This will be welcome news for the existing telecom companies as they would have found it difficult on their existing balance sheets to raise more loans to bid in another auction so soon. But it is bad news for the government, which is hoping to raise additional non-tax money to meet its hugely challenging fiscal deficit.
The government had planned to bring down the reserve price of airwaves and carry out another auction to sell those bands which could not be sold in the recently-concluded 2G auctions, before March 2013.
But quoting section 11(d) of the Telecom Broadcasting and Cable Law, the regulator has said it cannot revise its recommendations on spectrum pricing. According to its provisions, the government can ask TRAI to decide on any specific issue, only once. If the government disagrees with the recommendations the regulator can be asked to re-visit the topic, but that too only once.
High-level sources in the government said TRAI, under J S Sarma, had given its recommendation on the pricing of spectrum in April this year. The suggested price of Rs 18,000 crore for a 5 Hz band had been sent back by the government for reconsideration as it was considered too high. This too was deliberated by his successor, Rahul Khullar, and re-sent to the telecom department for a final decision.
This means Sarma’s recommendations cannot be sent back to TRAI for a fresh look. But this is necessary to reduce the price of spectrum as even the reduced price of Rs 14,000 crore for a 5 Hz band did not find any takers in most telecom circles in the latest auctions for 800 MHz and 1800 MHz.
Instead TRAI will now have to be asked to examine the matter afresh without any reference to the existing recommendations. This means there will be a long procedure of consultations with the industry followed by a consultation paper and so on. The timeline will stretch to at least four months at a conservative estimate, said a source.
In the 2G auctions in November the government could sell only 101 out of the 176 blocks of spectrum on offer. The metro cities of Delhi and Mumbai, which accounted for 40 per cent of the base price of Rs 14,000 crore for 5 MHz of 2G spectrum, drew no bids.
After the muted response, Telecom Minister Kapil Sibal has announced his intention to bring down the base price for spectrum in circles which did not attract any bid. Delhi, Mumbai, Karnataka and Rajasthan did not get any bid.
The government earned only Rs 9,407.64 crore from the recent auctions, much lower than the Rs 28,000 crore that it was expecting on the basis of reserve price of total spectrum put to auction at the rate of 8 blocks per circle.