The government has set a reserve price of Rs 14,000 crore for the proposed auction of the 2G spectrum, which is at the lower end of the band recommended by the group of ministers on telecom, much lower than the price set by telecom regulator.
The Union Cabinet also approved a levy of 3-8 percent on different slabs as annual spectrum usage charges, which was in line with recommendations of the Empowered Group of Ministers. The decision was taken at the cabinet meeting held today.
The Empowered Group of Ministers, headed by P. Chidambaram (now Finance Minister), had suggested a reserve price at Rs 14,000-15,000 crore for 5 Mhz of airwaves. The Telecom Regulatory Authority of India had recommended a base price of Rs 18,000 crore.
In a major development, India’s Supreme Court cancelled 122 2G licences provided after January 2008 in on grounds they were issued in a “totally arbitrary and unconstitutional” manner. The court also directed TRAI to make fresh recommendations 2G licence allocations. The companies that lost licences are Uninor (a joint venture between Unitech and Norway’s Telenor), Loop Telecom, Sistema Shyam (joint venture between Shyam and Russia’s Sistema), Etisalat DB (joint venture between Swan and Etisalat of UAE), S Tel, Videocon, Tatas and Idea Cellular.
The apex court had asked the government to conduct fresh auctions by August 31, but meeting this deadline looks extremely difficult. The reserve price would still disappoint the industry, which had been seeking at least 80 percent cut from TRAI recommendations, as the pricing would result in soaring of telecom calls in the country.
The Cellular Operators Association of India, the GSM operators body, had accused TRAI of “blatantly” ignoring industry representations on spectrum pricing and auction, and continuing to push its flawed recommendations.