Set floor price for phone calls, data; no other option for telecom sector: Niti CEO to Trai

New Delhi, Mar 9 () Niti Aayog CEO Amitabh Kant has come out in support of fixing minimum rates for mobile calls and data, saying there is no other option due to heavy debt of the telecom sector and unsustainable fall in prices.

At present, telecom companies are free to decide on call and data rates but due to stiff competition they have sought regulatory intervention.

Mobile subscribers get access to 4G data at a price as low as Rs 3.5 per GB but if the floor price is fixed as demanded by telecom operators, the mobile internet prices will rise 5-10 times from the current level.

Debt-ridden Vodafone Idea has proposed that the minimum price of data should be fixed at Rs 35 per GB, Bharti Airtel has proposed minimum price of Rs 30 per GB for low data users and Reliance Jio wants it to be priced gradually to Rs 20 per GB.Advertisement

Kant's stand comes days after Niti Aayog showed discomfort in its official response submitted to telecom regulator Trai on fixing floor price for phone calls and data prices to bail out telecom companies.

"We would like to strongly emphasise that floor prices are the need of the hour to enable continuation of a multiplicity of firms that is critical for healthy competition. Given the heavy debt burden being faced by the sector and the recent fall in prices to unsustainable levels, there is no option available but to set floor prices," Kant said in his letter to Trai dated March 4.

The Telecom Regulatory Authority of India (Trai) is holding consultation with interested parties over fixing a minimum price for call and data services following demand from the industry.
Advertisement

On February 28, the last date to submit comments on the consultation process, Niti Ayog joint secretary Archana G Gulati raised a question on the proposal to set up a minimum floor price and said its implementation could prevent entry of a new player in the sector and deprive customers the benefits of competition.

Gulati had suggested that in case the minimum price for telecom services is considered imperative to address financial stress in the sector, then it should be a very short term intervention and reviewed within three month of introduction. However, Kant said review of the floor price may be done once the sector fully revives.Advertisement

According to a submission by Vodafone Idea, it will take three years for the company to restore its revenue levels.

"As we have mentioned in our comments, this (floor price) may be reviewed for its impact on the market and a view may be taken on bringing back forbearance, once the sector fully revives. However, in the extraordinary circumstances that the sector is going through at present, we believe that floor prices are absolutely necessary to avert lasting damage to India's digital agenda and economic growth," Kant said.

The cheapest data rate of Rs 3.5 per GB is offered in a plan priced at Rs 599 with 84 days validity that offers up to 2GB data per day at 4G speed. The same plan will cost Rs 3,360-5,880 if the regulator accepts proposal from telecom operators to price the data in the range of Rs 20-35 per GB.Advertisement

Competition Commission of India in its submission has said setting floor price for mobile services is a regressive step that may have a detrimental effect on market competition.

"No mature jurisdictions have imposed price floors on crucial sectors like telecom. Such retrograde regulatory measures bring inefficiencies in the longer run," CCI had said.

Gulati had said the increase in data tariffs is most likely to reduce subscription and consumption which would have a negative cascading effect on the economy.Advertisement

Although Kant extended strong support for setting up floor price, he said it is not a long-term solution. "We do nevertheless agree with Trai that floor pricing is not a long-term solution. There is also an inherent opportunity to seize the present situation to bring in far reaching reforms in the sector which will provide lasting relief needed to create a healthy, vibrant and dynamic telecom sector vital for economic growth," Kant said. PRS PRS ANUANU
{{}}

(This story has not been edited by Business Insider and is auto-generated from a syndicated feed we subscribe to.)