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Mulayam’s spectrum bias cry

New Delhi, June 27: Samajwadi Party leader Mulayam Singh Yadav, who has emerged as a fallback cushion for the UPA, has said existing telecom companies should not be asked to pay a spectrum fee to match the price thrown up at the proposed 2G auction.

The auction must be held before an August 31 deadline set by the Supreme Court.

The department of telecommunications has proposed to make it mandatory for all telecom operators to pay the auction-determined price for the existing 2G spectrum they possess over the remaining period of their licences.

The DoT is believed to have sought attorney-general Goolam Vahanvati’s views on this radical proposal which has sent a frisson through the industry.

Yadav has now written to the finance minister, demanding that the government reject the DoT proposal.

“I am very concerned by this new proposal mooted by DoT without bothering about the serious and far-reaching consequences,” Yadav said in the letter to finance minister Pranab Mukherjee on June 10.

“It is obvious that this new proposal has deliberately been thought of to benefit older GSM mobile operators which have enjoyed the benefit of spectrum at the old lower price for 17 to 18 years and who will, therefore, have to pay a higher price for only the remaining 2 to 3 years of their licences,” Yadav said.

He said the newer players would get the benefit of the old spectrum price for only six to 10 years and would have to pay the new higher price for as many as 10 years.

Telecom operators in India have been awarded 2G licences that come bundled with spectrum that are valid for 20 years. Early entrants like Bharti Airtel and Vodafone were awarded their telecom licences in 1994 and most of their spectrum allotments will come up for renewal in 2014. However, later entrants like Reliance Telecom and Tata Teleservices have slammed the proposal.

The Association of Unified Telecom Service Providers of India (AUSPI), which represents the interests of CDMA players in India, has termed DoT’s proposal as arbitrary and designed to “aggravate the prevailing inequality among old GSM operators and others”.

Yadav said DoT’s proposal would give the old GSM players a staggering benefit of over Rs 50,000 crore.

“I suspect some other considerations are at work because this is not how honest officers are expected to perform their duties. It is particularly suspicious that the DoT proposal is contrary to even what the independent regulator Trai has recommended,” Yadav said.

Back in April, the Telecom Regulatory Authority of India had recommended that 2G spectrum in the 1800 Mhz should be auctioned and set a reserve price of Rs 3,622.18 crore per Mhz. The DoT later raised the price by 25 per cent to Rs 4,545 crore.

The auction of 2G spectrum has been ordered by the Supreme Court after it cancelled the 122 licences that were awarded in January 2008 along with bundled spectrum in controversial circumstances at a price dated back to 2001.

Yadav said he was concerned that the DoT proposal would darken the investment climate in the country "which is already very poor and which has resulted in the GDP growth rate falling to almost 5 per cent."

The Samajwadi leader said some legal experts felt that DoT’s proposal was “legally not sustainable as it violates the sanctity of contracts entered into in the past by the government”.

He said there was already a lot of concern in the Indian and international investment community about the manner in which past decisions of the government were changed after many years.

“This new proposal of DoT will be one more example where the Indian government will be criticised for suddenly changing the rules of the game,” Yadav said.

“If all this is suddenly changed because of rash actions of one government department - DoT - to benefit the narrow interests of a few old GSM operators, all these lenders will suffer unprecedented losses,” he said. “This will result in substantial litigation and claims against the government for damages.”

Yadav asked the finance ministry to immediately scrap the DoT proposal.