New Delhi, Nov. 9: The government today allowed telecom companies to raise overseas loans to buy spectrum in the auction starting Monday.
The RBI will issue a formal notification within a week, a finance ministry official said.
Raising funds overseas will be cheaper as local interest rates are high.
Analysts said the move would not only enable the telecom firms to reduce the cost of money to be paid but also help the government to get the entire amount upfront.
Companies bidding in 2G auction can opt for staggered payment but it is costly as it involves interest payments at prevailing prime rates.
“The successful bidders in the 2G auction would be eligible to refinance their rupee loans availed of from the domestic lenders for making the upfront payment with a long-term ECB under the automatic route,” the official said.
The telecom industry had been seeking further easing of the external commercial borrowing (ECB) norms as banks are reluctant to lend money.
In 2010, the government had allowed telecom firms to use ECBs to pay for 3G spectrum. It was a one-time facility. The Centre had mopped up Rs 1,06,000 crore from 3G spectrum and broadband wireless auctions.
The Centre has already raised the overall ECB cap to $45 billion. The ceiling will not come in the way of the companies borrowing from abroad, the official said.
“Keeping in view the large outlay of funds required to be paid directly to the government within a limited period, relaxation is provided for the upcoming 2G auction,” he added. The government expects to garner at least Rs 40,000 crore from the auction and the one-time fee.
Next week, spectrum will be auctioned at a minimum bid price of Rs 14,000 crore for 5MHz for the 22 telecom zones.
Airtel and Vodafone are among the biggies that have submitted bid applications. Other players in the fray are Videocon, Telenor and Idea.
The receipts from spectrum are important to the government, which is faced with a huge task of managing the widening fiscal deficit.
However, in a blow to the government’s plans of revenue earnings, Tata Teleservices and Videocon have dropped out from the auction of CDMA spectrum, leaving no bidder in fray for the 800MHz band.
According to the list of final bidders released by the DoT, Aditya Birla-promoted Idea Cellular has maximum eligibility points (1594), which enable it to bid for airwaves in the highest number of circles.