Home / Companies / Print media hopes govt will revise ad rates, remove duties

New Delhi: India’s print media industry has joined the growing list of businesses seeking a bailout from the government to combat a sudden downturn in the economy after three years of rapid growth.

With advertising—their main source of revenue—slowing, publishers have asked the government, the single largest advertiser in newspapers, to revise its advertising rates, abolish custom duty on newsprint and withdraw fringe benefit tax levied on the non-core salary components of their employees.

According to three people familiar with the development who separately confirmed the details, a group of leading national and regional language publishers, including Bennett, Coleman and Co. Ltd, HT Media Ltd, Jagran Prakashan Ltd, Business Standard Ltd and Indian Express Newspapers (Mumbai) Ltd, met external affairs minister Pranab Mukherjee on 23 January and apprised him of the problems being faced by the industry.

Mukherjee, who is heading the cabinet currently in the absence of Prime Minister Manmohan Singh, is also looking after the finance portfolio in this period and is believed to have asked the group to make a presentation to the information and broadcasting (I&B) ministry.

“The group submitted a memorandum to the I&B secretary on 27 January. Among various other things, they have asked the government to pay commercial rates for DAVP advertisements," said one of the three people, a senior executive at a media company, who didn’t want to be identified given the sensitivity of the issue.

DAVP refers to the Directorate of Advertising and Visual Publicity, a unit of the I&B ministry that manages the government’s advertising and buys media space or air-time on its behalf, and commercial rates are the rates at which regular private advertisers buy space in newspapers and magazines.

DAVP is the largest advertiser in terms of volumes, or the advertising space bought, for most national publishers. The fee paid by the agency for the space bought, however, is only 8-10% of the rates paid by commercial advertisers. Commercial advertising rates for the Delhi edition of top-selling English dailies, for instance, range from Rs2,500 per sq. cm to Rs3,500 per sq. cm, while the corresponding DAVP rates are Rs250-283 per sq. cm.

“Being a government agency and also a bulk buyer, DAVP wrests a huge discount from all publishers," said a senior advertising executive working with a media firm.

“While in terms of volumes, DAVP ads comprise 10-20% of all the ads most publishers get; in terms of value, they only account for 5-6% of the total ad revenues they generate," added this person, who did not want to be identified.

In the wake of slowing revenue from advertising, a result of the prevailing economic downturn that has prompted most large advertisers to pull back their advertising spends, the publishers have asked the government to increase its rates.

“We have asked the government to pay full rates. It will provide us some succour. Right now, we are bleeding because of the steep decline in regular advertising," added the senior media executive cited in the first instance.

According to a Mumbai-based analyst who tracks the media industry, print ad spends dropped by 30% and 40% in New Delhi and Mumbai, respectively, during November and December.

“Delhi and Mumbai are the largest print advertising markets, and November and December are one of the busiest months in terms of advertising," added this analyst, who did not want to be identified.

“Real estate, automobiles, financial services and all other such large print advertisers have cut their ad spends massively in the past few months," said Paresh Nath, deputy president of the Indian Newspaper Society (INS) and chairman of Delhi Press Patra Prakashan Ltd which publishes 31 magazines in several Indian languages.

“I don’t see these advertisers loosening their purse strings any time soon, and a hike in DAVP rates will definitely help the industry."

Along with DAVP rates, the publishers have also asked the government to withdraw the 3% custom duty on newsprint, the single largest cost component for them.

Newsprint prices were extremely volatile in 2008 and touched a high of $960 (Rs46,944 now) per tonne in the December quarter. The prices have come down to around $600-650 per tonne but they are likely to remain volatile because of several leading suppliers cutting production significantly in the coming few months.

The publishers have also sought withdrawal of fringe benefit tax levied on its employees’ salaries, arguing that many of the perks given to employees get spent in carrying out their day-to-day functions and, hence, shouldn’t be taxed.

“The travel allowance, for instance, is actually used up by reporters and it is unfair to tax them on this allowance," said the media executive quoted in the first instance.

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