Policy & Regulation: Pricing and Tariff Control

Overview

Administered prices, price caps and tariff orders - NPPA/DPCO, GST changes, regulated insurance and broadcast tariffs - that cap or set realisations.

GST 2.0

The 56th GST Council reform effective 22 Sep 2025, collapsing the old 5/12/18/28% structure into two main slabs of 5% and 18%, with a 40% demerit rate for luxury and sin goods and abolition of the compensation cess on most categories
For autos, two-wheelers up to 350cc and small cars moved from 28% to 18%, motorcycles above 350cc rose to 40%, EVs stayed at 5% and individual life and health insurance premiums went to nil

InvIT monetisation under NMP

An Infrastructure Investment Trust holds operating assets and distributes cash flows to unitholders. Under the National Monetisation Pipeline, developers and public entities transfer completed transmission lines, roads and other assets into InvITs to recycle capital
The sponsor typically retains a minority stake and continues to operate the asset

NPPA/DPCO price control / NLEM

The National List of Essential Medicines (NLEM 2022 - 388 medicines) forms Schedule-I of the DPCO, 2013; inclusion makes a molecule subject to an NPPA ceiling price
Ceiling = simple average of prices of brands with 1%+ market share plus 16% retail margin, revised annually by WPI. Non-scheduled drugs may raise MRP only 10% a year, and Para 19 lets NPPA cap any drug or device

NPPA price caps - medical devices

Medical devices are notified as drugs, so NPPA can cap them under the DPCO, 2013 - either by scheduling a device or, more commonly, under Para 19 in public interest
A second lever is trade margin rationalisation, which caps the margin between price to distributor and MRP rather than the price itself, targeting distribution mark-ups rather than manufacturing cost

NTO (New Tariff Order) broadcast tariff framework

TRAI's tariff framework for addressable television, introduced in 2017 and revised through NTO 2.0 and NTO 3.0. It requires broadcasters to declare a la carte MRPs for every channel, caps what may be included in a bouquet, and regulates the network capacity fee distributors charge
Subsequent amendments raised the permitted bouquet discount to 45%, removed the NCF ceiling and made FTA declaration mandatory

NTO 3.0 (TRAI)

The third iteration of TRAI's tariff framework, addressing broadcaster grievances from NTO 2.0 by raising the permitted bouquet discount to 45% of the sum of a la carte MRPs
Subsequent 2024 amendments went further for distributors - abolishing the network capacity fee ceiling, widening DPO discount limits and making FTA channel declaration mandatory

FM Phase III licence fees

The framework under which private FM radio operates, with licences won at auction and an annual fee payable as a percentage of gross revenue, alongside migration terms from earlier phases
Draft Telecommunications (Television, Radio and Associated Services) Rules, 2026 would consolidate FM Phase III guidelines with uplinking, DTH, HITS, community radio and IPTV rules under the Telecommunications Act, 2023, offering licensees a migration choice

DAVP / BOC government advertising rates

The Central Bureau of Communication, formerly DAVP, sets the rate card at which the central government advertises in newspapers. Rates are revised on the recommendation of a periodically constituted Rate Structure Committee
A 26% increase was approved in late 2025 on the 9th Committee's recommendations - the first revision since Jan 2019, covering colour premiums and preferential positioning

8% AGR licence fee on DTH operators

Under policy guidelines notified Sep 2022, DTH operators pay 8% of Adjusted Gross Revenue - gross revenue net of GST - as a quarterly licence fee. Cable operators pay no equivalent AGR-linked fee
TRAI recommended in 2023, reiterated in 2025, cutting it to 3% and phasing it out entirely by FY27. MIB separately raised demand notices covering roughly 17 years of dues, reported at around Rs 16,000 cr across four private operators

NTO / DPO (distribution platform operator) framework

The distribution platform operator's side of TRAI's tariff regime. A DPO must offer channels a la carte at declared MRPs, may bundle only within permitted discount limits, and charges a network capacity fee for carrying capacity rather than for content
The 2024 amendments abolished the NCF ceiling and widened permitted DPO discounts, addressing long-standing distributor grievances

MMDR mineral concession auction regime

Since the MMDR Amendment Act 2015, mineral concessions are granted only through competitive auction rather than administrative allotment, with the winning bidder paying a percentage of mineral value to the state on top of statutory royalty
Six tranches of critical mineral auctions have run, and FY2025-26 saw a record 212 blocks auctioned including 22 critical mineral blocks

DMF / NMET mining levies

Two statutory contributions on top of royalty. The District Mineral Foundation, under Section 9B of the MMDR Act, takes 10% of royalty for leases granted after Jan 2015 and funds local development through PMKKKY; the National Mineral Exploration Trust takes 2% to fund exploration
Both are calculated as a percentage of royalty, which is itself a percentage of average sale price

Regulated RoE (cost-plus) model

Central and state generators supplying under long-term PPAs earn a regulator-determined return on equity - set at 15.5% for central sector thermal projects under CERC norms - with fuel and approved costs passed through
Capacity charge recovery depends on declared availability rather than actual generation, typically against a normative availability of 85%

