A week after the damp squib 2G spectrum auction, Planning Commission Deputy Chairman Montek Singh Ahluwalia said that it was a mistake to set a high reserve price. The Government had set the reserve price at Rs 14,000 crore for 5 Mhz of pan-India spectrum.
While bidders and analysts had criticised the high price, this is the first time a government functionary is accepting an error in decision making.
“I myself had raised the issue that it was a mistake to pitch the reserve price at a level close to that (Rs 14,000 crore). I think in hindsight it was clear that the reserve price was too high,” Ahluwalia told reporters on the sidelines of a CII event here on Wednesday.
He said there was a need to relook the price during the second auction planned later this fiscal. The Empowered Group of Ministers (EGoM) will look at lowering the prices in Rajasthan, Karnataka, Mumbai and Delhi circles, which did not have any takers in the first round, he said.
Ahluwalia is also part of the EGoM that had set the base price of Rs 14,000 crore. The auction lasted two days (November 12 and 14) and collected Rs 9,407.64 crore, far lower than the targeted Rs 40,000 crore.
Several rounds of discussions were held to set the reserve price and the EGoM had actually lowered the reserve price from the Rs 18,000 crore suggested by the Telecom Regulatory Authority of India (TRAI).
He said eventually the right price will be discovered. “A healthy auction is key to price discovery,” he said adding that since the Supreme Court has observed that an auction is not necessarily the only option, the Telecom Ministry could propose an alternative. “If Kapil Sibal gives us an alternative proposal, we will consider it on merit,” he said.
Asked to comment on the reason for fixing the high reserve price, Telecom Minister Sibal had blamed TRAI and the Comptroller and Auditor General.