In a major boost to facilitating easy payment terms for the proposed 3G spectrum auction during the current fiscal, the government on Monday relaxed the ECB (external commercial borrowing) norms further to permit prospective 3G bidders to raise rupee funds from domestic markets.
These rupee funds, according to a Finance Ministry statement here, could be refinanced through ECBs raised abroad at a later date, subject to certain conditions. Among other stipulations, ECBs will have to be raised within 12 months from the date of payment of the final instalment to the government and domestic banks will not be permitted to provide any guarantee.
The government had earlier permitted eligible borrowers in the telecommunication sector to avail themselves of the ECB route for the purpose of payment for spectrum allocation. Explaining the rationale for further relaxation in norms, the statement said: “In terms of the guidelines issued by the Department of Telecommunication, the successful bidders would be required to pay 25 per cent of the bid amount within five days of the close of the auction and the balance amount within 15 days of the auction closure. Given the short window available between the date of application for the auction and the date of payment, the bidders find it difficult to raise ECB to meet the payment obligation for bidding”.
“As the amount involved will be huge and has to be raised within a limited period and payable directly to the Government, it has now been decided that the fee for spectrum allocation may be met out of rupee resources by successful bidders, to be refinanced with a long-term ECB, under the approval route,” it said.
At present, while there are no restrictions on telecom service providers in raising debts from the domestic market, the relaxation in ECB norms is aimed at helping the bidders to mop up cheaper foreign debts at a later date which, in effect, would mean a big help in rescheduling the payment.
These amendments in ECB policy are to come into force on the date of notification of regulations/directions issued by the Reserve Bank of India in this regard under the Foreign Exchange Management Act, 1999.
The government aims to mop up about Rs.35,000 crore through the all-India 3G auction which is expected to go a long way in bridging the high fiscal deficit budgeted at 6.8 per cent of the GDP (gross domestic product) for 2009-10.