The Department of Telecommunications (DoT) has mooted a proposal under which operators will pay a one-time fee for all spectrum allotments beyond 6.2 MHz.
The proposal, however, has to be cleared by the Telecom Commission before it is taken forward.
Since the amount paid by GSM operators as entry fee was enough to guarantee them only 6.2 MHz spectrum, the plan is to divide the total amount they have paid by 6.2 to arrive at a per megahertz value.
This value will then be multiplied by the extra spectrum (beyond 6.2 MHz) to calculate the total amount due to the government. The companies would also be asked to pay a penal interest rate from the day they got the extra (beyond 6.2 MHz) spectrum till June 30, 2008, based on the prevailing interest rate (prime lending rate) of the State Bank of India.
For instance, if a company paid Rs 620 crore for 6.2 MHz, the cost per megahertz would be Rs 100 crore. However, if the company actually got 10 MHz, it would be considered as owing the government Rs 380 crore (Rs 100 crore each for 3.8 MHz).
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If it got this extra spectrum one year ago and the bank interest rate was 10 per cent then, it would have to pay the government Rs 418 crore (Rs 380 crore each for 1.10 MHz).
The move is significant as top political leaders like Samajwadi Party General Secretary Amar Singh have publicly stated that spectrum has been given free of cost to GSM operators and there should be a mechanism to make them pay for this scarce resource. However, GSM companies have vehemently opposed the move saying there has not been any "unauthorised" allocation of spectrum.
Under the universal access service licence, operators were given up to 6.2 MHz spectrum for a one-time entry fee. However, most GSM operators have been given spectrum beyond 6.2 MHz without any extra charge.
The Telecom Regulatory Authority of India (Trai) had taken cognisance of this issue as spectrum is a scarce resource and had suggested that allocation of a one-time charge beyond 10 MHz should be made by incumbents on a pro-rata basis for each additional MHz of spectrum that they would get.
The DoT has pointed out that the need for a complex method for calculating the fair value of spectrum arises from the fact that spectrum beyond 6.2 MHz was allotted to operators at various times.
They also argue that there is enough justification for an addition to the basic price (which operators paid for spectrum up to 6.2 MHz) on account of the time value of money forgone for not realising these amounts at the appropriate time.
Thirdly, they point out that the method suggested balances an unreasonable low rate or a very high rate for spectrum which might not find favour with either stakeholders or regulators due to the absence of any explicit directive on the subject at the time the policy was formulated.