The short line-up of bidders for the upcoming spectrum auction, especially for CDMA, has raised concerns about the potential revenue implications for the Government.
There are only two bidders for CDMA spectrum, with one applying only in three circles.
While Videocon has applied for CDMA spectrum in 10 circles, Tata Teleservices has shown interest only in three. But the two bidders are unlikely to compete for the same circles in which case the bidding won’t go beyond the base price. Though there are five bidders for GSM spectrum, here too, there is unlikely to be any aggressive bidding.
The Finance Ministry had earlier said that it hoped to earn Rs 40,000 crore this year from spectrum sale. That target seems far-fetched given the low levels of interest and the Government allowing successful winners to pay the bid amount in instalments over a 10-year period.
If the two bidders for CDMA spectrum win the auction at base price, the total payout will be Rs 6,500 crore. GSM spectrum at base price will bring another Rs 15,000 crore. And the one-time spectrum fee on incumbent operators will get the Government Rs 20,000 crore, assuming that BSNL and MTNL will be given a waiver in some form. The amount adds up to Rs 41,000 crore which is in line with the Government’s target.
The problem arises if the operators choose to pay the money in instalments. In such a scenario, the Government would get only 30 per cent of it this year, which is only Rs 12,000 crore.
But Finance Ministry officials say that is the worst-case scenario. “As the process of bidding is being finalised, we cannot tell authoritatively at this moment how much amount we will get. But we hope that there will not be worst-case scenario,” a senior official told Business Line .
According to the official, the cost of paying through instalments will be high, which could prompt the operators to pay the full amount upfront. In case of staggered payment, the operators will have to pay one-third immediately, and the remaining with interest at the prevailing benchmark prime lending rate of State Bank of India.
“If the operators opt for staggered payment, they will have to pay interest of 9.5-10 per cent, which is quite high. Now economic sense says that the operators may raise the money through external commercial borrowing (where the rate is lower) and pay entire money upfront,” the official said.
The income from the spectrum sale is crucial to the Government’s efforts to reach the budgeted fiscal deficit target of 5.1 per cent.