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Montek bats for spectrum trading

April 08, 2013 20:18 IST

Montek Singh Ahluwalia, deputy chairman of the Planning Commission, has made a strong pitch to allow trading in spectrum.

He said the matter could be discussed by the empowered group of ministers (EGoM) on telecom headed by Finance Minister P Chidambaram. The move, if pushed through, could have significant repercussion on the telecom companies, which are neither allowed to trade nor share their spectrum under the current policy.

In a note to Communications Minister Kapil Sibal a few days ago, a copy of which was also sent to Chidambaram, Ahluwalia suggested the department of telecommunications (DoT) should refer the issue of fixing the reserve price for re -auctioning of the unsold spectrum to the Telecom Regulatory Authority of India (Trai) rather than going for further arbitrary reduction.

After two failed attempts at auctioning the entire 2G spectrum (1,800 MHZ) on offer, the government is now gearing up for a third round to auction the remaining spectrum as directed by the Supreme Court.

The dismal response to the past two auctions was due to the high price set for spectrum. The government had reduced the reserve price by 30 per cent in certain circles before the second auction.

In his note, Ahluwalia said from a purely economic point of view, an auction should be conducted in order to make full use of the scarce resource.

He added, the tradability of spectrum could not be allowed earlier as spectrum was being auctioned on the basis of an administered price. But, if it is auctioned on the clearly-stated basis that it is tradable, then any potential for gain through subsequent trading will be reflected in the auction price, he said. When contacted, he declined comments on the issue.

Explaining the gains of such a move, he said tradability would ensure greater economic efficiency, resulting in higher revenues to the government on account of higher spectrum usage charges.

Ahluwalia claimed DoT agreed “in principle” with his view on spectrum trading, as he had communicated it in the past as well. Then, DoT had said that was not the time to allow trading in spectrum. According to Ahluwalia, the time has come now.

Trai has backed the idea of spectrum trading for many years. The National Telecom Policy of 2012 also favoured trading of airwaves.

At present, spectrum trading is allowed in Australia, Canada, New Zealand and some European countries.

Ahluwalia also noted since the government has conducted an auction to abide by the Supreme Court Order that asked it to auction all available spectrum due to licence cancellation, the government has fulfilled the mandate, although the auction was not successful.

He added DoT should seek fresh recommendation from Trai on what needs to be done for the next round of auction of spectrum. He cautioned that since the government has time to conduct auction, it should try to ensure an ideal outcome because if the third attempt also fails, it will then have an adverse impact on the investment climate and credibility of the country.

Ahluwalia suggested Trai should be asked to take into account the recent auction experience and the changed market conditions, before making recommendations. It may also recommend possible changes in auction procedure, if needed, he added.

Surajeet Das Gupta & Sounak Mitra in New Delhi
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