Cabinet approves 30 per cent cut in reserve price of unsold airwaves

The cabinet approved a 30 per cent cut in the reserve price of mobile phone airwaves in four telecommunication zones, a minister said on Thursday, after carriers shunned last month's auction in those zones saying the prices were too high.

The cabinet also approved a ministerial panel's proposal to set the auction reserve price of more efficient 900 MHz band airwaves at twice that of the basic phone airwaves in the 1800 MHz band, the minister, who did not want to be named, said.

India is betting on the revenue from the auctions and stake sales in state-run companies to plug its widening fiscal deficit. The government raised less than a quarter of its Rs 40,000 crore target in last month's auction.

The government aims to conduct the next auction during the current fiscal year ending in March. It also plan to sell 900 MHz band airwaves in a separate, but simultaneous auction.

After poor response to last month's 2G spectrum sale, the ministerial panel on telecom earlier this month decided to lower the base price by 30 per cent for radiowaves in the 1800 MHz band in four circles, which attracted no bidders, for fresh auction this financial year.

These four circles—Delhi, Mumbai, Karnataka and Rajasthan—were some of the most expensive circles in last month's 2G spectrum auction.

The reserve price for last month's sale per block in Delhi was Rs 693.06 crore, while the same for Mumbai, Karnataka and Rajasthan was fixed at Rs 678.45 crore, Rs 330.12 crore and Rs 67.08 crore, respectively.

The EGoM had also decided to auction spectrum in 900 MHz band in Delhi, Mumbai and Kolkata simultaneously with sale of radiowaves in 1800 Mhz.

"The EGoM met today and we have decided to auction the 1800 MHz band in four circles—Delhi, Mumbai, Karnataka and Rajasthan—and 900 MHz band in Mumbai, Kolkata and Delhi," Telecom Minister Kapil Sibal said after the meeting.

He added that a decision on the pricing has been taken and "we will now be moving the Cabinet for the approval on the pricing and we have also decided that we will complete the auction process within this financial year".

The much-hyped 2G mobile phone spectrum auction was virtually a flop as the government managed to garner bids worth just Rs 9,407 crore.

Compared to the 3G auction, which lasted 35 days and got Rs 67,719 crore, the latest round of 2G spectrum auction held in November lasted just two days.

Nearly half of the GSM airwaves that the government sought to auction across India’s 22 telecom circles remained unsold. Telecom Minister Kapil Sibal has said then that the government’s “intent is to have another auction before March 31”.

Of the five telcos that bid for GSM airwaves, Videocon won four blocks each in six circles and Idea won four blocks each in seven circles. Telenor got spectrum in six circles. Vodafone secured spectrum in as many as 14 circles, which included Uttar Pradesh (East) and Uttar Pradesh (West). Bharti Airtel won spectrum in only one circle, Assam. None of the telcos participating in the 2G auction applied for a pan-India licence, saying that the reserve price was too high.

The government’s reserve price in fact drew criticism even before the auction took off. Telcos and analysts had warned that the process would get a weak response. Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, too said that the Rs. 14,000 crore reserve price was too high.

The auction was ordered by the Supreme Court, which, in February this year, had cancelled 122 licenses sold in 2008 by Mr Raja, through a process allegedly bent by corruption. Last year, in a politically incendiary report, the government's auditor CAG said that the country had lost up to Rs. 1.76 lakh crore because telecom licenses and spectrum were not auctioned in 2008.

When the auction flopped, the gist of the government's response was, "I told you so."

Telecommunications Minister Kapil Sibal emphasised that policy must remain the prerogative of the government and that an "environment of sensationalism" is to blame for the poor response by telecoms to the auction.

“The telecom story is no longer a story we can share with the world. Sensationalism took over,” Mr Sibal said a day after the auction.  “You cannot extrapolate figures and sensationalize them and destroy the hen that laid the golden egg,” he added.

With inputs from Reuters and PTI