Cabinet to take up 2G spectrum auction soon

Moving one step closer to auctioning spectrum , the telecom department has finalised a note for the cabinet, which will take a final decision on the reserve prices as well as the spectrum usage charge to be paid by successful bidders.

Sources tell NDTV that the cabinet note sticks with the two options recommended by the empowered group of ministers (EGoM). It had recommended a reserve price of either Rs 14,000 cr or Rs 15,000 cr. This reserve price is for 5 MHz of GSM spectrum across the country.

However in a departure from the EGoM's recommendations of two options for spectrum usage charge the cabinet note has suggested keeping the spectrum usage charge structure unchanged. Spectrum Usage charge or SUC is a percentage of revenue paid by telecom companies to the government annually. This will be in addition to the auction price. at the moment the SUC varies from 3 to 8% depending on the quantum of spectrum held by a telecom company.

Senior officials who are aware of the note tell NDTV that the note also details the reasons behind lowering of the reserve price from the TRAI recommended Rs 18,100 cr . Inability of banks to funnel so much money to the telecom sector and encouraging larger participation in the auction are two key reasons for lowering the price according to the note.

The note also says that a lower price need not mean lower recovery as the bids may go up. Moreover, the one time fee to be imposed on existing telecom companies, the note argues, will also add to the government's kitty.

The government was forced to auction spectrum after the Supreme Court scrapped 122 licences issued after January 2008 and ordered spectrum to be auctioned in February 2012. The Supreme Court has set a deadline of 31st August for auctioning spectrum.