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2008-7-4 Note After Meeting With PM

2008-7-4 Note After Meeting With PM

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Published by: Firstpost on Feb 24, 2012
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02/24/2012

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Spectrum Issues 
1. The issues contained in the attached note dated 4 July 2008were discussed with PM by FM and Minister (Telecom) on July 4,2008. Secretary (DoT) and I were present. 2. All the issues have been agreed to as in the note. Inparticular, it was also decided that the proposal to extend licencesfor the spectrum overhang period (to make the licencecoterminous with the last tranche of spectrum allotted) asdiscussed in para 12 of the note will not be pursued because it isadministratively and conceptually clumsy and potentiallyproblematic from the legal angle.3. Please reconfirm that the SBI-PLR method will yield revenueof Rs.3000 crore plus even without the proposed licenceextension. The SBI-PLR method was agreed to on this expressunderstanding. Sd/-(D. Subbarao)Finance Secretary6 July 2008 AS (EA) 
 
Ministry of FinanceDepartment of Economic Affairs July 04, 2008 Spectrum Issues - Update (Update on Papers dated February 11, April 17 & 29, and June11, 10, 27 & 30, 2008) 
1. Meetings took place between Finance Minister and Minister of Telecommunications on May 29, 2008 and June 12, 2008 toresolve outstanding issues relating to allocation and pricing of 2Gand 3G spectrum bands. The DEA paper, in following paragraphs,attempts to consolidate the position on the outstanding issues.2.The issues that are taken up for discussion in this paper aresummarized as under:
i.
Raising spectrum usage charges for 2G spectrum
ii.
Pricing of spectrum for 2G allocations
iii.
Method of allocation of 3G spectrumI.
Spectrum Usage Charge for 2G Spectrum
 3. Spectrum usage charge is pegged to the bandwidth and iscalibrated as a percentage of the Adjusted Gross Revenue (AGR).In view of historical legacy reasons and the administrative issuesinvolved in changing an established practice, it was decided tocontinue with the current practice of levying spectrum usagecharges on the basis of varying percentages of AGR for differentbandwidths of spectrum. 4.It has been agreed to raise the rates as indicated in Table 1below. This will yield revenue of Rs 4,149 crore in 2008-09, an
 
increase of Rs 1,270 crore over the revenue yield on the currentrate structure. 
Table 1: Spectrum usage charges and Revenue Implicationsthereof for 2008-09 
Bandwidth Range(MHz)
Spectrumusage chargesas a % of AGR
 
Existing Price Proposed PriceUpto 4.42%3%4.4 6.23%4%6.2 8.04%5%8.0 10.04%6%10.0 12.55%7%12.5 15.06%8%RevenueImplication for 2008-09 (in Rs.Cr.)2,8794,149Source: DoT FinanceII.
Pricing of Spectrum for 2G Allocations
 5. It is legally and administratively tenable to impose a two parttariff for Spectrum: a fixed, one-time "upfront" spectrum price for allowing the allottees to use a public resource for private profit;and, a recurring spectrum usage charge, whereby Governmentshares the profits accruing to the operator. However, due tohistorical legacy reasons, spectrum allocations upto 6.2 MHz for GSM (5 MHz for CDMA) shall not be charged both from new andexisting operators.6. It has been agreed that the "base price" shall be determined

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