A top government panel has said auctioning of spectrum is not the best option for a country like India. This comes at a time when controversies over spectrum allocation and telecom licensing policy have claimed their second ministerial scalp.
"International experience has shown that though auction is tempting, it may lead to losses," the high-powered committee headed by former finance secretary Ashok Chawla said in its presentation to the group of ministers (GoM) on tackling corruption, headed by finance minister Pranab Mukherjee.
The comptroller and auditor general, the government's auditor, and even courts have said the Centre incurred revenue loss of up to Rs 1.76 lakh crore by allocating telecom spectrum through a non-transparent mechanism.
The Chawla panel, however, said auctions are effective only in relatively mature markets like in the US and Europe where telephone density is high and affordability isn't a concern.
Even in the US, spectrum was allocated through administrative decisions till 1995.
But, it added, in countries like India, companies can bid financially unjustifiable amounts resulting in the "winner's curse"- in their zeal to win spectrum, telecom firms can over-estimate the potential for acquiring customers, pay billions of dollars and get saddled with enormous debt.
"While mode of allocation of spectrum should become progressively more market-related, it should also take into account global experience and the context and specific requirements of the country, status of the evolving market, technological developments and the extent and spread of the coverage," the committee said in its report.
"The committee has recommended market-linked processes but stopped short of recommending auctioning as an option," said an official present at the meeting.
Experts, however, said an open bidding system should be the preferred option.
"A well-structured auction of spectrum is always the right way to do it," Andy Halford, group CFO of British telecom giant Vodafone, told HT.
Last year, the government netted more than Rs 1.05 lakh crore by auctioning 3G and broadband wireless spectrum.
Mukherjee has directed the recommendations be referred to a secretaries' panel headed by cabinet secretary Ajit Seth.