Telecom Minister Ravi Shankar Prasad has instructed officials in his ministry to hold spectrum auctions this financial year, following a nudge from the finance ministry which needs the funds to meet its fiscal deficit targets for fiscal year 2015-16. The finance ministry has sounded out the telecom ministry on the need to auction airwaves in the current fiscal given the additional outflows on account of 'One Rank, One Pension' (OROP) and the government's inability to meet disinvestment targets. The Centre has targetted fiscal deficit of 3.9% of gross domestic product (GDP) for this fiscal.
"The regulator could soon be requested to suggest a reserve price for various bands in as short a time as possible," an official told ET. Spectrum auctions in March 2015 - where some operators faced a must-win situation for business continuity as their permits were up for renewal - had fetched the government a record 1.10 lakh crore. The government had budgeted around 43,000 crore through spectrum auction and one-time spectrum charges this fiscal year.
But some senior telecom department officials felt it might not be advisable to conduct auctions this year as telcos' appetite for airwaves had diminished, given their heightened debt levels and lack of full deployment of spectrum they won in the last round of auctions. Additionally, they need to conserve cash to roll out 4G networks and expand 3G services to tap the surging demand for data services.
Things are, however, likely to change as a result of the new instructions. A senior official said DoT is now trying its best to speed up the entire procedure without skipping any required step. The official explained that first the regulator will need to hold a consultation process. Then, the Telecom Commission - the highest decision-making body in department of telecom - will need to ratify the proposed price, which will finally need Cabinet nod.
The Telecom Regulatory Authority of India is scheduled to soon begin consultations on pricing of various bands of spectrum. The telecom department had written to the regulator earlier this year for recommendations on pricing the 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz, 2300 Mhz and the 2500 Mhz bands.
The department had also sought starting price for airwaves in the coveted 700 Mhz, which may be auctioned for the first time, though there is an ongoing debate within the industry on whether this is the right time to put up for sale this bandwidth that can be used for 4G services.
Operators collectively bid 1.10 lakh crore for airwaves in the March auctions. The outgo led to the telecom industry's cumulative debt surging to over 3 lakh crore in 2014-15, from 82,726 crore in 2008-09. "Operators still haven't been able to put all their airwaves to use, the industry is already reeling under such heavy debt," one telecom department official said, explaining why the department feels holding auctions might not be a good decision at the moment.
"We aren't sure if there is sufficient appetite for more spectrum at this point of time," said another official.
Experts agree with these views. "From a demand-supply perspective, considering there is an uptake of data, operators might pick up some airwaves in certain parts of the country. But on an overall basis, taking into account the debt positions and the fact that revenue isn't growing at a great pace, these auctions won't see the kind of response the government saw in the last auction," said Prashant Singhal, global lead, telecommunications, at consulting firm EY.
But the finance ministry's constraints are different. It is saddled with additional expense of an estimated 8,000-10,000 crore from implementation of OROP. These benefits would be given retrospectively from July 1, 2014, with arrears to be paid in four half-yearly installments, and pensions being re-fixed every five years.
Moreover, the government is well short of its disinvestment target for the current fiscal year. It has divested part of its stake raising about 12,600 crore.