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EGoM Suggests Lower Reserve Price For Spectrum To Cabinet

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Telecom companies are still on tenterhooks as to how much lower will the 2G spectrum base price be than the one suggested by telecom regulator Trai. Though it has not been announced yet, it seems certain that the Empowered Group of Ministers (EGoM) which met on 20 July, suggested a price lower than the Rs 18,000 crore base price that new companies would have had to pay if Trai recommendations were accepted in toto.

The reconstituted EGoM, which met for the second time this week, firmed up its views on key issues like reserve price, spectrum usage charge and terms of payment and sent it to the Union Cabinet headed by Prime Minister Manmohan Singh for a decision, Telecom Minister Kapil Sibal said after a two-and-half-hour long meeting.

The Telecom Regulatory Authority of India (Trai) had recommended a base price of Rs 3,622 crore per unit of spectrum, called MegaHertz, for the auction of spectrum vacated from Supreme Court cancelling 122 licences issued by the then Telecom Minister A Raja in 2008. This base price translated to over Rs 18,000 crore for a pan-India spectrum for new companies.

"The EGoM discussed three specific issues... the Empowered Group of Ministers are going to make a specific recommendation on each of these issues to Cabinet so that Cabinet decides on it finally," Sibal told reporters.

NDTV reported that reserve price for telecom spectrum auction was set in the range of Rs 14,000-Rs 16,000 crore.

Earlier, the EGoM decided that the final call on issues like reserve price, spectrum usage charge and terms of payment will be taken by the Cabinet.
"The EGoM discussed three specific issues...EGoM are going to make a specific recommendation on each of these issues to Cabinet so that
Cabinet decides on it finally," Telecom Minister Kapil Sibal told reporters in New Delhi.

Telecom companies bidding in the auction will pay to the government an annual fee for using airwaves, called spectrum usage charge, besides the price at which they buy the spectrum.

The industry had been pitching for a 80 per cent cut in the reserve price as they felt Trai recommended rates would lead to upto 100 per cent hike in mobile telephone charges.

Sources said EGoM may not have gone for a drastic cut in reserve price. 

At the last meeting, the EGoM had asked the Department of Telecom to prepare a matrix of reserve price in the range of Rs 12,000 crore to Rs 18,000 crore and do an impact analysis on government revenue at different rates as well as on mobile tariff.