EGoM to seek AG's view afresh on one-time fee

Last Updated: Tue, Oct 09, 2012 19:40 hrs

The empowered group of ministers (EGoM) on telecom, headed by Finance Minister P Chidambaram, will seek legal opinion afresh from the attorney general of India (AG) on its recommendation to impose a one-time fee on spectrum above the start-up 4.4 MHz for incumbent operators.

The EGoM’s recommendation is in variance with the opinion of Attorney General G E Vahanvati, who had said the one-time charge should be levied on spectrum beyond 6.2 MHz with retrospective effect from July 2008.

The EGoM will approach the AG again and explain to him why the panel opted to levy the one-time fee on spectrum beyond 4.4 Mhz with prospective effect, according to a senior Department of Telecommunications (DoT) official, who do not want to be named.

The fresh opinion from AG will be placed before the Cabinet, which is scheduled to meet on October 16 to decide on the EGoM’s recommendations. The one-time fee will be applicable from the date of the Cabinet’s decision.

Explaining the EGoM’s stand, the official said the panel had raised questions on charging the fee on spectrum above 6.2 MHz because this would mean implicitly the government had accepted an obligation under the licence to give up to 6.2 MHz of spectrum. Among GSM operators, there are 90 licencees that have spectrum of 6.2 MHz or above, while 64 companies have between 4.4 MHz and 6.2 MHz. In the case of CDMA, 33 licencees hold 2.5 MHz of spectrum, while 35 licencees hold either 3.75 MHZ or 5 MHz.

If the EGoM’s recommendations are implemented, they are likely to fetch the exchequer Rs 27,000 crore. According to DoT’s assessment, the government will get Rs 7,900 crore from the one-time fee paid by the GSM operators for spectrum in the 4.4 MHz to 6.2 MHz range, and Rs 13,200 crore on spectrum beyond 6.2 MHz. In the case of CDMA, spectrum beyond the 2.5 MHz threshold would earn the government Rs 6,200 crore.

The calculations of DoT is based on the base price of Rs 14,000 crore for the GSM players and Rs 18,200 crore for the CDMA players.

Of the total amount, the outgo of the two state-run telecom firms--Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd--would be around Rs 10,000 crore and the rest would be from private operators such as Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications (R-Com).

Considering the financial health of the two state-run telecom firms, the government might look at extending financial assistance to the companies to pay the one-time fees, the DoT official said.

On the crucial issue of refarming of spectrum, the official said the EGoM was likely to take a decision before the actual auction would start in November.

Telecom stocks on Tuesday fell on BSE even as the benchmark index made gains. Idea’s scrip fell 3.24 per cent to Rs 82.05 and Airtel closed at Rs 265.20, down 1.83 per cent, while the Anil Ambani-led R-Com lost 2.38 per cent and closed at Rs 61.60. The benchmark Sensex gained 0.45 per cent to close at 18,793.36 points.

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