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Updated: November 9, 2012 00:26 IST

Cabinet okays one-time fee on telcom companies

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Union Finance Minister Chidambaram. File photo
Union Finance Minister Chidambaram. File photo

Government is hoping to garner about Rs.31,000 crore from this move

The Cabinet on Thursday approved a levy of about Rs 31,000 crore as a one-time fee on spectrum held by incumbent telecom firms such as Bharti Airtel and Vodafone in an attempt to create level playing field between old and new operators.

Finance Minister P Chidambaram said the Cabinet had approved of the recommendation of an Empowered Group of Ministers that GSM-based telecom operators be asked to pay for airwaves they hold beyond 4.4 MegaHertz at an auction-determined price, while CDMA carriers pay for holdings beyond 2.5 MHz, for the remaining validity of their permits.GSM operators, holding more than 6.2 MHz of spectrum, will pay a retroactive fee for the airwaves from July 2008.

Mr Chidambaram said while the price discovered in the auction beginning November 12 will apply for the one-time fee to be charged from incumbent GSM operators, the Department of Telecom (DoT) will work out the basis for the same for CDMA carriers as there are no bidders for CDMA auction now and so there will be no auction determined price.

“Similar recommendations (of auction determined price being levied) were made for CDMA but there has been subsequent developments since the EGoM meeting that bidders who had evinced interest for CDMA auction have withdrawn from the auction. Therefore there is no auction now for the CDMA,” he said.

“DoT has been requested to come back to the Cabinet regarding implementation of the decision regarding CDMA,” he added.

The government had planned to hold two separate auctions for spectrum used by GSM and CDMA-based mobile phone carriers hoping to reap a combined Rs 40,000 crore revenue.It has set a base price of Rs 14,000 crore for 5 MHz of a pan—India GSM spectrum, more than seven times what companies paid in 2008 to get telecom licenses. For CDMA, the base price was set at 1.3 times the GSM airwaves.

However, no bidder is left in fray for CDMA auction after Tata Teleservices and Videocon Telecommunications withdrew from the sale.

Mr Chidambaram said licensees “will be given an option to surrender spectrum beyond 4.4 MHz for GSM” if they don’t want the one-time fee.Also, payments can be made in monthly instalments at 9.75 per cent interest rate.

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I agree that the CAG's 1.75LakhCrore loss was not to india, it was a
government loss only. The price of calls is incredible cheap in india
because of the negligable license paid. The coverage of the mobile
network is absolutely incredible. This has driven a faster takeup than
for any other technology in the countries history. The benefit to the
common man is well in excess of all past and future government

Had the license fee been paid, the bribes paid on projects sanctioned
on the 1.75 Lakh Crore would have been truly extraordinary.

So whilst raja and co should be prosecuted, let us not lose sign of
the bigger achievements of the telecom industry.

from:  Maha
Posted on: Nov 9, 2012 at 17:25 IST

Reminds me the "golden goose" story. While temporarily help fiscal
problems, these retroactive charges will scare away foreign investors
when India needs them badly.

from:  Manoj
Posted on: Nov 9, 2012 at 01:00 IST

CAG reports basically says that the Government could have reaped 1.75
lakh crores from spectrum sales. It is the loss to government and not to
India. Thus, my view there was no loss. The actual loss was the few
1000 crores as bribes paid to Raja and ilk. With the rise in spectrum
prices, it is obvious that the cost would be passed onto consumer. But
then I may be completely wrong.

from:  Arindom Baidya
Posted on: Nov 8, 2012 at 16:29 IST

There will be no bidders. Existing operators will surrender spectrum beyond 4.4 MHz.

Posted on: Nov 8, 2012 at 14:59 IST

It is not clear, the CAG pointed that the loss is 1.75 lakh crores, but now in 2012 after the supreme court order, the auction price fixed is only 31000 crores, seven times more, whether this figure is acceptable to CAG and supreme court, and further, whether the consumer has to bear the excess revenue.

from:  kusumban
Posted on: Nov 8, 2012 at 14:01 IST
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