The back and forth on the issue of charging incumbent mobile operators a one-time spectrum fee continued with the Cabinet on Tuesday referring the matter to the Empowered Group of Ministers that in now headless.
The Cabinet chose to put the ball in EGoM’s court after the Finance Ministry and the Planning Commission raised objections to the proposal during the meeting today.
According to sources, there was no agreement on whether the fee should be applied only to those operators with more than 4.4 Mhz spectrum or to all the players for the entire quantum of spectrum they hold.
The problem, however, is that the EGoM does not have a Chairman after the Agriculture Minister, Mr Sharad Pawar, stepped down from the post. The Group has already delayed a decision on the reserve price for the upcoming auction and it is not clear if it will be able to take a call on the one-time fee any time soon.
Awaits apex court direction
According to sources, the Government could be waiting for a direction from the Supreme Court on the Presidential Reference before taking a decision on spectrum-related issues.
The apex court is expected to give its views next week. The reference seeks clarification on key aspects, including the methodology of allocating natural resources and the validity of spectrum allocated by other mechanism.
Government sources said the court’s views on the reference could have major ramifications and hence any decision taken now could get irrelevant.
The DoT had proposed collecting a one-time fee from all incumbent mobile players for the remaining period of their licence. Initially, the Telecom Commission had suggested imposing this fee on only those players that have more than 4.4 Mhz spectrum. But after the Supreme Court cancelled the licences of new players and ordered an auction, the Telecom Ministry proposed a fee for the entire spectrum held by the incumbent operators.
Options to incumbents
The DoT has argued that the one-time fee was needed to maintain the playing field level between old and new players. It said that on the one hand new players are being asked to buy spectrum through an auction on market-based price and on the other incumbent players were holding spectrum under the old pricing scheme.
The Finance Ministry — headed by the Prime Minister, Dr Manmohan Singh — had taken the view that this formula could be problematic. The Ministry had suggested that incumbents could be given the option of using the existing spectrum up to 4.4 Mhz or up to 6.2 Mhz without any additional fee but restricted to offering only 2G technology based services.
But if the operators want to use the spectrum to deploy higher technology then they should be asked to pay the market price.
The Planning Commission has also backed this, stating the desire to create a level playing field cannot be transformed into a search for a “Procrustean Bed” in which all supposed advantages of incumbents are sought to be equalised. But the delay in arriving at a decision is adding to the uncertainty in a gloomy telecom sector.
Rs 5,236 cr cleared for Defence cable project
Amidst all the uncertainty in telecom, the Cabinet Committee on Infrastructure took one crucial decision to approve Rs 5,236 crore for laying of alternate communication network for Defence services.
This project is important for vacation of spectrum for mobile services. The fresh funding is over and above Rs 8,098 crore already approved earlier. The objective of this financial approval is to get the Defence Optical Fibre Cable network implemented for which the cost estimate has escalated by Rs 5,236 crore due to change in specifications and other requirements emanating from the user.
This includes the network for Army, Navy and Tri-services backbone. This network will be implemented by Bharat Sanchar Nigam Ltd in 36 months.
This project is crucial for the upcoming auction as the Department of Telecom wants about 55 Mhz of spectrum from the Defence forces. If the armed forces agree to give up more spectrum in lieu of the fresh funds, the DoT will be able to accommodate more players. Under the current proposal, the DoT is planning to sell eight slots of 1.25 Mhz each. This will be enough to accommodate only 2-3 players even though as many as six players are set to lose their licences in September.