New Delhi: India has amended overseas borrowing rules allowing winners in an upcoming third generation (3G) wireless spectrum auction to pay the fee in rupees, which could be later refinanced by overseas borrowing within 12 months.
The move will help telecom companies to raise funds from the domestic market for the payment upfront, and give them flexibility to refinance the fee through cheaper overseas borrowings later.
The government is expected to complete the 3G auction by March. It had estimated in July last year the spectrum allocation could raise up to Rs35,000 crore.
Relaxing norms: The move will give telecom companies the flexibility to refinance the fee through cheaper overseas borrowings later.Hemant Mishra / Mint
“The fee for spectrum allocation may be met out of rupee resources by successful bidders, to be refinanced with a long-term ECB (external commercial borrowings), under the approval route,” the finance ministry said in a statement.
The overseas borrowings would have to be raised within 12 months from the date of payment of final instalment to the government, it said.
“It allows successful bidders to tap domestic resources to meet fund requirements,” said N.R. Bhanumurthy, an economist at Delhi-based think tank National Institute of Public Finance and Policy.
It will also enable the government to suck out excess liquidity in the banking system and help fund its fiscal deficit.
Local companies, which hold a telecom licence, and foreign companies with previous experience of running 3G services directly or through a majority-owned unit, are eligible to bid for the 3G spectrum.
Last month, the Reserve Bank of India had allowed telecom companies to raise overseas funds for paying the fee for spectrum.