700 Mhz spectrum auction may cause loss to govt: Experts

TRAI in its recent communication to the Department of Telecom had said that it was separately initiating a consultation process on issues related to spectrum refarming, where it would consider limiting auction of 700 MHz spectrum band initially to those not holding spectrum in the 800 MHz and 900 MHz bands

New Delhi: Auctioning of spectrum in the valuable 700 MHz band to new telecom players who have not been allocated any radio waves, as proposed by the Telecom Regulatory Authority of India (TRAI), could cause loss to government exchequer, reports PTI quoting experts.

“Restricting the initial auction of 700 Mhz to few may not enable the government realise true market value of the valuable spectrum,” Ashish Basil, partner (telecom practice) at Ernst and Young, told PTI.

Mr Basil said that opening of 700 Mhz spectrum, however, will introduce new players and would benefit consumers.

TRAI in its recent communication to the Department of Telecom (DoT) had said that it was separately initiating a consultation process on issues related to spectrum refarming, where it would consider limiting auction of 700 MHz spectrum band initially to those not holding spectrum in the 800 MHz and 900 MHz bands.

The 700 Mhz frequency band is considered to be one of the most valuable slots for telecom services as most of the latest technology can be transmitted in this band.

Also, investment required to roll out infrastructure will be lower for telecom companies in 700 Mhz compared to telecom operators providing services using higher frequency.

In 2010, the government made around Rs68,000 crore from auction of 3G spectrum in 2100 Mhz spectrum band, but proposed model of TRAI may generate lower revenue for a band which is considered more valuable then third generation (3G) spectrum band, Executive director at PricewaterhouseCoopers India Mohammad Chowdhury said.

“This round is not likely to drive as much value for government, as the 3G licensing in 2010 since operators will be bidding on the economics of the spectrum as opposed to also for participation rights in the market (for 3G) as they did before,” Mr Chowdhury said.

Mr Basil sees this move may benefit telecom industry and consumers but will be a pain for incumbent players.

“The network costs for the incumbents in 800/900 Mhz may go up as they move into relatively less efficient 1,800/1,900 Mhz bands post refarming,” Mr Basil said.

He said that proposal may lead to players in 800 and 900 Mhz pay additional cost for the 700 Mhz spectrum band.

CDMA services are provided through 800 Mhz spectrum band while GSM services in the country are carried through 900 and 1,800-Mhz spectrum band.

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Inflation may come down by March next: PMEAC chief

The rationalisation process in the pricing of petroleum products was still to be completed and this may have an impact on price levels in the coming months, the former RBI governor said. Factoring all these, the headline WPI inflation would remain high till December this year, he added

Kochi: Prime Minister's Economic Advisory Council chairman C Rangarajan on Tuesday said inflation, a matter of concern, may come down to 7% by March 2012, reports PTI.

There could be a significant easing of inflation in the last quarter of the fiscal and inflation may come down to 7% in March 2012, he said speaking at a function here.

Managing inflationary pressures was the biggest challenge, he added

The rationalisation process in the pricing of petroleum products was still to be completed and this may have an impact on price levels in the coming months, the former RBI governor said. Factoring all these, the headline WPI inflation would remain high till December this year, he added.

Headline inflation was 9.7% in September.

Food inflation rose to 12.21% for the week ended 22nd October.

The high inflation seen in the last two years is due to certain severe supply constraints, particularly of farm products, Mr Rangarajan said.

Noting that the industrial production has remained ‘subdued’ in the last few months, he said it was important for the monetary authorities to focus primarily on ‘taming’ inflation which has remained above 9% continuously for more than 10 months.

The regime of tightening can come to an end as inflation shows definite signs of decline, he said.

Pointing that there was need to remain committed to maintain inflation at low levels, he said high growth does not warrant a higher level of inflation.

“We must use all our policy instruments interventions in the foodgrain market, monetary policy and fiscal policy to bring down the current inflation and re-anchor inflationary expectations to the 5% comfort zone,” he said.

Mr Rangarajan said fiscal deficit is projected to fall to 4.6% in the current year. In 2010-11, the fiscal deficit came down to 4.7% of GDP.

“There are concerns whether we will achieve this. To gain credibility, it is important that fiscal deficit remains close to this level. Over the medium, we should aim to reach the target of 3% of GDP,” he said.

Some policy decisions will have to be made. Some of them may be controversial like the petrol price hike, he said.

Stressing the need to focus on agriculture, he said this was necessary not only for ensuring food security, but also in making a dent on poverty.

“Without a strong growth, we will not be able to provide employment to the growing number of young people who will join the labour force,” he said.

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RBI not to intervene in foreign exchange market: Deputy governor

“In exchange rate policy, the rupee is a floating currency. It remains that the exchange rate is market determined and there is no intent to intervene with a particular exchange rate in mind,” RBI deputy governor Subir Gokarn said

Mumbai: The Reserve Bank of India (RBI) on Tuesday said it does not intend to interfere with the exchange rate and its monetary policy stance in the coming months would be determined by movement in inflation, reports PTI.

“In exchange rate policy, the rupee is a floating currency.

It remains that the exchange rate is market determined and there is no intent to intervene with a particular exchange rate in mind,” RBI deputy governor Subir Gokarn said here.

Mr Gokaran said the rupee, which is a partially convertible currency, has depreciated because of global conditions.

“...capital reallocation around the world has impacted many currencies, and we have stayed with our policy,” he said.

The rupee has depreciated against the US dollar by about 9% this year.

The rupee on Tuesday weakened by 37 paise to trade at Rs49.48 against the dollar as the US currency strengthened in the overseas markets.

On the possibility of halting the policy rate hike in its next policy review due on 16th December, he said it would depend upon inflation rate.

“We gave the guidance two weeks ago (in mid-year monetary policy)...Unless there is something dramatic that happens to change it, that guidance remains. So let us say, the guidance remains the same until further notice at this stage,” Mr Gokarn said.

RBI had since March 2010 raised key rates 13 times with a view to calm down the inflation which was still hovering near the double-digit mark.

The deputy governor further said that RBI’s projection on inflation has take into account international crude oil prices.

Since the time deregulation of petrol prices, “we assume that the pass through will be more or less full. The new element in this calculation (on inflation projection) is exchange rate movement”.

On the rate of price rise, he said the structural drivers of inflation are still strong and the RBI expects it to remain high through October and November.

Headline inflation stood at 9.72% in September.

The government is yet to announce the inflation data for October.

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