The Union Cabinet on Friday fixed a reserve (minimum) price of Rs. 14,000 crore for 5 MHZ of pan-India 2G spectrum in the 1800-MHz GSM band for auctioning spectrum to be vacated by companies whose 122 licences were cancelled by the Supreme Court on February 2, 2012.

The reserve price for 5 MHz of CDMA spectrum has been put at Rs. 18,200 crore, 1.3 times the price of GSM spectrum.

Only two slots of 5 MHz each will be put on the block, though spectrum will be available for bidding in multiple blocks of 1.25 MHz.

Taking a bold political decision, the government shaved $750 million, or roughly Rs. 4,100 crore, off the roughly Rs 18,000-crore reserve price recommended by the Telecom Regulatory Authority of India (TRAI).

Winners are required to make an upfront payment of just one-third of the total bid amount for GSM spectrum and one-fourth for CDMA spectrum, with the rest to be paid after a two-year moratorium in 10 equal, annual instalments.

The government has further retained the present slabs for spectrum usage charge, which ranges from 2 per cent to 8 per cent, depending on the quantum of spectrum held by the operator.

Telecom Minister Kapil Sibal said: “This [the reserve price] is only the starting point of the auction. And I have absolutely no doubt that the auction itself will give us a much higher price.”

The pace at which the auction preparation and the auctioneer’s appointment is proceeding suggests that the Centre will miss the Supreme Court-approved second extension of the August 31 deadline too, pushing the auction to October-December.

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