Government sets spectrum base price at Rs 14000 crore

NEW DELHI: The Union Cabinet has approved the reserve price for auction of second generation radio waves as well as spectrum usage charges (SUC) and an auctioneer will be soon appointed to carry forward the process.

The Cabinet set the reserve price of Rs 14,000 crore for the 5 megahertz pan-India spectrum in the 1800 megahertz band, communications and IT minister Kapil Sibal told a news conference. The price is 22% lower than the telecom regulator's suggestion.


At the Cabinet meeting, I&B minister Ambika Soni and defence minister A K Antony suggested that the spectrum price be fixed at Rs 15,000 crore, the second option provided by the empowered group of ministers (EGoM), sources said.

They said the two ministers are learnt to have cited the perception about corruption to argue for the need to peg the reserve price closer to the Rs 18,000 crore recommended by the telecom regulator.

The Cabinet also endorsed the EGoM's suggestion that the reserve price for the 800 megahertz band, which is used by CDMA operators, be fixed at 1.3 times the price for 1800 megahertz band. The decision sparked comments from some ministers that there should be a level-playing field for GSM operators.

The EGoM had gone ahead with the telecom regulator's suggestion and pegged the reserve price for 900 Mhz spectrum at twice the value of 1800 Mhz band.

The announcement of the reserve price sets the stage for the spectrum auction which is being eagerly watched by investors as a test case for the government's commitment to resolve the crisis that hit the crucial telecom sector in the aftermath of the 2G spectrum scandal.

This is the first time that the government is selling 2G spectrum through the open auction method after the Supreme Court cancelled 122 telecom licences earlier this year ruling that the process adopted in 2008 for allotting spectrum was flawed.

"Now we have to take a call that in this particular environment what is the most appropriate thing to do to give a signal to the industry that India means business," Sibal said, adding that the government is keen to attract domestic and foreign investors.

"Existing slab rate system for spectrum usage charges (SUC), as recommended by the EGoM, as the preferred option has also been approved by the cabinet," Sibal said. This means, telecom operators would pay a 3-8 % levy depending on the radio waves held by them although there were suggestions by ministers that there should be a level playing field for GSM players, who pay a higher levy compared to the dual technology operators.

The Cellular Operators Association of India ( COAI), a lobby of GSM operators, however, said they were disappointed as the reserve price does not present a viable business case.

"The reserve price of Rs 14,000 crore is unreasonable and still very high and will adversely impact the business viability of the operators and pose a formidable impediment towards raising funds from banks for expansion of services. Adding to the already existing funding woes of the sector," it said in a statement.

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India joins U.S. in opposing E.U. emission plan

 India has joined the U.S. and 15 other major countries in opposing European Union’s Emissions Trading Scheme (ETS) which requires carriers flying to or from Europe to offset their carbon emissions.

The two-day meeting hosted by the United States to chalk out a common strategy against the E.U.’s emission trading scheme concluded on Wednesday.

“They (India) have been clear both in that meeting and any number of times thereafter that they are strongly opposed to the application of the ETS and have had quite strong and vigorous words concerning the application of the ETS to foreign carriers,” a senior administration official said on condition of anonymity.

Since the meeting was held under what is called “Chatham House Rules” — which is to say people are encouraged to speak freely and candidly because what they say isn’t going to be reported afterwards — the senior administration official was not at the liberty to divulge India’s point of view during the meeting.


India, in fact, has hosted meetings against E.U.’s ETS in New Delhi in the past.

“So I think you can get a pretty good flavour of where India stands, looking at other things that they’ve said, but I’m not going to discuss what they said in this meeting,” the official said, noting that probably every country outside of Europe has opposed the emission trading system on both legal and policy grounds.

“But at the same time as we have opposed the application of the ETS in that manner, we have been strongly supportive and many countries strongly supportive of the objective of reducing emissions from aviation,” the official noted.

The meeting was convened in Washington with a group of major aviation countries for supporting the process of making progress on reducing emissions in the International Civil Aviation Organisation (ICAO), which is the multilateral body charged with handling international aviation.

“We wanted to bring that group together to discuss ongoing progress and continued progress that can be made and also to explore whether there seemed to be some basis for an overall global solution that would have the additional effect of causing the E.U.’s ETS to be set aside with regard to foreign carriers,” the U.S. official said.

The meeting confirmed the very solid and strong opposition to the ETS as applied to foreign carriers, but also indicated that there was a lot of interest among countries in continuing to work on the suite of activities that ICAO has been working on.

“And those include developing a CO2 efficiency standard for aircraft and engines.

“There was, in that respect, a quite important development just within the last week or so from the Committee on Aviation Environmental Protections known as CAEP,” the official said.

Experts are also working on the development of the global standards needed to enhance the improvement of airline operations, things like air traffic management, which are actually enormously important, a big part of reducing emissions, the official added.

According to the U.S. official, a trading system by itself doesn’t cause aviation emissions to get reduced.

It might cause airlines to go into the market and buy reductions, buy allowances from their governments if the governments are supplying them or from other businesses, but there are a whole lot of steps that airlines can take — more efficient airplanes and airplane engines, much better air traffic management operations, the development of alternative fuels, the official argued.

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Rate cut unlikely as RBI sees more risks on inflation front

 The Reserve Bank on Monday hinted at holding on to its elevated rates in the quarterly monetary policy review tomorrow, saying there are increased risks on inflation scenario and lack of action on the fiscal front.

“Monetary policy space needs to be created through fiscal adjustment and structural measures to improve supply conditions ...” the Reserve Bank said in its report on Macroeconomic and Monetary Developments, released on the eve of the policy announcement.

The near-term outlook on inflation is marked by a slew of upside risks despite significant slowdown in growth, the RBI said, adding that suppressed inflation, poor supply responses and a weaker monsoon are risks to price-situation.


“Persistence of inflation, even as growth is slowing has emerged as a major challenge for monetary policy,” it said.

For the month of June, the headline or WPI inflation stood at 7.25 per cent while the consumer price index was at double-digit level of 10.02 per cent.

The pro-growth lobby, which is alarmed over quarterly growth slipping to a nine year low of 5.3 per cent for the March quarter, wants the RBI to slash interest rate to prop up growth.

In its last review of June 16, the RBI had refrained to cut policy rate despite hard lobbying by industry to ease policy rate.

RBI also said that the growth in the current fiscal is likely to be below the reduced potential of 7.5 per cent because of “global headwinds, inflation and policy uncertainty”.

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