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The information and broadcasting ministry has proposed annual licence fees ranging between Rs 10 lakh and Rs 1 crore for FM channels, before opening the sector for private participation.
It has also been proposed that there should be around 8 FM channels available to private parties in about 20 cities and successful bidders would not be allowed to form consortiums to operate channels.
An earlier suggestion for renting out AIR infrastructure to private parties to operate FM channels does not appear in the draft policy paper. "Private parties would have to invest in their own infrastructure like setting up transmitters," an I&B ministry official said. A transmitter costs about Rs 3 crore.
However, the government paper has said that the agreement with private FM operators would be for long periods, about three years, so as to justify such huge investments.
The official added that different licence fees have been proposed considering the grading of cities. For example, the licence fee would be Rs 1 crore in metros and this has been done in consultation with I&B minister Pramod Mahajan.
A meeting of interested companies is likely to be held in the next two days where the I&B ministry would elicit response from the interested parties before taking the proposal to the cabinet.
"There are about 18 companies, including BPL Mobile, Times FM and Radio Midday, which have evinced interest in operating FM channels and the meeting would be aimed at getting their responses," the official said.
However, the I&B ministry has said that private operators would not be allowed to broadcast news and current affairs programming on FM radio.
Mahajan said in an interview recently, "We would not allow private FM operators to get into N&CA programming."
The cabinet is expected to take a decision soon. The policy is still not clear on the issue of foreign equity participation. "Though 20 per cent foreign equity is allowed in TV uplinking with 80 per cent domestic shareholding, we have not yet decided on foreign equity in FM channels," the I&B ministry source said.
AIR's plans to introduce a second FM channel in some of the cities had run into rough weather last year.
AIR decided to withdraw a controversial clause relating to foreign equity from a tender which was floated to invite bids from private parties for time on AIR FM channel last year.
Times FM, a division of Bennet, Coleman & Co and a leading player in the FM sector, had alleged last year that AIR is encouraging entry of foreign companies through backdoor.