To the surprise of the telecom industry, finance minister Pranab Mukherjee has decided to push ahead with 3G spectrum auctions within this financial year. Sources said, as Mukherjee has budgeted Rs 35,000 crore from these auctions to help reduce the high fiscal deficit, he wants the process completed by the end of March.

The minister?s determination can be gauged by the fact that he is now personally monitoring work relating to the auction. Sources said that a meeting of the empowered group of ministers (eGoM) that Mukherjee heads is expected on Monday to ratify the notice inviting applications?the crucial legal document, which formally kicks off the auction process.

It has been decided that the final notice would not contain any clause providing financial compensation to successful bidders should the government fail to allocate them spectrum by December this year, since it is felt that such a situation would not arise. As reported earlier by FE, other members of the eGoM have already empowered Mukherjee to decide on the timing of the auctions.

Sources said given the looming deadline, the auctions would be conducted in the second half of March, with the entire process compressed into 15 days, against the earlier scheduled one-and-a-half months. As previously decided, successful bidders would be required to make full payment by March 31, but would receive spectrum only by September as the defence forces would only vacate the entire spectrum required by then.

To help operators raise funds, the finance ministry has already allowed them to refinance their domestic debt through external commercial borrowings later.

There has been mounting uncertainty whether 3G auctions could be held by March 31, since the law ministry had cautioned the government only to hold auctions once the entire required spectrum is available. This was to avoid possible legal complications in the event the government failed to allocate spectrum by the committed date.

The law ministry?s advice was based on a clause in the draft notice inviting applications, which stated that if the government failed to allocate 3G spectrum by December 2010, it would refund the amount deposited by successful bidders, along with interest.

Sources said now it has been decided that the compensation clause would be dropped. ?Since the decision regarding vacation of spectrum by the defence forces would be ratified by the eGoM, there would be no slippages. There?s no point in having any such compensation clause,? an official told FE.

The government has decided to hold auctions for three slots for private players across the country, barring five circles where auctions would be held for four. State-owned MTNL and BSNL are additional service providers. They have already been allocated spectrum and have started services in some circles.