The spectrum allocation policy for mobile telephony that caused a political uproar and then an industry-government deadlock, is set to change all over again with the Prime Minister Manmohan Singh-led Cabinet on Friday approving a set of base prices to auction radio waves.
The base prices for different bands of radio waves that can potentially earn a minimum of Rs 48,000 crore if the bids sail through successfully as planned in January.
"The Cabinet approved the spectrum sale price as recom­mended by an EGoM (empowered group of ministers)," a top official said. The fresh round of auction will likely take place on January 21 and 22.
A successful sale of radio spectrum is critical for the government's fiscal math in an election year amid a widespread economic deceleration.
The new reserve prices, in line with the recommendations of the telecom commission - the sector's highest policy making body - will involve a minimum Rs 1,765 crore per MHz as the price for pan-India spectrum in the 1,800 MHz band, 15% higher than the TRAI's suggested rate of Rs 1,496 crore.
The base price for the more efficient 900 MHz band that incumbent operators as Bharti Airtel and Vodafone use will cost a minimum of Rs 360 crore per MHz for Delhi, Rs 328 crore for Mumbai and Rs 125 crore for Kolkata, which is 25% higher than TRAI-recommended prices.
Even after the increase, the reserve price is lower than the base price ofRs 2,800 crore per MHz (1,800 MHz band) in the failed auction of November.
Telecom spectrum allocation in India has been hit by a swirl of allegations after national auditor Comptroller and Auditor General (CAG), in a report tabled in 2010, estimated that the government may have lost potential revenues of Rs 1.76 lakh crore when it allotted 2G spectrum in 2008 through a controversial "first-come, first-served policy."
In the wake of the 2G spectrum allocation scandal, the Supreme Court in an order had cancelled 122 telecom licences and ordered that the spectrum the government allotted in 2008 be put up for auction.
"The decisions will result in further efficient utilisation of the scarce natural resource of spectrum, facilitating expansion of telecom services in the country," an official said.
The tricky bit, however, would be the impact on consumer tariffs. Two rounds of bidding in November and March had fizzled out due to cold response from companies, which had said high prices could force a sharp rise in telecom tariffs and hurt consumers.
Together, the 900 MHz and 1800 MHz band airwaves are valued at about Rs 48,685 crore.
If the entire spectrum is sold at the base price and operators opt to stagger their payments in installments, the government may get only about Rs 15,000 crore in this fiscal from the auction.