Telecom Commission for price discovery of spectrum through auction

The Telecom Commission has recommended that all spectrum allotments beyond 4.4/2.5-Mhz will be charged at market price, both from existing as well as new allottees, and the price for spectrum in the 800/900-MhZ band will be 1.5 times the price of spectrum in the 1800-Mhz band

New Delhi: The Telecom Commission has recommended that discovery of spectrum prices should only be through an auction in future, both for 4.4 MHz of start-up airwaves or additional bandwidth beyond this required by telecom operators from time-to-time, reports PTI.

The Telecom Commission has submitted its recommendations to telecom minister Kapil Sibal, who will take a final decision in this regard and also seek a Cabinet nod for the proposal.

According to sources, the Telecom Commission has recommended that all spectrum allotments beyond 4.4/2.5-Mhz will be charged at market price, both from existing as well as new allottees, and the price for spectrum in the 800/900-MhZ band will be 1.5 times the price of spectrum in the 1800-Mhz band.

In December last year, the Telecom Commission had taken a decision on the Telecom Regulatory Authority of India’s (TRAI) recommendations with respect to spectrum auction, pricing and merger and acquisition-related issues.

Besides spectrum pricing, the commission has recommended a uniform licence fee of 8% of adjusted gross revenue (AGR).

The telecom industry was demanding a lower licence fee of 6 per cent of AGR, while sectoral regulator TRAI had recommended a fee of 8% of AGR in a phased manner over a period of two years.

New guidelines will be put in place with respect to mergers and acquisitions. The merger of entities with a market share of up to 35% (based on subscribers and/or AGR) in wireline and wireless services should be permitted, the commission has recommended to Mr Sibal.

However, appropriate guidelines shall be framed for cases where the merged entities would have a market share of more than 35%, in consultation with TRAI and the concerned authorities, the source said.

Post-merger, an entity will not to be allowed to hold more than 25% of the spectrum in a service area.

TRAI had recommended that if an entity, post a merger or acquisition, has up to 35% market share, it would be considered in the ‘green line’ or safe harbour.

However, in cases where the market share is above 35% but less than 60%, the proposal was to be referred to TRAI, as per the sectoral regulator’s recommendations. Subsequently, TRAI will carry out a detailed examination to ensure that there is no abuse of market dominance, it added.

Spectrum sharing will be permitted in order to promote efficient utilisation of spectrum and TRAI will be entrusted with the task of carrying out a review of usage of spectrum and make recommendations in this regard.

In addition, the Telecom Commission has recommended that spectrum in the 800-MhZ and 900-MhZ bands will be refarmed at the time of renewal. TRAI will make detailed recommendations in this regard, the Telecom Commission has told Mr Sibal.

Furthermore, a study will be conducted regarding the need for additional spectrum to supplement rural coverage provided by telecom service providers on a purely commercial basis.

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Bharti Airtel faces Rs1,067 crore TDS demand related to global operations

The international taxation unit of the I-T department has held that such payments are in nature of fee for technical services and are subjected to TDS deductions as per section 195 of the I-T Act

New Delhi: The Income Tax (I-T) Department has slapped a Rs1,067 crore demand notice on telecom giant Bharti Airtel for non-payment of TDS (tax deducted at source) dues in the last four financial years in connection with its overseas operations, even as the company said it was fully compliant with all the provisions, reports PTI.

The department has asked the company to pay a total tax of Rs1,067.24 crore under Sections 201 (consequences of failure to deduct or pay taxes) along with Section 195 (any person responsible for paying to a non-resident) of the I-T Act.

“Bharti Airtel is fully compliant on all applicable income tax provisions. This demand notice, pertaining to applicability of withholding tax on payments made to international operators, is not justified and we will take appropriate legal recourse,” a company spokesperson said.

The payments, which the department said are to be made immediately, are for four financial years—2007-08 (Rs202.07 crore), 2008-09 (Rs329.913), 2009-10 (Rs313.577 crore) and 2010-11 (Rs221.681 crore) in lieu of payments made by the company to “non-resident mobile service providers”.

