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Spectrum auction critical for govt's fiscal math, economic recovery

comment Updated: Mar 26, 2015 23:40 IST

The auction of telecom spectrum in India ended on Wednesday after 19 days of bidding. Airwaves held by four operators — Idea Cellular (nine circles), Reliance (seven circles), Vodafone (seven circles) and Bharti Airtel (six circles) — were expiring in 2015-16 and were put up for sale. The government also auctioned airwaves that were unsold in 2014 and 2013. Telecom spectrum allocation in India was hit by a swirl of allegations after the Comptroller and Auditor General (CAG), in a report tabled in 2010, estimated that the government might have lost potential revenue 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 in 2012 cancelled 122 telecom licences and ordered spectrum auctioning again.

The tricky bit to watch out for, however, would be the impact on consumer tariffs. In the next few months, the number of mobile subscribers in India will cross one billion. That means more than 80%, or three out of four Indians, have a phone connection — though that is literally not true as corporate subscriptions and second connections inflate the number. In the early days of the cellphone, a one-minute call from Delhi to Mumbai used to cost about Rs 35. And a call from India to the US cost twice as much. When mobile phones were launched in India, in 1994, the charge for a one-minute local call was Rs 16. Now a one-minute call costs as low as 30 paise per minute. You can now call anywhere in India for less than a rupee a minute and the normal rate for a call to the US is only about 60 paise per minute. Telecom companies have argued that the high prices of spectrum could raise their level of indebtedness and force them to raise tariffs.

It is undeniable that a successful selling of radio spectrum is critical for the government’s fiscal math and aiding economic recovery. The large number of bids that will fetch the government about Rs 1,10,000 crore from the latest auctions suggests operators are willing to pay a price for buying radio waves. The auction raises questions on the theory that had argued that the exchequer hadn’t lost any revenue. It establishes the primacy of transparent methods in national resource allocation.