New Delhi: With Sharad Pawar recusing himself from the Empowered Group of Ministers (EGoM) which was to decide on the base price for 2G auctions, the spectrum circus continues.
As the government now gets busy in finding a replacement to Pawar, there is increasing speculation about Telecom Minister Kapil Sibal wanting to push for a lower base price for 2G auctions. Sources told Firstpost that though Sibal may agree to substantially lower the spectrum base price, he may do so and suggest a higher 5 percent spectrum usage charge, against the 3 percent proposed by the sector regulator Telecom Regulatory Authority of India (Trai).
If this happens, it could be quite a smart move. Not only will Sibal have prevented a no-show in the upcoming auctions by lowering the reserve price. A no-show is a real possibility since the Trai-proposed reserve price is over Rs 3,622 crore per Mhz of all-India spectrum and thus deemed unaffordable for telcos. But shifting the burden from reserve price to spectrum user fee, Sibal would have addressed the industry’s other grouse of staggering the payment of fees.
At present, telcos pay varying spectrum usage charges based on their AGR – adjusted gross revenue, depending on circle and type of service offered. Trai, in its initial recommendations, had proposed lowering this charge to 1 percent while justifying the “high” base price for fresh 2G auctions. In its revised recommendations, it raised spectrum usage charge to 3 percent while retaining the base price.
If Sibal gets away with raising this further to 5 percent, he will have hit two birds with one stone – meeting revenue targets the government is eyeing from the telecom sector and allowing telcos to make large payments on a quarterly or yearly basis (usage charge payments) instead of collecting money upfront through a high reserve price during the auctions.
Another crucial aspect on which the government’s revenue generation targets hinge is whether telcos will be asked to pay for all the spectrum they hold prospectively or only for a part of the spectrum they hold. According to reports in The Economic Times and Business Standard, a meeting of the Cabinet Committee on Economic Affairs is expected to take a call on this issue later today (Tuesday). The two reports suggest that while Sibal’s ministry wants existing telcos to be charged for all spectrum prospectively at whatever base price is decided by the eGoM, Prime Minister Manmohan Singh and Planning Commission Deputy Chairman Montek Ahluwalia don’t think this is a good idea.
The ET story says the Department of Telecom “has been forced to modify a proposal that would have made it compulsory for existing operators to pay the auction-determined price for all airwaves they currently hold, following opposition from the finance ministry, the Planning Commission and the Department of Industrial Policy and Promotion”.
The BS report says the finance ministry has suggested that existing telcos should be given two options. One, they can be allowed to use up to 4.4 Mhz or 6.2 Mhz of spectrum at an administered price (the Rs 1,650 crore they paid for a pan-India licence) and not be charged the new rates, letting that spectrum remain non-liberalised. Or, two, they can be given an option to shift to liberalised spectrum (i.e. use spectrum for any kind of service, 2G, 3G or 4G) by paying the new price.
ET says the government could generate Rs 1,05,803 crore if telcos are asked to pay for all spectrum they hold prospectively. So why don’t the PM and Montek want this revenue? A telco official pointed out that the government is wary of disincentivising investments in the telecom sector, which is a real possibility if spectrum pricing and other financial aspects of the upcoming options remain unattractive to bidders.