Cabinet approves Rs 31,000 crore mobile airwave surcharge

The cabinet today approved a plan to levy a $5.7 billion (Rs 31,065 crore) surcharge on airwaves held by long-established telecommunications operators that will hit market leaders Bharti Airtel and Vodafone's local unit and two state-run carriers the most.

Addressing the media after the one-time fee was approved, the Finance Minister P. Chidambaram said the "decision was an endorsement of the EGoM's (empowered group of ministers) decision".

He added the fee only applies to GSM operators, adding that there will be no auction for CDMA operators since the two companies that had expressed interest in bidding have pulled out.

A ministerial panel had proposed to the cabinet that GSM-based carriers be asked to pay for airwaves beyond 4.4 megahertz at an auction-determined price, while CDMA carriers pay for holdings beyond 2.5 megahertz, for the remaining validity of their permits.

On the top of that, it had also suggested that GSM-based carriers that have more than 6.2 MHz of airwaves should also pay a retroactive fee for the extra airwaves for the period between July 2008 and December this year.

The telecom minister has said the surcharges being proposed are aimed at creating a level playing field between old and new operators.

"Both GSM and CDMA would be charged, that is decided," said a government minister, who declined to be named, adding that the Department of Telecommunications would determine the basis for charging spectrum held by CDMA operators.

India, which traditionally bundled airwaves with telecom permits and charged just about $300 million for all-India permits, is for the first time auctioning off second-generation airwaves after a scandal over a state grant process in 2008.

The telecommunications ministry had planned to hold two separate auctions for airwaves used by GSM and CDMA-based mobile phone carriers hoping to reap a combined Rs 40,000 crore to plug a high fiscal deficit.

The government has set a base price of Rs 14,000 crore for 5 MHz of GSM airwaves in all the 22 zones, more than seven times what companies paid in the 2008 grant process. The base price of CDMA airwaves had been set 1.3 times the GSM airwaves.

But India has been left with no bidders for the CDMA part of the auction after Tata Teleservices and Videocon Telecommunications dropped out of the sale.

With inputs from Reuters