In a letter dated February 28, Archana G Gulati, joint secretary at the government think tank, said that the consultation paper itself highlighted the fact that market interventions in the form of price controls, such as the proposed minimum floor price, are likely to disincentivise competition, cost efficiency, price, and quality parameters and also deter new entries and innovation.
“In fact, the greatest disruption in recent years was the entry of a new player with better technology who made significant inroads into the market, thanks to very low tariffs. This brought intense competition and growth to the market,” the letter said.
The letter was in response to Trai seeking recommendations from stakeholders in tariff issues, including a minimum floor price for voice and date tariffs.
Setting the floor price now could prevent a similar new entry riding on disruptive technology and depriving customers of the benefits of competition, said Gulati. The only reason a minimum floor price was being considered was to address the prevailing financial stress in the sector, she added.
But in a separate March 4 letter to Trai, NITI Aayog CEO Amitabh Kant has expressed a diametrically opposed view in which he ‘emphasised’ that floor prices are the ‘need of the hour’ to enable the 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,” he said in the letter.
In fact, Kant went further saying that the setting up of floor prices was in the ‘national interest’ and necessary to ensure that the sector received much-needed relief measures which would ultimately benefit consumers and the economy.
However, towards the end of the letter, Kant said that floor pricing was not a long-term solution. Telecom service providers — Bharti Airtel, Vodafone Idea, and Reliance Jio — have all sought a minimum floor price for mobile data services, while saying that voice call tariffs should be left to market forces.
The companies believe that data prices should be regulated, keeping in consideration the financial health of the sector.
“We recommend that the floor price be set for mobile data services. It is critical that the floor price should be made applicable to all categories of tariff plans, i.e., retail consumer, corporate, tendered or other contracts, segmented and any other, including one on one,” Airtel said.
Reliance Jio said tariffs must not be hiked abruptly as it may dampen usage considerably. For now, it believes the tariffs can be raised to Rs 15 per gigabyte (GB) and gradually to Rs 20 per GB after six to nine months, based on data consumption. Reliance Jio said Trai can review its tariff order after three years.