3G auction issue referred to GoM

With the Cabinet Committee on Economic Affairs (CCEA) on Wednesday referring a proposal for auction of third generation spectrum, vital for offering high-end mobile services to a group of ministers an air of uncertainty now hangs over the issue and most telcos are now discounting the possibility of it being settled during the tenure of the current government. Industry sources believe that with the decision the chances of 3G entering India in2009 are bleak.

Several reasons are being cited by sources for the move to refer the issue to a group of ministers. The cabinet decision may have been prompted by the differences between various ministries over the floor price for the auction of 3G airwaves some sources say. The divisions over the number of players to be allowed to operate in the areas could also have been the reason they add.

According to executives of some telecom companies there are several pending cases over 3G policy which could have led to the cabinet decision. Additionally they say the group of ministers can engage defence forces for vacating 3G frequencies.

The issue had been referred to the CCEA after inter-ministerial differences cropped up over the reserve price for the spectrum and the number of blocks that would go under the hammer. The Department of Telecommunications (DoT) had proposed three options in its cabinet note – retaining the base price for an all-India licence for the spectrum at Rs2,020 crore(as initially suggested by DoT), increasing it to Rs.3,540 crore or its doubling to Rs.4040 crore (as per finance ministry recommendation).

The note had also sought the view of the department of legal affairs on whether the Telecom Regulatory Authority of India (Trai) needed to be referred to by the DoT.

on the issue of spectrum price. The CCEA was also required by the note to take a decision on whether a 2 per cent administrative charge needed to be levied on the successful bidder. Trai and DoT held conflicting positions on the issue with Trai insisting on the levy while DoT opposing it.

This is the second time the UPA government has referred a telecom proposal to a group of ministers. About three years ago, the issue of vacation of spectrum had been referred to a GoM that was constituted but has met only once so far.

The cabinet note had also recommended the completion of he auction process within two months of the CCEA clearing the 3G policy. The latest development has delayed the auction indefinitely.

Meanwhile with the Election Commission mooting April-May as tentative dates for the Lok Sabha elections a code of conduct may also come into force anytime and politicians may avoid taking any potentially controversial decision.