EGoM Ministers left in the lurch on 2G pricing

The ministers in the EGoM on spectrum, who are scheduled to meet on Wednesday, have been near isolated by the bureaucracy, and left to make the controversial decision on the reserve price for the upcoming 2G spectrum auctions, based on a quagmire of complex and contradictory analysis.

Sources in the DoT reveal that TRAI’s third set of recommendations, on the impact analysis of the reserve price on tariffs and industry viability, has made it difficult to entertain industry demands for a merit-based reduction from the base price of Rs. 3,622 crore per MHz for pan-India 2G spectrum.

Bureaucrats are learnt to have distanced themselves from the industry, and thereby any external influence, since they don’t want to court controversy by opposing TRAI in the aftermath of the 2G scandal. The current discussions are focussing on issues of deciding rollout duties, instead of reserve price.

At stake is an exchequer revenue of more than Rs. 3 lakh crore, on the one hand, and industry concerns regarding viability and consumer tariffs, on the other.

The EGoM, which is chaired by Mr. Chidambaram, and whose members include Telecom Minister Kapil Sibal, I&B Minister Ambika Soni, Defence Minister A. K Antony, Law Minister Salman Khurshid, V. Narayanasamy (PMO), and Montek Singh Ahluwalia (Deputy Chairman of the Planning Commission), will attempt closure on the reserve price on Wednesday, though another meeting before a final announcement isn’t ruled out. The EGoM is constrained by the fact that it has to wade through a lot of paperwork and some advice, but no resultant definitive decision, from either the Telecom Commission or the DoT, after TRAI submitted its Impact Analysis on June 21, 2012.

Meanwhile, the telecom industry is delayed in its attempts to comprehensively rebut TRAI’s conclusive Impact Analysis, which reaffirms that its reserve price doesn’t impact consumer tariffs, or hurt industry viability. While TRAI says the maximum tariff impact of 5 to 10 paise/minute would leave the industry profitable, operators say the impact will be severer at up to Re 1/minute.

Clearly fighting a losing battle, the industry’s only hope now rests on either a politically bold decision, or the slim chance of a minor reduction in the range of 5-10 per cent in the reserve price, the sources said.

Since the last EGoM, no negotiations have been known to have taken place, at least publicly, between ministers in the EGoM and the industry. The final decision will have to be political, made under the aegis of the government’s powers to make “policy.” As a result, the industry’s ability to press for a lower reserve price will only be by way of written submissions, or meetings at bureaucratic levels.

The only window available for the industry is to explore the legal lacuna arising out of the want of a specific decision by the Telecom Commission, or its endorsement by the full Telecom Commission. However, this can only be appealed in the TDSAT if the industry finds consensus, the chances of which look remote at this stage.