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TRAI re-considers inflation linked tariff amendment orders

12-May-2016
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TRAI re-considers inflation linked tariff amendment orders

TRAI has released its decision relating to inflation linked hikes for tariffs. It had issued tariff orders providing for inflation linked hike applicable to rates of TV services at wholesale level in the non-CAS and DAS systems.

In order to measure the effects of inflation linked hike, on the basis of the monthly Wholesale Price Index (WPI) maintained by the ministry of Commerce and Industry TRAI tried to work a change in the WPI. It was eventually decided to implement the hike in two phases, first for the period from December 2008 to March 2014 with a hike of 15 percent and was made effective from April 2014, the second phase would see a hike of 11 percent accounting for remaining part of the inflation linked for the same duration and was made effective from January 2015.

 These tariff amendments were set aside by The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) and TRAI was directed to re-consider the issue with the observation made by TDSAT, it stated “These negotiations take into account all aspects including growth in subscribers, inflations, etc. Each year the subscription charge goes up and the subscription revenues have increased by 130 percent as against the growth in subscriber of 34 percent. Yet these aspects have not been taken into account by the TRAI”

TDSAT also observed that TRAI should consider other inflation indices such as GDP Deflator in the calculation of inflation linked hikes. A civil appeal was filed by IBF and another in the Supreme Court against the order of the TDSAT. The Supreme Court upheld the order of TDSAT in August 2015 and also directed TRAI to re-consider the hike with the observations made by the TDSAT.

TRAI on the orders of the Supreme Court conducted a fresh examination taking into account the GDP Deflator as a measure of the inflation. Other associated factors as suggested by the TDSAT like increase in the number of subscribers and also increase in the total revenue accrued to broadcasters were also studied.

TRAI observed that the annual revenues that actually accrued to the broadcasters have surpassed the estimated revenues that should have accrued to them taking into consideration the YOY hike in inflation as calculated by the GDP Deflator. The broadcaster’s CAGR year on year also showed a positive growth.

As a result of the fresh analysis TRAI has decided that two inflation linked Tariff Amendment Orders issued by it in 2014 and set aside by the TDSAT are not required at present, therefore withdrawing the two tariff amendment orders set aside by TDSAT and the Supreme Court. 

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