The international taxation unit of the department has, according to sources, held that such payments are in nature of fee for technical services and are subjected to TDS deductions as per section 195 of the I-T Act.

The department, in its notice, also said that for payments of such taxes, the location of the company's property or place of conducting the operations is not ‘relevant’.

Bharti Airtel offers a variety of telecom services both in India as well abroad.

The company claims to have a subscriber base of over 230 million across 19 countries.

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Cairn receives govt nod to start of production from Bhagyam oilfield

Cairn, which was recently taken over by London-based mining group Vedanta, will begin oil production from Bhagyam at the level of 20,000-25,000 barrels per day (bpd) sometime this month and it will reach the approved peak output of 40,000 bpd later this year, an oil ministry official said

New Delhi: After months of delay, the government has given Cairn India the go-ahead for commencement of production from the Bhagyam oilfield, the second-largest find in the exploration firm's prolific Rajasthan block, reports PTI.

Cairn, which was recently taken over by London-based mining group Vedanta, will begin oil production from Bhagyam at the level of 20,000-25,000 barrels per day (bpd) sometime this month and it will reach the approved peak output of 40,000 bpd later this year, an oil ministry official said.

The block oversight committee has approved production of 25,000 bpd from Bhagyam oilfield.

“The Management Committee (MC), which comprises representatives of the oil ministry and its technical advisor, the Directorate General of Hydrocarbons (DGH), approved the start-up of production,” he said.

Oil and Natural Gas Corporation (ONGC), which holds a 30% stake in the Rajasthan block, had asked for third-party certification to ascertain if Cairn’s production plan will prudently exploit the reserves and if the surface facilities are capable of handling oil and water from the field.

The official said third-party certification endorsing the production plan came a few weeks back, after which ONGC gave its go-ahead for commencement of production.

Prior to this, DGH had approved the production plan, he said, adding that the FY11-12 production rate, work programme and budget for the Bhagyam field have also been approved by the block oversight committee.

Currently, Mangala—the biggest of the 18 oil discoveries in the Thar desert block—is producing 125,000 bpd, but it can produce 150,000 bpd within a few days from MC approval.

Bhagyam, too, has the potential for output to go up to 60,000 bpd, sources said, adding that the Rajasthan block would have an output of close to 175,000 bpd by the end of the current fiscal.

Cairn, which is the operator of the Rajasthan block with a 70% stake, was ready to pump oil from Bhagyam in October, but delayed the production in the absence of regulatory approvals.

So far, the company has committed more than $250 million toward development of Bhagyam against the approved Field Development Plan estimate of $470 million.

Approvals for the Bhagyam field were delayed because of a dispute over payment of royalty and oil cess with partner ONGC.

But now that UK’s Cairn Energy—which sold 40% of its stake in the Indian unit to Vedanta—and the Anil Agarwal-led firm have agreed that Cairn India will share royalty and pay cess on its 70% share in the block, the approvals have started flowing.

Sources said the Rajasthan block has the potential to produce 300,000 bpd, a quarter more than the previously projected peak output.

Besides enhanced output of 150,000 bpd from Mangala and 60,000 bpd from Bhagyam, the expected contribution from the Aishwariya field has been revised upward to 25,000 bpd, compared to 10,000 bpd previously estimated.

The other fields in the block can produce 65,000 bpd.

Sources said the Bhagyam field is ready to start production, while output from Aishwariya will begin later in 2012.

At present, the approved peak output from Rajasthan is just 175,000 bpd—made up of 125,000 bpd from Mangala, 40,000 bpd from Bhagyam and 10,000 bpd from Aishwariya.

For the new peak, the government needs to approve field development and investment plans along with the extension of exploration activities over the rest of the block.

Cairn India holds 70% participating interest in the block and state-owned ONGC the remaining 30%.

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