The cabinet finally decided to fix the base price for 2G auction at Rs. 14,000 crore for the 5 megahertz pan-India spectrum in the 1800 megahertz band. This is 22% lower than the telecom regulator's suggestion.
The Supreme Court in its February 2 verdict this year had cancelled 122 spectrum licences allotted during the tenure of former telecom minister A Raja. These licences were believed to be rigged. The apex court had also directed the sector regulator Trai to auction the airwaves.
Subsequently TRAI had recommended a reserve price of Rs 18000 crore for 5 Mhz of spectrum in 1800 MHz band. The telecom companies opposed this vehemently. Later, the communications ministry wanted to reduce it to Rs 12,000 cr while the EGoM had suggested a base price between Rs 14,111-Rs 15,111 crore for 5 Mhz of airwaves in auction. The mobile phone companies were demanding an 80% reduction from the Rs 18,111 crore proposed by Trai.
Justifying the Friday’s decision, the telecom minister Kapil Sibal said that this is a firm signal from the government that India means business and its policies are in favour of investors. It is a signal we want to lower the reserve price.”
He said that the government would appoint an auctioneer and the EGoM would meet on Monday to decide the auction process.
The Cabinet also approved the EGoM's suggestion that the reserve price for the 800 megahertz band, which is used by CDMA operators, be fixed at 1.3 times the price for 1800 megahertz band.
It also approved the existing slab rate system for spectrum usage charges (SUC), as recommended by the EGoM, as the preferred option.
"The reserve price of Rs 14,000 crore is unreasonable and still very high and will adversely impact the business viability of the operators and pose a formidable impediment towards raising funds from banks for expansion of services. Adding to the already existing funding woes of the sector," COAI said in a statement.