Radio is an immensely powerful medium. Its free-to-air nature, ease of reception, affordability and diversity of receiver sets, ease of listenership at all places and at all times distinguish it from other forms of media and place it at an advantageous position to inform, educate and entertain the people.

Terrestrial radio started in the year 1923 as a private initiative after temporary permissions were given to radio clubs in Kolkata, followed by Mumbai and Chennai. Thereafter, the government stepped in 1930 and it remained in government domain for nearly seven decades. At the time of independence the radio coverage in India was 2.5 percent of the area and 11.1 percent of the population. Now AIR with its network of 232 stations and 374 transmitters provides coverage to about 92 percent area and 99 percent of the population. External Services Division of AIR broadcasts in 27 languages (16 foreign and 11 Indian) to over 100 countries. FM radio sector was opened up for private participation in the year 1999 when the policy for FM Phase I was announced.

The thrust of the government has always been to endure a robust growth of the radio sector. An FM radio channel in each city has also been earmarked for educational purposes. Indira Gandhi National Open University (IGNOU) is already operating a number of channels in many cities.

The FM radio policy has been ever evolving. Both the industry and the government learnt lessons from the limited success of FM Phase I. The deficiencies of Phase I which resulted in only 21 operational channels in 12 cities were overcome in Phase II announced in the year 2005. It provided a revenue-sharing regime instead of a fixed fee regime amongst others, resulting in a quantum jump in the growth of the sector. The policy has been well received and we now have a total of 248 channels operated by 42 operators in 84 cities. As reported by FICCI, the compound annual growth rate (CAGR) of the radio industry has been 19.7 percent over the period 2006-2008. It has grown from Rs. 4.9 billion in 2005 to Rs. 8.4 billion in 2008 and is expected to touch Rs. 9.2 billion by the end of 2009. Though radio advertising comprises only 4-5 percent of the total ad spend in India as of now, looking at the market share of radio in other parts of the world, one expects the share to grow further and stabilize at around 10-12 percent.

Although the global economic slowdown has adversely impacted the growth rate and the total ad spends, yet it is hoped that the value for money, which the radio as a marketing medium offers, both for national as well as local advertisers and the advantageous position it holds vis-?†-vis other media as far as local advertising is concerned, will enable it to maintain its growth through difficult times. Government in September 2008 allowed political advertisements over radio thus opening up another source for tapping advertisement revenue. From some of the feedbacks available it is understood that the marginal fall in the ad revenue earnings of the radio industry for the first half of 2009 is likely to be more than compensated in the second half with the GDP growth rate and consequent increase in corporate ad spends.

The industry has developed various mechanisms which include the radio audience measurement (RAM) in addition to the Indian listenership track (ILT) which already existed to measure the size of the radio audience. Advertisers will find it easier to place their advertisements on the radio and will be able to determine the popularity of the radio channels over different cities. My only apprehension is radio operators entering into an unhealthy race for increasing their RAM figures on the lines of the chase for TRP ratings we are witnessing on the television front.

We are today standing on the threshold of a fresh phase of expansion and growth of the FM radio services to 278 more cities, thus providing FM radio coverage to all cities with a population of more than one lakh. The proposed FM Phase III policy conceives special incentives for extending the reach to North-Eastern States, Jammu and Kashmir and Island territories for making the operations viable in these areas. These include allowing the ownership of channels in these areas over and above the 15 percent limit on national ownership and payment of annual fees at the rate of 50 percent of the rate for an initial period of three years of operations. The incentive is also proposed to be extended to the existing operators in these areas to enable them to effectively compete with new operators. The removal of restriction in networking of channels owned by an operator is bound to bring down the operational costs in general and will also improve the viability in remote and difficult areas. Multiple ownership of channels in a city not falling under D category will enable diversity in the content aired and will allow operators to distinguish themselves from others to cater to niche audiences. This will also increase the overall listenership base and the listening time will increase the advertisement pie by making focused advertising possible.

The operators are also proposed to be allowed to carry news, though only to a limited extent to begin with, by allowing them to carry the news bulletins of All India Radio. The transition has to be gradual, keeping in view the sensitivities involved and the absence of a locally based regulatory mechanism. Certain categories of permissible broadcast are also proposed to be specifically clarified. The limit on foreign investment is also likely to be raised. Calculation of indirect foreign investment has already been simplified by the Department of Industrial Policy and Promotion (DIPP). After the policy is approved, the tendering is proposed to be held in three batches to give the industry and the prospective bidders enough time to garner adequate resources to plan and organize their future growth.

One of the major issues remained to be addressed, which is not directly under the control of I&B ministry, is that of music royalties. The expenditure on music royalties as per an industry study report varies from 7 percent to 43 percent of the operational costs depending on city categories and impacts the profitability and viability of FM radio operations especially in C and D category cities. Since a large part of the Phase III expansion is going to take place in such cities an amicable resolution of the issue is a prime concern for us. The ministry has been following this matter with the HRD ministry at various levels to ensure a speedy resolution. I am hopeful that we will be able to resolve the matter keeping in view the international best practices.

In the proposed FM III Policy a number of steps have been taken to ensure reduction of operational costs per channel. Permitting FM operators to network on a pan-India basis within their own network, allowing ownership of multiple channels in a city subject to certain city level and national level limits, incentivizing operations in NE, J&K and Island territories by charging only half the annual fee for a period of three years and providing Prasar Bharati infrastructure at half the rentals in such areas will definitely bring down the operational costs further. To improve the viability further as against a maximum of four channels in D category cities permitted in FM Phase II, FM Phase III proposes only three FM channels in D category cities so that there are lesser operators to share the advertisement pie. The reduction in the lock-in period of shareholding of promoters and majority shareholders from the present 5 years to 3 years will give them greater freedom to change the share holding pattern.

One of the objectives of bringing private city-based stations is that they should promote local content and local talent. Unfortunately this aspect has not fructified and the thrust so far has been on Bollywood-based popular content. It is because the restriction on multiple ownership of channels does not provide enough room to do so and forces the operator to minimize risk and maximize revenues by resorting to content popular with mass audience. With FM III now promising to provide greater freedom and multiple ownership, promotion of local content, talent and culture should be given due space. Formats like talk shows, dramas, classic and folk music concerts, programming specifically for children, short stories and plays with a social message should also be incorporated.