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Spectrum pricing: DoT panel questions Trai suggestions

Rejects proposal to reduce reserve price of spectrum by over 60%.

Rejects proposal to reduce reserve price of spectrum by over 60%.

A department of Telecommunications panel has rejected the proposed reduction in reserve price of spectrum by over 60 per cent made by the Telecom Regulatory Authority of India (Trai) along with most of its other recommendations.

The rejection could make it difficult for the next round of auctions for the spectrum in the prized 900 Mhz band and in 1,800 to go through in this fiscal. This will severely undermine the finance ministry’s efforts to keep the fiscal deficit for FY’14 to the budget target of 4.8 per cent of GDP on the basis of the auction receipts.

The panel,headed by member (technology),has instead suggested that Trai should reconsider the recommended reserve price for sharp reduction that regulator has made for 2G spectrum to be put up for sale in the proposed third round of auction.

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The government plans to conduct the auctions by January 2014 and expects to garner close to Rs 40,000 crore from it.

The telecom department now has two options. After the committee report is placed before inter-ministerial panel,Telecom Commission,scheduled to meet on October 3,the recommendations could be sent back to Trai for further clarifications. Or the decision of the panel along with Trai’s can be put before the Empowered Group of Ministers on spectrum,headed by finance minister P Chidambaram.

The DoT panel has questioned almost all major recommendations made by Trai,including spectrum usage charge,expansion of the 900 band by treating part of the 800 band as part of it and has asked for reverting the pricing of spectrum to the earlier pan-Indian model despite the failure of two successive auctions. But analysts said it is now necessary for Trai to explain the rationale behind its decisions.

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The panel has claimed that the Trai recommendations for the 900 Mhz spectrum price in three service areas — Delhi,Mumbai and Kolkata — were based on price of 1,800 Mhz band that were not borne out.

“Various assumptions have not been clearly spelt out in the recommendation. In this situation,committee is not in position to arrive at a conclusion,” it notes.

For 2G spectrum in 1,800 Mhz band that were freed from cancellation of 122 telecom licences after a Supreme Court order,Trai had recommended about 37 per cent reduction in base price and for 900 Mhz the regulator has recommended sharp reduction of about 62 per cent compared to the last reserve price.

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Similarly,on spectrum trading which the banks with exposure to the sector have endorsed,the telecom panel has surprisingly called for a holistic view by government before allowing the mechanism.

Trai was asked to reconsider their earlier suggestions on spectrum pricing after two auctions to bid them out did not receive enough interest from telecom companies. The companies complained that the spectrum pricing was too high and did not reflect the market reality.

First published on: 02-10-2013 at 03:26 IST
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