Is spectrum auction a leaky bucket?

  • Manoj Gairola, Hindustan Times, New Delhi
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  • Updated: Sep 14, 2012 01:27 IST

The government may not get the Rs. 50,000 crore of revenue that it expects from the auction of spectrum scheduled for November, thanks to a loophole in the payment schedule of spectrum fees.

Information Memorandum, which contains guidelines for auction of spectrum issued by the department of telecommunications (DoT), says the successful bidders will not be required to give upfront bank guarantee for all the annual installments.

As per the payment schedule, a successful bidder of 1,800 MHz spectrum will have to pay 33% of the total bid amount within 10 days of the auction. Rest of the amount can be paid in 10 equal installments after a moratorium of two years.

The successful bidders will not be required to pay any upfront bank guarantee for the last nine installments.

Interestingly, the telecom commission, the highest decision making body of the sector, had favoured that the bidders should be allotted spectrum after they make 100% upfront payment for the spectrum.

In a presentation to the empowered group of ministers (EGoM) on July 12, the DoT referred to the 1995 bidding of spectrum when the operators did not pay the committed fee after a three years of auction.

In 1999, the government waived off all the remaining installments of the defaulting operators and shifted them to the revenue share regime.

The government lost billions of dollars.

Last year, communications and IT minister Kapil Sibal said that this decision of the previous NDA regime resulted in loss of billions of dollars to the government.

In all the subsequent auctions of spectrum (in 1995 for 2G, in 2010 for 3G and 4G), the successful bidders were asked to pay upfront the final bid amount.

"The pre-1999 experience did not favour deferred payment," said DoT in the presentation. "The Telecom Commission has recommended upfront payment of the full amount and further recommended that the view of RBI and the ministry of finance may be solicited on this issue."

Earlier, in its recommendations on auction of spectrum on April 23, while recommending deferred payment for spectrum fee, TRAI recommended that "annual instalments for deferred payments shall be duly securitised." However, the Information Memorendum says successful bidders will be required to securitise through bank guarantee of "one annual instalment" only.

It is not yet clear how the proposal was put up before the EGoM when both the TRAI and the commission were opposed to it. "The payment schedule has approval of the EGoM," said a senior DoT official."


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