled back its 27.5% inflation-linked wholesale tariff hike for non-addressable systems, contending that the hike is not needed as the rise in revenue of the broadcasters has outstripped the increasing inflation over the years.

The regulator took this decision after examining the matter afresh by taking into account the GDP deflator as a measure of the inflation. Other associated factors such as the increase in the number of subscribers and that in total revenues accrued to the broadcasters were studied to carry out a detailed and holistic analysis of the issues.

The Telecom Disputes Settlement & Appellate Tribunal (TDSAT), while setting aside the tariff hike, had directed TRAI to reconsider the matter. The TDSAT’s judgment was upheld by the Supreme Court, which directed TRAI to issue fresh orders.

After considering the year-on-year hike in inflation using the GDP deflator, TRAI found that the annual revenues that actually accrued to the broadcasters had surpassed the estimated revenues.

The compound annual growth rate (CAGR) of the year-on-year revenues accruing to the broadcasters also witnessed a positive growth, it added.

TRAI further stated that this growth kept well ahead of the estimated revenues compensated for the year-on-year change in inflation as computed using the GDP deflator.

“Consequent to aforesaid analysis of the facts, the authority has observed that there is a healthy growth in the industry with rise in revenues outstripping the increasing inflation over the years and therefore concluded that inflation-linked hike provided earlier vide 11th T.A.O. and 13th T.A.O. dated 31 March 2014 and 31 December 2014 respectively, which have been set aside by TDSAT vide its order dated 28 April 2015 and the said order of TDSAT has also been upheld by the Supreme Court of India, are not required at present,” the TRAI said in its order.

The tariff hike was given in two instalments, namely 15% on 31 March 2014 and 12.5% on 1 January 2015.

The authority’s decision was challenged by distribution platforms and consumer organisations since the upward revision in wholesale price for non-DAS areas would automatically result in a revision of the ceiling on wholesale prices in the digital addressable system (DAS) regime. DAS wholesale rates are 42% of non-DAS areas.

The appeal was upheld by the TDSAT, which set aside the inflation-linked tariff hike on 28 April 2015. While setting aside the tariff amendment orders notifying the tariff hikes, the tribunal directed the regulator to reconsider the issue. The TDSAT had observed that TRAI should consider inflation indices such as the GDP deflator in the calculation of inflation-linked hikes.

The Indian Broadcasting Foundation (IBF) challenged the TDSAT order in the Supreme Court. However, the apex court upheld the TDSAT order and directed TRAI to reconsider the hike in the light of observations made in the order of the TDSAT and pass an order afresh.

TRAI had calculated the quantum of the inflation-linked hike by working out the change in the Wholesale Price Index (WPI) from December 2008 to February 2014, based on the monthly WPI data maintained by the Ministry of Commerce & Industry.

This, the authority said, was done as per industry demand as no inflationary hike had been permitted since 2009. WPI as a relevant inflation index had been used in line with the earlier inflation-linked hikes permitted by the authority based on the same index.

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