FICCI policy recommendations for growth of the radio broadcast industry

Wednesday, Mar 02, 2016

In a latest report, the Federation for Indian Chambers of Commerce and Industry (Ficci) has identified five broad policy recommendations for the radio broadcast industry. The first recommendation is for restriction on ownership of licenses and the second is for a three-year lock-in period. The apex chamber has also called for changes in the policy for sourcing of news and current affairs, service tax/GST levy on advertisements and auction rules.

The existing policy on restriction on ownership of licenses, does not allow a licensee to run more than 40 per cent of the total channels in a city and stipulates that there must be at least three different operators in the city. It doesn’t allow a licence holder to operate more than 15 per cent of all the radio channels in the country, excluding channels located in Jammu and Kashmir, the North-Eastern States and island territories.

The policy restrictions have, no doubt, been designed to address concerns about monopolies and to promote competition. In effect though, Ficci feels, the restrictions prohibit industry players from leveraging economies of scale and hold them back from making greater investment in technology and content.

The industry chamber believes that there may have been sufficient rationale for such restrictions when the radio industry was in its infancy. The radio broadcast industry has matured since then and so, the time may be right to remove the regressive regulations, so industry players may scale up their operations and technologies.

The industry believes that there are regulations and regulatory bodies, such as the Competition Commission of India (CCI), that may effectively address the concerns about a monopolistic market or other unfair trade practices. The industry federation feels that the government should now reconsider its policy and remove arbitrary caps on the radio broadcast industry.

The industry chamber recommends that the cap on ownership be removed, so that national players and strong regional players may emerge and be able to consolidate operations, bring in economies of scale, reach consumers at the grass roots level and acquire more frequencies.

The current provision on the three- year lock-in period mandates that the shareholding of the largest Indian shareholder in a radio broadcasting company cannot be reduced below 51 per cent till a period of three years from the date on which all the channels allotted to the company holding permission stand operationalized. Existing radio broadcasters have already served a lock-in period during Phase I and/or Phase II of the policy regime.

Now Phase III imposes a fresh lock-in period from the date of operationalization of all the channels, which could possibly extend during Batch II auctions. The Federation of Indian Chambers of Commerce and Industry recommends that the three-year lock-in period should be waived for new allotments in Phase III for existing radio broadcasters, since they have already served the lock-in period in the earlier phases. The body suggests imposing a onetime lock-in period.

The current policy regulation on sourcing of news and current affairs, permits licence holders to carry news bulletins of All India Radio (AIR) in the same format. Consequently, exclusive radio interviews, debates and content sourcing from any other sources are not allowed.

With the current age of internet and converged media platforms, information and news access has become unrestricted. Under phase III, the medium will penetrate deeper into newer cities. So, Ficcci recommends that radio being a free-to-air (FTA) medium for masses, should not be restricted in terms of sourcing of news and information.

The radio, the chamber feels, should be considered as a primary medium for dissemination of information at the local and national levels, so it may promote pluralistic opinions and higher awareness among listeners. The radio industry should, consequently, be liberalized in lines with the television industry to broadcast independent debates and local news sourced from wire services, or independently. The chamber advocates that standard rules of checks and balances that apply to other news media, should apply to FM radio as well.

The current policy on service tax (or the GST when it comes) levy on advertisement on radio is liable to service tax. Radio competes with newspapers at the local level. There is no levy of service tax on advertisements in newspapers. The Ficci report recommends removal of service tax on advertisements for radio broadcast companies, so they may have a level playing field. It recommends that service tax and GST on radio be the lowest, as it is a free-to-air medium.

Auction Rules are another major concern of the Ficci report. In the existing policy, during the first clock round, the Auction Activity Requirement (AAR) will be set at 80 per cent. Subsequently, the AAR will be increased in two steps as the auction progresses, from 80 per cent to 90 per cent and then to 100 per cent.

In Phase III Batch I Auctions, the AAR went from 80 per cent to 90 per cent after many rounds and then arbitrarily from 90 per cent to 100 per cent, after many rounds which led to gaming, parking and artificial rate increases. The Ficci study recommends that the increase in AAR be in an accelerated manner in Phase III, Batch II auctions. The AAR of 100 per cent, it feels, should be reached after a few rounds of AAR at 80 per cent and 90 per cent.


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