DoT suggests higher 3G spectrum auction price to Cabinet

A draft note prepared for the cabinet by the Department of Telecommunications (DoT) has recommended raising the base price for an all-India licence for spectrum for third-generation, or 3G services from Rs 2,020 crore to Rs 3,540 crore. The government is auctioning a maximum of five blocks of 3G spectrum of 5 MhZ each in the note to the cabinet.

DoT’s latest proposal is at variance with the finance ministry’s demand that the base price be doubled for an all-India licence (which covers 22 circles) from Rs 2,020 crore to Rs 4,040 crore.

The note has been prepared after the department of legal affairs had clarified that DoT did not need to refer the issue of re-pricing spectrum to the Telecom Regulatory Authority of India (Trai).

The cabinet note has also recommended that the auction should be completed within two month from the date the Cabinet Committee on Economic Affairs (CCEA) clears the 3G policy. This means, even if the CCEA clears the proposal within January, the auction will be complete only by the end of March — around two months from the revised deadline of January 30.

DoT has suggested that the government could double the base price for services in Mumbai, Delhi and category A cities from Rs 160 crore to Rs 320 crore, but increase one-and-a-half times for Kolkata and category B circles (Rs 120 crore). No changes should be made for category C circles (Rs 40 crore).

The note said a very high base price in category C circles and to a certain extent in B circles would discourage the entry of regional players since they might not be able to justify the business plan even at the reserve price, which would be the starting point of the auction. This, the note argues, would reduce the level of competition and lower revenue collections from licence fees.

DoT’s proposal has, however, included the finance ministry’s suggestion for the CCEA’s consideration too.

The note has also left it to the CCEA to decide the contentious issue of whether a 2 per cent administrative charge should be levied on the successful bidder. DoT has said the charge should be levied.