India Inc's overseas M&A appetite slows, says report
Not seeking gas price revision before April 2014: RIL

Corporate Nov 22, 2012

2G auction: Montek admits high reserve price was a mistake

New Delhi: Days after the auction of mobile phone spectrum evoked a tepid response, Planning Commission Deputy Chairman Montek Singh Ahluwalia today said it was a "mistake" to have a high reserve price and there was need to relook at the price during the second auction planned later this fiscal.

Ahluwalia, who was part of an Empowered Group of Ministers that set Rs 14,000 crore as the base price, said the government which plans to have another auction soon for the unsold spectrum, needs to take a relook at the price.

"I myself had raised the issue that it was a mistake to pitch the reserve price at a level close to that..." he told reporters here. "I think in the hindsight it was clear that the reserve price was too high".

Ahluwalia said several discussions were held to set the reserve price for auctioning the spectrum. Reuters

The government, which had set a reserve price of Rs 14,000 crore for pan-India spectrum broadly drawing from the basis used by CAG in calculating the loss in the previous sale in 2008, managed a meagre Rs 9,407.64 crore in the auction that lasted barely two days.

"But that doesn't matter, we are going to re-auction and you will discover the price," he told reporters on the sidelines of Indo-Japan symposium here.

Ahluwalia said several discussions were held to set the reserve price for auctioning the spectrum and the EGoM had "actually lowered the reserve price" from Rs 18,000 crore suggested by sector regulator TRAI to Rs 14,000 crore.

"I want to mention here that one or two newspapers criticised that as if by lowering the reserve price we are going to reduce the outcome. I had argued very strongly that a healthy auction process will discover the prices whether you fix it at one or two or seven hundred," he said.

Replying to a query on whether the government would reduce the spectrum prices for auction in Mumbai, Delhi, Rajasthan and Karnataka telecom circles, which went unsold in the last week's auction, Ahluwalia said it is a matter to be decided by EGoM.

"Well I don't know what the EGoM will say. But let's be clear about this that we were asked for auction. Its extremely easy to negate the auction by fixing (the prices)... So if the government wants to discover the price by an auction, then it has to auction".

Ahluwalia said there are different ways of auctioning that needs to be discussed. "I am sure that the Department of Telecom will look at all these options," he added. The Planning Commission Deputy Chairman said there is also a need for finding the best ways of refarming the spectrum as well as identifying the key issues related to it.

"If you believe in auction, then you should also believe in spectrum trading. That will completely eliminate all that business of what is the market price and all. But these are big policy changes and it is not easy to simply introduce something," he said.

He said the auction should be done in a clean and transparent way adding "once the auction is done, the issue of refarming can be looked at afresh...we should get the auction over and done and then what future policy should be, should be thought out much more clearly".

Ahluwalia said there should not be any knee-jerk movements. As the auction is mandated by the court, the
government is doing that. Ahluwalia said he will wait to hear the view of the Department of Telecom on the issue of refarming of spectrum.

He said the telecom auction was not done for fiscal deficit. "Telecom auction was done as there were some suspicion on some other methods...lower prices etc. And auction is a very transparent method."

The government has set the target of garnering Rs 30,000 crore through disinvestment and Rs 28,000 crore by way of sale of spectrum to telecom companies by the end of this fiscal to rein-in its balooning fiscal deficit.

The Finance Ministry has raised the fiscal deficit target for 2012-13 to 5.3 percent of the GDP (gross domestic product) from 5.1 percent estimated in the budget. Finance Minister P Chidambaram had already indicated that steps would be taken to restrict the fiscal deficit, which is the difference between total receipts and expenditure, to 5.3 percent.

PTI

Related Stories.