Spectrum auction revenue may miss 2012-13 target

The government is likely to fall short of its targeted revenue from the auction of telecom spectrum this financial year by a wide margin.

Even as the Telecom Regulatory Authority of India is being criticised for the steep reserve price it has set for 2G spectrum auctions in the 1,800 MHz band, the government may be able to garner only Rs 18,000-20,000 crore (Rs 180-200 billion) in 2012-13, just about half the target of Rs 40,000 crore (Rs 400 billion).

However, this, too, would be possible only if the government accepts the latest Trai recommendations on spectrum auctions in their entirety, including the staggered payment by telecom companies that the regulator has suggested.

In fact, former bureaucrats and industry veterans even hinted at the possibility of no bids at the reserve price recommended by Trai.

"While Trai may have tried to help the finance ministry meet its revenue goal, it has failed to do so," said a critic, on the condition of anonymity.

The lower-than-expected revenue from spectrum auctions would add more pressure on the fiscal deficit target for 2012-13.

Finance Minister Pranab Mukherjee had, in his Budget speech, said he had made a determined attempt to come back to the path of fiscal consolidation in the Budget for 2012-13 by pegging the fiscal deficit at Rs 513,590, or 5.1 per cent of the gross domestic product.

The target has been questioned by experts across the board.

Trai has recommended the auctioning of a 5 MHz block in the 1,800 MHz band (usually used by GSM companies for 2G services) this financial year.

It also wants the government to carry out auctioning of another 2.5 MHz block in the 800 MHz band (for CDMA services) in 2012-13. While the reserve price is Rs 3,622.18 crore (Rs 36.22 billion) per MHz spectrum in the 1,800 MHz band, that in the 800 MHz band is Rs 7,244.36 crore (Rs 72.44 billion).

So, the least the government could get from this auction would be Rs 36,220 crore (Rs 362.2 billion), and the assumption is the value of the bids may not be too high, as the reserve price has already been pegged at the price discovered in the 2010 3G

bids.

Even if the final bid amount rises by Rs 20,000 crore (Rs 200 billion) to touch Rs 56,220 crore (Rs 562.2 billion), the government may get just 33 per cent of this amount, or Rs 18,552 crore (Rs 185.52 billion), as the down payment in 2012-13.

Trai has recommended a down payment of 33 per cent of the bid amount, followed by two years of moratorium and equal installments over 10 years.

The 3G and broadband wireless access spectrum auction in 2010 was a contrast to the current scenario.

The finance ministry had then set a target of Rs 35,000 crore (Rs 350 billion) for both 3G and BWA auctions.

However, its collection exceeded that amount to cross Rs 1 lakh crore (Rs 1 trillion).

The government has projected a 32 per cent jump in non-tax revenue receipts at Rs 164,614 crore (Rs 1,646.14 billion) in 2012-13, against the 2011-12 revised estimate of Rs 124,737 crore (Rs 1,247.37 billion), primarily due to the free auctioning of spectrum, a fallout of the Supreme Court verdict cancelling 122 2G licences earlier this year.

According to senior finance ministry officials, the spectrum auction under various heads slated for 2012-13, including that to be freed due to the cancellation of 2G licences, is slated to contribute Rs 40,000 crore (Rs 400 billion) to the total telecom collection target of Rs 58,217 crore (Rs 582.17 billion) -- over three and half times more than the 2011-12 revised estimate of Rs 16,551 crore (Rs 165.51 billion).

The combined effect of lower tax and disinvestment receipts and higher expenditure, primarily due subsidies, raised the fiscal deficit to 5.9 per cent of the GDP in the revised estimates for 2011-12.