The finance ministry has cleared the decks for the auction of third-generation telecom licences by the end of this financial year, by assuring the law ministry that it would ensure all successful bidders the availability of spectrum by September 1, instead of selectively releasing spectrum depending on availability.
This ends a four-month controversy over the issue and assures the government minimum revenues of Rs 30,000 crore (Rs 300 billion) from the auction of three 3G licences in each telecom circle for country-wide services.
The delay was the result of differences between the department of telecommunications and the defence ministry over the latter breaching a schedule for releasing spectrum for 3G services.
DoT currently has spectrum - the airwaves that enable high speed telecom services - for only two of the three circles for which licences are being auctioned. The defence forces had agreed to release spectrum for the third slot only in September, meaning two successful bidders would have received spectrum immediately after the auction and the third only in September.
By setting a single spectrum-release deadline for all bidders, the finance ministry aims to ensure a level playing field for all operators.
The 3G auctions for all-India licences were initially scheduled to begin on February 13 but were postponed to a time-frame between mid-February and March 5. It is not clear whether DoT will follow this schedule or announce a new set of dates within the financial year.
In its response to law ministry objections raised last month, the finance ministry said a high -level committee under the cabinet secretary, as well as the Empowered Group of Ministers under Finance Minister Pranab Mukherjee, will review the progress of the timelines for spectrum availability by September 1, a deadline to which it has committed to all successful bidders under the draft notice-inviting-applications.
The law ministry had said auctioning slots without the spectrum in hand could cause the government legal problems. Successful bidders, the law ministry suggested, could demand compensation on investments they make to roll out service if they do not receive spectrum on time.
The law ministry has also accepted the finance ministry's suggestion of deleting a clause in the draft NIA that provided for a full refund plus interest if spectrum was not allotted to successful bidders by December 31.
The matter had been referred back to the finance ministry, since deferring the 3G auction had critical revenue implications. The issue was serious enough for the Prime Minister's Office to suggest a compromise, in allowing DoT to consider auctioning broadband wireless access spectrum, pending a decision on 3G. BWA enables high-speed wireless broadband services.
Last year, DoT and the defence ministry signed a memorandum of understanding under which the latter would vacate one slot of 5 MHz by September and the other in 2013.
Later, however, the defence ministry expressed uncertainty over whether it would be able to vacate the spectrum within September, since an alternate network that Bharat Sanchar Nigam was supposed to set up for it would not be ready. The differences had delayed 3G auctions for over a year.
