122 licenses were cancelled earlier this year by the Supreme Court, which ordered that spectrum or the airwaves used for mobile networks should be auctioned. The licenses that were revoked had been granted in 2008 by then telecom minister A. Raja, who was jailed for corruption and conspiracy. He was meant to follow a first-come-first-serve policy; the CBI says he accepted kickbacks to help companies jump to the top of a long queue.
The Supreme Court had ordered that the auction of the spectrum must be completed by August 31, and that the Telecom Regulatory Authority of India, or TRAI, should form the guidelines. TRAI shocked the industry by recommending that the reserve price be at Rs 18,000 crores, 10 times that of 2008. Telecom companies said the new prices would force consumers to pay much for cellphones tariffs.
A group of ministers was formed to then study the issue and present recommendations on pricing to the cabinet. The decided-upon figure of Rs 14,000 crore was reportedly pushed for by Telecom Minister Kapil Sibal, while other members of the cabinet were open to a higher amount.
The cabinet has also approved an annual spectrum usage charge of 3-8 per cent on different slabs of revenue for telecom firms. So far, companies paid for 2G licenses, but the frequency was thrown in at no extra cost.
While cancelling the licenses, the Supreme Court also said that all national resources must be allocated only via auctions to ensure transparency. The government has asked for clarity on that decision, suggesting that the court’s directions amount to interfering in legislation. The government has also said in court that a first-come-first-serve policy cannot be abolished in sectors like mining.