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Corporate Nov 16, 2012

Count, Chidu count, the difference between 40,000 cr and 380 cr

By Firstbiz Editors

When asked at a recent press conference whether the government expected to get Rs 40,000 crore from spectrum auction even after cancelling CDMA spectrum, Finance Minister P Chidambaram told the reporter it does and jokingly urged the reporter to bid too.

But, even if the common man, many of whom are still clueless about what spectrum is and why such a scam surrounding it, had bid, it is unlikely to have helped the government, because the gap between the expectation and the actual figure is nonsensically wide.

Reuters

An Economic Times report today puts the actual amount the government is likely to get from the auction at Rs 380 crore.

An executive with a company has been quoted as saying in the report that he has learned the winners will pay only one-third of their dues.

In that case, the government will only get Rs 376 crore from Vodafone and another Rs 2.9 crore from Bharti Airtel. In total, about Rs 380 crore.

Another executive quoted in the story has said inflows will be staggered, while outflow on account of refund to companies whose licences where cancelled will be one-time. In that case, net effect will be a negative outflow for the government in the short term, he has said.

The government has a chance to go down the world history to be the first auctioneer to witness an outflow of funds instead of an inflow, that too after auctioning a precious and scarce resource.

How they stack up

According to the report, Telenor will have to pay Rs 4,018 crore for the six circles it won. But it will pay one-third of this amount, which will be Rs 1,325 crore. But the government has to refund Rs 1,658 crore to the company, more than offsetting the company's dues to the government.

Similar is the case with Videocon too. The total payment of the company to the government is Rs 2,222 crore. One-third of this amount is Rs 733 crore. A company executive in the ET report has been quoted as saying that the company will have to pay the government only in the seventh year due to the government's offsetting clause.

For Idea Cellular, the total outgo for the seven regions it won is Rs 2,030 crore. The one-third upfront payment is Rs 677 crore, while the refund it needs to get from the government is Rs 1,170 crore, the report said.

Over to Chidambaram to count the difference between the expectation and the actual figure.

by Firstbiz Editors

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