The Inter Ministerial Group (IMG) is reportedly not looking to hold the next round of spectrum auction this financial year, keeping the financial stress in the telecom sector at the moment.
A report from PTI says that “inter-ministerial group (IMG), looking at measures to mitigate financial stress in the telecom sector, has recommended that the new round of spectrum auction be held in the next financial year and not the current one.”
The report also says that IMG has also recommended that the payments for spectrum be taken in 16 instalments (16 years) as opposed to the current 10 years practice. It is also revealed that IMG has favoured a cut in interest rates on penalties by switching from PLR based on MCLR based rates, which could give some relief of about two percentage points in the current scenario.
“The IMG has recommended spectrum auctions for the next fiscal, and making available 20 MHz of radio waves in 2300 band before the auction,” said the source to the publication.
Furthermore, the telecom commission will meet on September 8 to ponder the recommendations given by the IMG. A person familiar with the matter pointed out that IMG has not made any recommendation on the interest levied for spectrum auction payment. “The IMG has recommended a reduction in licence fee and spectrum usage charges under the new telecom policy,” revealed the source to PTI.
Trai recently released a consultation paper on spectrum auction to be held this fiscal. However, IMG is now looking to not conduct any spectrum auction in the near future.
The IMG — comprising senior officials from the Ministries of finance and communications — was constituted in mid-May to “examine systemic issues affecting viability and repayment capacity in the telecom sector and furnish recommendations for resolution of stressed assets”. In addition, IMG yesterday wrapped up the discussions with banks and telecom companies it had from the last three months.
The current scenario of the Indian telecom sector is pretty bad as the operators owe an insane Rs 4.6 lakh crore to banks.
“Over the past few months as IMG held its deliberations, new and old telecom operators have continued to blame each other for the sector’s financial difficulties,” further adds the report.
ICRA also opined that the telecom sector is not ready for a spectrum auction for at least the next one year. Mr Harsh Jagnani, Sector Head and Vice President, Corporate Ratings, ICRA Limited elaborates: “The industry is undergoing many structural changes which will continue to absorb the bandwidth of the operators for some time. Entry of a new operator led to a bruising price competition amongst the telcos, and a stable pricing regime is still some time away.”