Telecom tariffs to rise 37 to 49 paise at Rs.1,400 crore reserve price: COAI

New Delhi - Telecom tariffs would rise 37 to 49 paise per minute led by the cabinet's decision to fix the reserve price for the 2G spectrum auction at Rs.14,000 crore per 5 MHz in the 1,800 MHz band, an industry lobby for GSM operators said Monday.

The Cellular Operators Association of India (COAI), which is also examining legal options against the government, said it will finalise its steps by the end of this week.

"We are examining all the legal options to challenge the policy decisions of the government and are currently talking to our lawyers. We will be able to take a decision on that by the end of this week," COAI director general Rajan Mathews told IANS.

COAI also said this decision would lead to a rise in the industry debt to anywhere between Rs.3.7 lakh crore and Rs.5.4 lakh crore.

"The cabinet has not given due consideration to the fundamental issue of unsustainable high reserve prices which will significantly increase costs, thereby invariably increasing the tariffs,"the industry body said in a statement.

"No mention is made as to how the industry, that is already highly leveraged and under a debt burden of Rs.2 lakh crore, will fund the high outflow on account of auction of 2G spectrum, especially in the wake of the banking sector’s unwillingness to take on more exposure to the industry," it added.

The final reserve price set by the cabinet is lower than the Rs.18,000 crore suggested by sector regulator TRAI.

According to COAI, the cabinet's decision will severely affect the sustainability of the sector and further add to the investment drought that it is witnessing of late.

It also said Inddia's reserve price is way above the international reserve price per MHz per population.

The reserve price per MHz per population in India (on purchasing power parity basis) of Rs.19.68 is enormously high as compared to Rs.1.06 that Ofcom (Britain's telecom regulator) has recently announced for auction of 1,800 MHz band, it said.

The Supreme Court Feb 2 ordered cancellation of 122 licences issued during the regime of A. Raja and asked the government to re-distribute these licences through an auction for which it has set a Aug 31 deadline.

The Empowered Group of Ministers (EGoM) is scheduled to meet Tuesday to decide on the auction timeline. It was earlier scheduled to meet Monday evening.

Though the government has been reiterating that it is making all efforts to meet the apex court's deadline, industry experts feel that it is likely to seek another extension.

The Supreme Court had initially given the telecom department four months to conduct the aution while cancelling the licences in February but extended the deadline to Aug 31.