In a move which is going to delay the auction of 3G spectrum, the government has constituted an empowered group of ministers (eGoM) headed by finance minister Pranab Mukherjee to decide upon the number of slots to be auctioned and the reserve price to be paid by the participants.

The eGoM would also look into the issue of levying a recurring administrative charge on the winning parties as suggested by the Telecom Regulatory Authority of India. 3G spectrum are the airwaves on which mobile services providing for faster data applications and video streaming work.

FE was the first to report that the auctions would get delayed as the government had opted for the eGoM to come to a consensus on the issue rather than resolving the matter through the Cabinet.

Apart from Mukherjee the other members of the eGoM will be communications and IT minister A Raja, home minister, P Chidambaram, defence minister, A K Antony, law minister, Veerappa Moily, information and broadcasting minister, Ambika Soni, agriculture minister, Sharad Pawar, science and technology minister, Prithviraj Chavan, and deputy chairman of the planning commission, Montek Singh Ahluwalia. The group will be served by the department of telecommunications.

Earlier, the DoT and the finance ministry were hoping that the matter would be decided by the Cabinet rather than the eGoM and in that case auctions were planned for August. Industry sources have said that operators would take around six months to roll out 3G networks from the date on which they are allocated the spectrum. With the matter now set to be first discussed by the eGoM, auctions are sure to be delayed.

In the Budget 2009-10 the government has projected revenue of Rs 35,000 crore from 3G and broadband wireless access spectrum auction, which is higher than the earlier of estimate of around Rs 25,000-30,000 crore drawn by the DoT.

Though there was a consensus between the DoT and the finance ministry that a reserve price of Rs 3,510 crore be fixed for conducting auctions for five slots per circle, the Prime Minister wanted that first the matter be examined thoroughly by an eGoM and then only be brought to the Cabinet for discussions.

Early this year also when the matter was discussed in the Cabinet, there were widespread differences of views, which had led the government form a GoM. However, with the elections and a new government coming to office the GoM lapsed. It was widely held then that some operators had used the layers of government to lobby their case for a higher number of slots to be put on auction.

The issue is simple: the government needs to decide the reserve price for auctions based on the number of slots. Initially, DoT had proposed a pan-India reserve price of Rs 2,020 crore for five slots. The finance ministry suggested Rs 4,040 crore. A middle ground was found at Rs 3,510 crore for five slots. However, the EGoM would examine whether auctions can be conducted for higher number of slots as spectrum availability in certain circles is up to 12 operators. However, in that case the reserve price needs to be fixed higher, even upwards of Rs 4,040 crore since approximately 6-7 operators are present in most of the circles the maximum revenue needs to be realized through reserve price as the bids won?t go high.

?There?s also the view that all spectrum should not be auctioned at one go by limiting it currently to only five slots and auction the remaining two years down the line when the fourth generation technology (long term evolution)comes, as this could yield government revenue to the tune of Rs 100,000 crore.