Policy think tank NITI Aayog has changed its stance on imposing a floor price on voice and data tariff for mobile service providers. The move comes within a week of the NITI Aayog’s announcement, wherein it said it was not in support of bringing a telecom tariff regime that imposes a minimum price for various telecom services.

According to documents shared by the Telecom Regulatory Authority of India (TRAI), NITI Aayog's Archana Gulati, wrote to the telecom regulator pointing out that floor price on telecom tariff may disincentivise new entrants in the sector.

“The greatest disruption in the recent years was the entry of a new player with better technology who made significant inroads into the market," Gulati wrote to TRAI on February 28.

The letter pointed out that the move could stymie competition in the sector and called for the move to be carried out in a limited manner.

"If at all a measure such as tariff floor is considered imperative on account of inability to address the financial stress of the sector by any other less market distorting means; this should be a very short term intervention," Gulati's letter said, adding that her letter had the approval of NITI Aayog CEO Amitabh Kant.

However, within a week Kant wrote to TRAI Chairman RS Sharma clarifying the stand of the think tank.

In a letter to Sharma written on March 4, Kant wrote, “We would strongly like to emphasise that floor prices are the need of the hour to enable continuation of a multiplicity of firms that is critical for healthy competition.”

NITI Aayog seems to have changed its stand on the impact of the tariff hike as well. Gulati said in the communication to TRAI that NITI Aayog says, "The consultation paper does not cover the impact of the recent hike in tariff, nor does it contain any information on price elasticity. However, the increase in data tariff in what is acknowledged to be a price sensitive market is most likely to reduce subscriptions and consumption which would have a negative cascading effect on the economy; the opposite of the multiplier effect of increasing data consumption.”

Nonetheless, Kant in his letter to TRAI, maintained that the fall in tariff could lead to a heavy debt burden on the telecom sector.

"...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. TRAI has rightly pointed out that sectors revenues have not kept pace duty the increasing need for investment especially in the context of the new technologies like 5G. It is in the National interest to ensure that the sector is provided with much needed relief measures which would ultimately benefit consumers and the economy,” the NITI Aayog CEO said.

First Published:Mar 9, 2020 6:38 PM IST