New Delhi: The finance ministry is backing a recommendation to force telecom firms to pay more for the additional 2G spectrum they have, which would put it at odds with mobile service providers such as Bharti Airtel Ltd and Vodafone Essar Ltd.
With the government looking at earning more than Rs1 trillion from the auction of broadband wireless access (BWA) spectrum and the high-speed 3G frequency allocations, the finance ministry will push for extra revenue from 2G spectrum as well, as had been suggested by the Telecom Regulatory Authority of India (Trai), according to an official familiar with the situation.
The regulator had suggested on 11 May that operators with 2G spectrum of more than 6.2MHz should pay a one-time fee based on the price of 3G spectrum as per the recent auction. Trai decided to go in for further consultations on the 2G pricing recommendation after facing a barrage of criticism from telecom companies that would have to pay more for their frequencies.
Graphic: Yogesh Kumar / Mint
The department of telecommunications (DoT) has begun deliberations on the Trai recommendations, a process that may take a while as they cover wide-ranging aspects.
The official cited above said the finance ministry had yet not spoken to DoT or Trai on the matter and says that it is up to them to decide how to value the spectrum, among other procedures.
The finance ministry is likely to express its views on the subject at an appropriate time once the process to take a call on Trai’s recommendations gets under way, he added.
India’s fiscal deficit is expected to fall below 5% of gross domestic product (GDP) in 2010-11 from the projected figure of 5.5%, largely due to the income from the auctions and helped by oil prices coming down to $68 a barrel.
The government had provided for Rs36,000 crore from the auction of spectrum in the budget, with Rs30,000 crore from the 3G spectrum and the rest from BWA licences.
The Trai recommendations have been criticised by the telecom companies, which have asked the government to reject them.
On 5 June, after 82 rounds of bidding, the BWA spectrum auction hit a provisional price of more than Rs9,800 crore for one 20MHz slot across the country. With this, the government’s assured revenue from the auction has touched nearly Rs30,000 crore. The auction is at present in the 90% activity requirement and is expected to go into 100% later this week.
The government has already earned Rs67,715 crore from the recently concluded auction of 3G spectrum.
“The government needs this money right now due to the huge expenditure in the various infrastructure development programmes,” said a telecom regulatory expert working with one of the larger management consulting firms, on condition of anonymity as he is not authorized to speak to the media. “Globally, spectrum is treated as a commodity between the telcos and the government, and the price is driven completely by market dynamics, which ensures efficiency of usage. The Indian government should move in this direction.”
Sanjiv Shankaran contributed to this story.