New Delhi: The government on Monday announced a 19% increase in advertising rates it pays to newspaper companies for publishing its advertisements. These advertisements are disbursed by the Directorate of Audio Visual Publicity or DAVP, the media buying and publicity arm of the government. The announcement was made by the information and broadcasting minister Manish Tewari at a press meet in New Delhi. The price increase will be from retrospective effect (15 October 2013).

Speaking to reporters, Tewari said that the interim rate increase had been announced after consultations with the ministry of finance and the Election Commission of India. The revised rates will be applicable until the seventh Rate Structure Committee on the Print Media Rate Card gives its final recommendations.

“This change augurs well for print companies which have been struggling to maintain advertisement growth in a challenging economic environment. Going forward, government advertisement would increase in the backdrop of upcoming general elections in 2014," said Karan Mittal, a media analyst for ICICI Securities. Regional language and Hindi newspapers will stand to benefit more than their national counterparts, he added.

Although the top executives of newspaper companies welcomed the increase in DAVP ad rates, they said the print media industry is in need for a bigger boost.

“We have been asking the government to increase the DAVP rates for a long time. This increase is very meagre. But something is better than nothing," said Mahendra Mohan Gupta, chairman, Jagran Prakashan Ltd.

Publishers have been building a case for a 100% increase in DAVP rates as the cost for newspapers had escalated by 100%. “The fall of the rupee against the dollar itself increased our imported newsprint cost by 70%," said Gupta.

“The government should actually pay us commercial rates and we could give them a discount for bulk advertising," he added.

The central government spent Rs400 crore through DAVP last year. The 19% increase will boost this figure. In addition, the state governments that spend nearly Rs2,000 crore on print media advertising, although not through DAVP, are also likely to increase their ad rates after the announcement by the central government, said a DAVP official present at the meeting.

Ravi Dhariwal, CEO, Bennett, Coleman & Co., the publisher of The Times of India and The Economic Times said the current increase was fine as an interim measure but it was nowhere near being sufficient. “We lose money every time we print a DAVP ad as it does not take into account our total cost," he said.

“The bigger task is to correct the formula for fixing the DAVP ad rate and take all our costs into account. The current formula for calculations is way too narrow and we will continue to lose money if the Rate Structure Committee does not look into the matter," Dhariwal said.

In a report carried by Mint in September, Mohit Jain, executive president, supply chain, at Bennett, Coleman and Co., the largest buyer of imported newsprint in the country, estimated that due to the depreciating rupee, the industry as a whole will end up spending an additional Rs1,200 crore on newsprint alone this year.

At the press meet, Tewari also mentioned that he had discussed the findings of the Leveson Report, which carried the findings of the Leveson inquiry in the UK, and its relevance in the Indian media context. The inquiry had been a judicial one that had been instituted to look into the practices of the British media following the News International phone hacking scandal. Tewari said that the government had always supported practice of ‘Self Regulation’ in the media domain and would do so in the future as well.

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