EGoM to take final call on pricing and refarming of spectrum

New Delhi - An empowered group of ministers (EGoM) led by Finance Minister Pranab Mukherjee will take the final call on key issues such as pricing and refarming of spectrum for 2G auction, Telecom Secretary R. Chandrashekhar said Saturday.

The Telecom Commission, which met for the second time this week, decided to present an analysis report to the EGoM and asked the new Telecom Regulatory Authority of India (TRAI) Chairman Rahul Khullar to study and analyse the reserve prices proposed earlier and their impact.

"The Telecom Commission did not recommend any price but referring TRAI's recommendations with an analysis report. The report will contain three points," Chandrashekhar, chairman of the Commission, an inter-ministerial forum, told reporters here.

“We will ask TRAI to do an analysis. This will cover various scenarios: What will be the impact on tariffs if the cost escalation due to the new reserve price is fully passed on to consumers and when it is fully absorbed by telcos.

"What will be the cost impact for telcos if only new spectrum is auctioned at the new price and what will the impact be if spectrum already held by telcos is also converted to new, technology-neutral spectrum at the new prices? Also, TRAI will have to do a circle-wise analysis,” he said.

The commission has asked TRAI to complete the analysis by May 31. The department of telecom (DoT) will then make its own recommendations and analysis to the Empowered Group of Ministers (EGoM) for a final decision.

"TRAI have to submit this analysis before the meeting of EGOM, that is expected to meet in the first week of June. And on that bases of recommendation and analyses the EGoM will take a decision," Chandrashekhar said.

The commission, however, agreed on the auction timing for the 900 mega hertz (Mhz) spectrum before June 2013.

“For pricing of this band the commission will take a decision later. For 800 MhZ TC recommends 2:1 formula but will send TRAI others recommendation too, like 3:1. TC suggests 3 percent spectrum usage charges.”

The commission did not come to any conclusion on the deferred payment issue. But it supported the mortgage plan in consultation with the Reserve Bank of India (RBI) and the finance ministry.

“It (commission) has also suggested shorter period of 10 years instead of 20 years for leasing of spectrum. After 10 years companies have to pay price of that time.”

Earlier, TRAI has recommended, among other proposals, a reserve price of Rs.3,622 crore for 1 Mhz pan-India spectrum, which is around 10 times higher than the price at which 2G licences were allocated in 2008 under then Telecom Minister A. Raja.

The proposals have been highly criticised by the operators and independent analysts. Calling TRAI's recommendations a 'death knell' for the industry, the operators have warned of a 100 percent hike in tariffs if the proposals are accepted.

According to a study conducted by consultancy PricewaterhouseCoopers (PwC), telecom tariffs are expected to rise by 90 paise a minute in metros and 20-34 paise on an average across the country if the sector regulator's recommendations on spectrum pricing are accepted.

Following constant opposition from the industry, the DoT had asked the regulator to review the recommendations. However, TRAI largely retained its proposals on high reserve price even in the revised paper.

The recommendation comes in the wake of the Feb 2 Supreme Court order cancelling 122 telecom licences issued in 2008.