Govt defers one-time 2G fee for cell cos

The Planning Commission too opposed it saying the move would raise tariffs

Telecom companies got something to cheer from the government on Tuesday with the union cabinet deferring a plan to levy a one-time fee on them for holding second generation 2G spectrum.

Instead,the meeting chaired by Prime Minister Manmohan Singh referred the proposal from the Department of Telecom DoT to the Empowered Group of Ministers EGoM. The DoT under Communication Minister Kapil Sibal had moved a cabinet note to levy the fees on existing telecom operators,at a price based on upcoming auction rates but the finance ministry opposed it saying the levy would be a breach of contract. The Planning Commission too opposed it saying the move would raise tariffs.

The EGoM on telecom is currently deciding the base price for the auction of available 2G spectrum. The auction is a follow-through of a Supreme Court order that had canceled 122 licences of eight companies and asked the government to invite fresh bids by the end of August.

But the cabinet is yet to decide on who will chair the EGoM after Agriculture Minister Sharad Pawar quit on Monday citing concerns about potential controversies. Pawar had become the chairman after Pranab Mukherjee resigned as finance minister to contest the presidential election.

Tuesdays decision is expected to please companies such as Bharti Airtel,Vodafone and other operators who are not affected by the Supreme Court order to revoke the licences granted in 2008 by the then telecom minister A Raja.

Sources said that while the ministerial panel will take a final call on the base or reserve price for the auction,its decision on the one-time levy would come back to the Cabinet as a recommendation.

The DoT had made three proposals to the cabinet on the issue. The first was a one time fee,impose a fee on spectrum held beyond 4.4 MHz or levy a fee on airwaves held beyond 6.2 MHz. The proposal says the change in licence conditions of existing telecom operators had become necessary to provide a level playing field for all companies in the sector,which had entered the sector between 1994 and 2009 since they paid different fees.

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The proposal,based on the controversial recommendations of the Telecom Regulatory Authority of India,to charge a base price that is nearly ten times the 2008 spectrum prices has projected a windfall gain of upto Rs 1,05,803 crore for the government if the existing players were asked to match the auction price for all airwaves they hold for the remaining period of their licences.