2G spectrum auction flops; less than Rs. 10K crore of bids received by Govt

November 16, 2012

The 2G mobile phone spectrum auction ended in a flop show with merely Rs. 9,407 crore being collected in the process contrary to the high valuation estimated by the CAG in its criticizing report of the government two years ago. Half of the airwaves on offer remaining unsold and government getting just about one-third of the targeted revenue.
The CAG had earlier estimated Rs. 1.76 lakh crore as the loss to the exchequer in giving away spectrum on first-come-first-serve basis in 2008. To this, the telecom Minister Mr. Kapil Sibal held that, “the facts are before the nation and quite clear.”

The government received bids worth much less than Rs 10,000 crore (Rs 100 billion) in an auction that ended in two days, i.e. far less from the 35-day bidding for the 3G spectrum in 2010 that fetched Govt Rs 67,719 crore (Rs 677.19 billion). Infact, the government was aiming Rs 28,000 crore (Rs 280 billion) from the sale of 2G spectrum in the GSM band.
The less interest shown by telecom players in the 2G auction was actually due to high base price.
Taking the price garnered in the 3G auction as the benchmark, the CAG in its report in 2010 had held that the decision to give away spectrum by Govt at rates fixed in 2001 could have resulted in a probable loss of Rs 1.76 lakh crore to the exchequer.
Thus, now the government put on auction a significant portion of the spectrum that was freed from Supreme Court in February this year cancelling 122 mobile permits issued by the then Telecom Minister A Raja to 9 telecom players in 2008.
The government thenceforth fixed the base rate for 2G auction at almost equivalent to the 3G auction price. Further, as the government has promised to refund the license free paid in 2008, the net gain to the exchequer may be almost nil.
The halfhearted response to the auction may mean that the government will find it difficult to meet the revised fiscal deficit target of 5.3% of GDP.

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