Merchant / DAM tariffs

Power sold on the exchanges - day-ahead market, real-time market and term-ahead contracts - rather than under a long-term PPA. Prices clear on demand and supply, spiking in summer peaks and collapsing in solar hours
Merchant exposure is the opposite of the regulated model: uncapped upside, no floor

TBCB (tariff-based competitive bidding) vs cost-plus RoE

Two ways transmission projects are awarded. Tariff-Based Competitive Bidding auctions the project to whoever quotes the lowest transmission charge; the regulated cost-plus route awards it administratively with a regulator-set return on equity
The Draft National Electricity Plan 2026 designates TBCB as the default mode for transmission awards

ATF (aviation turbine fuel) state VAT

Aviation turbine fuel sits outside GST, so states levy VAT on it under the State List - a constitutional feature rather than an oversight. Rates ranged from 1% at UDAN airports to 25-29% in high-revenue states before reductions in May 2026
ATF is roughly 35-40% of an Indian airline's operating cost against a global average nearer 25%

AERA (airport economic regulator) tariff control period

The Airport Economic Regulatory Authority sets aeronautical tariffs - landing, parking and user development fees - for five-year control periods, based on the airport's capital base, cost of capital and traffic forecasts
AERA has proposed linking tariffs to monthly service quality performance across 32 objective indicators plus subjective measures

Coal supply structure & transition

A single state-owned producer supplies over 80% of India's domestic coal, at administered prices under fuel supply agreements with linked consumers. Rail evacuation rather than mining capacity is often the binding constraint
Calcined pet coke for aluminium anodes depends on imported green pet coke

Upstream fiscal & pricing regime

India imports over 85% of its crude, and domestic production operates under administered gas pricing formulas, royalty, cess and periodic windfall taxation. Revenue-sharing contracts and open acreage licensing replaced profit-sharing to reduce disputes
Mature fields need enhanced recovery to slow decline

APM (administered price mechanism) gas allocation & CNG economics

City gas distributors receive administered price mechanism gas for CNG and domestic piped supply, at prices well below imported LNG. Allocations have been cut as domestic output declined, forcing costlier LNG into the mix
Marketing exclusivity in a licensed area expires after a defined period, after which open access applies

Public procurement - bidding-capacity norms

Tender eligibility rules that cap how much work a contractor may bid for, based on past turnover, completed project size, net worth and existing order book. They exist to stop under-resourced firms winning work they cannot execute
They effectively segment the market by contractor size

Public procurement - empanelment & rate contracts

Government agencies pre-qualify a panel of consultants or suppliers and set standard rates, then award work from the panel without a fresh tender each time
Empanelment is periodic and competitive; awards within it are administrative

Section 10(10D) Rs 5 lakh premium cap on tax-free maturity

Section 10(10D) of the Income Tax Act exempts life insurance maturity proceeds from tax. Budget 2023 removed that exemption where aggregate annual premium across a policyholder's non-ULIP policies exceeds Rs 5 lakh, for policies issued from 1 Apr 2023
A parallel Rs 2.5 lakh cap already applied to ULIPs. Death benefits remain exempt regardless of premium size

Motor TP administered pricing

Third-party motor liability cover is compulsory and its premium is fixed by government notification rather than by the insurer. Rates were left unrevised for several consecutive years to FY26 despite claims inflation
Motor third-party loss ratios have run well above 100% across much of the industry, so the segment loses money before investment income

1/n premium recognition norm (long-term policies)

IRDAI's rule effective 1 Oct 2024 requiring premium on long-term policies to be recognised evenly across the policy period rather than booked upfront. A three-year policy now earns one-third of its premium in each year
It aligns revenue recognition with the period of risk cover, and applies across long-term motor, health and other multi-year products

RoDTEP & RoSCTL extensions

RoSCTL rebates embedded state and central taxes on exported garments and made-ups through tradable duty-credit scrips; RoDTEP does the same for non-apparel textiles and other goods. Both were extended to 30 Sep 2026
RoSCTL runs until the 16th Finance Commission approves a successor, whichever comes first

Tobacco tax restructuring 2026

From 1 Feb 2026 cigarettes moved from 28% GST plus compensation cess to a 40% GST slab plus a fixed per-stick additional excise duty of Rs 2,050-8,500 per 1,000 sticks by length and filter type. The compensation cess was abolished 31 Jan 2026 once state borrowings were repaid
GST is now computed on printed retail sale price rather than transaction value, and bidis were cut to 18%

State excise & pricing control

Alcohol is a state subject, so each state sets its own excise duty, label registration, pricing approval, distribution model and retail structure. Some states run government monopolies on wholesale or retail; others prohibit alcohol entirely
Price increases require state approval and are often delayed for years

Aged rice

Basmati matured in controlled storage for one to two years before milling. Ageing reduces moisture and alters starch structure, so the grain elongates more, separates better and absorbs less water when cooked
It is the main quality differentiator among branded basmati, and the reason premium brands hold large inventories of paddy and rice

FRP/SAP vs frozen sugar MSP

The Centre sets a Fair and Remunerative Price mills must pay for cane; several states impose a higher State Advised Price on political rather than recovery-linked grounds. Sugar's own Minimum Selling Price has been frozen at Rs 31/kg since 2019
Production cost for 2025-26 is estimated near Rs 41.7/kg, so the input is indexed upward while the output price is not

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