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Balancing act on spectrum price

New Delhi, Nov. 27: The empowered group of ministers (EGoM) on spectrum is likely to balance the possibility of lowering the base price of radio waves for the second round of auction with the government’s revenue target at its meeting on Thursday.

The panel is also expected to discuss alternatives to auction, sources said.

The government plans to hold another round of spectrum sale by the end of March to meet its revenue target of Rs 40,000 crore.

However, reducing the base price may become a long-drawn process as the government will have to make a fresh reference to the Telecom Regulatory Authority of India (Trai) to ensure legal compliance. Trai will then start a consultation process on pricing without any reference to its earlier proposals. The entire process can take 3-4 months.

Sources said, “The Supreme Court has clearly indicated that (an) auction is not necessarily the only option. It is possible that the EGoM may propose an alternative to auction which will be considered on merit.”

Telecom minister Kapil Sibal recently announced that the government would hold another auction by March. “What procedure we follow for that auction is something we will decide in another few weeks,” Sibal had said.

The Supreme Court today sought clarity from the Centre on the next round of auction. The apex court had earlier this month pulled up the Centre for not putting up the entire spectrum on the block.

The recent spectrum sale, held on November 12, fetched the government less than a quarter of its revenue target, and found no takers for more than half the airwaves on sale. The Centre earned Rs 9,407 crore.

A total of 390MHz was put up for sale against the 473.6MHz of spectrum vacated as a result of the Supreme Court’s cancellation of 122 permits in February. However, only 127.5MHz was sold.

Last week, finance minister P. Chidambaram had said the government would conduct a second and, if necessary, a third auction to reach the target of Rs 40,000 crore.

The Centre had claimed that the price of spectrum in India was lower than countries such as Sweden, France, Germany, Spain and the US.

“While India is charging Rs 11.66 for radio waves in the 1800MHz band, Sweden charged Rs 15.69 for spectrum in 2011 auctions,” junior telecom minister Milind Deora told Parliament recently. The Centre has calculated the prices on a per-megahertz-per population basis.

Industry players are lobbying for a significant cut in reserve price in the four circles where spectrum remained unsold — Delhi, Mumbai, Karnataka and Rajasthan. These regions constituted 50 per cent of the auction base price.

“CDMA airwaves can be priced at half of the 1800MHz (GSM band). This will encourage bids for the 800MHz band, especially since this will be a cheaper alternative to 3G spectrum for providing data services,” said an executive of a top telecom firm.

 
 
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