The Finance ministry, strapped for cash amid falling tax revenues, is now seeing a higher price for the scarce wireless spectrum the government will sell to telecom operators offering high-value third-generation (3G) services and wireless broadband services.
The department of economic affairs (DEA) has asked the department of telecommunications (DoT) to double the reserve price for 3G spectrum to Rs 4,040 crore. If implemented, this may put financial pressure on the companies bidding for 3G spectrum.
In a letter written on Thursday to the DoT, DEA’s secretary said the reserve price for 3G should be increased from Rs 2,020 crore to Rs 4,040 crore and that for broadband wireless access services to Rs 2,000 crore from Rs 1,000 crore.
Bidding for 3G spectrum will take place on January 30.
If DoT keeps the reserve price low, operators will tend to bid low for spectrum and the government will not get the real price for the spectrum, the DoT says.
Not surprisingly, the industry is upset. “All major economies in the world are passing through an unprecedented meltdown. It is already difficult to raise funds in this environment. If the government increases the reserve price, then it will be difficult to raise funds,” said an industry representative who did not want to be identified.
“In any case, the final price is to be decided through a bidding process. Therefore, let the market decide the real price of spectrum,” he said.