FinMin asks DoT to double 3G reserve price

The ministry also wants the reserve price for WiMAX to be raised from Rs 1,000 cr to Rs 2,000 cr.

In a development that could further delay the auction of next generation 3G spectrum, the finance ministry today asked the Department of Telecommunications (DoT) to double the reserve price for pan-Indian allocation of 3G spectrum to Rs 4,040 crore.

In a note sent to Telecom Secretary Siddartha Behura, the finance ministry said: “The reserve price may be increased from Rs 2,020 crore to Rs 4,040 crore for a pan-Indian allocation of two blocks of 5 MHz of 3G spectrum.”

The ministry has asked the DoT to modify the note incorporating revised prices before bringing it to the Cabinet Committee on Economic Affairs (CCEA). The DoT officials, however, expressed concern saying any change in the norms with regard to the reserve price of the 3G spectrum may require the Telecom Regulatory Authority of India’s nod.

Similarly, the finance ministry has also asked to double the reserve price for wireless broadband services, known as WiMAX, to Rs 2,000 crore for pan-Indian allocation. The DoT had recommended Rs 1,000 crore for the same. Early this week only, The DoT had issued revised schedule for auctioning of the 3G spectrum and as most of the domestic players were getting ready to participate in the bidding process, the finance ministry’s intervention could delay the process.

Sources said the finance ministry has also questioned the rationale of limiting the auction of only four slots of spectrum in each circle. The DoT had recommended that a maximum of four slots or less would be allocated in each circle depending on the availability of the 3G spectrum. The finance ministry has also sought justification of a clause that says that “the Government of India reserves the right to cancel the bidding process or disqualify any bidder without assigning reason,” saying how this would be implemented. Officials said that a final decision on the 3G spectrum issues would be taken by the CCEA.

Other than the reserve price, the finance ministry has kept rest of the eligibility parameters unchanged. Minimum net worth of companies required for bidding for an all-India 3G licence will remain Rs 1,380 crore, the note said.

With the revised reserve price, the government may garner up to Rs 60,000 crore from the 3G spectrum auction. This, however, could not be immediately confirmed from the DoT officials.

According to the existing 3G guidelines, foreign players though can bid on their own, but they will have to form a joint venture with a maximum of 74 per cent stake with an Indian company before they commence operations.

The government has also relaxed the External Commercial Borrowing (ECB) guidelines to permit ECBs up to $500 million to finance the spectrum acquisition fee.

Meanwhile, the industry has reacted sharply to the finance ministry’s proposal of doubling the reserve price for 3G spectrum to Rs 4,040 crore.

An industry official, who did not wish to be quoted, said, “In an environment of the economic downturn, the idea to increase the base price, when the schedule has already been revised once, is a backward step. It is being done with some vested interest to delay and stall the auction process.” The official went on to add that the government should see to it that 3G services takes place in the country and is affordable for the consumers.

“With these kind of knee-jerk reactions, the 3G spectrum auction would not be possible, which is bad for the industry,” he said.