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The long pending proposal to auction third generation (3G) spectrum is likely to be cleared by the Union Cabinet in its Wednesday meeting on 28th January 2009, according to sources in the communication ministry. It is reported that the Cabinet will also take a final call on the floor price for the sale of 3G radio frequencies. This technology renders state-of-the-art mobile services like high speed internet, interactive gaming and ultra-fast downloads.

The clearance would mean an increased possibility for the auctions to be hosted any time soon. Sequentially this would mean customers having easy access to 3G services such as video calls on their cell phones by the second half of 2009. A Small repayment for the 380 million mobile users who carry their 3G-enabled handsets and are unable to exploit the high-end services that ought to have come with it if not for the absence of 3G spectrum allotment.

While the Department of Telecom (DoT) had set a base price of Rs 2,010 crore for a pan-India 3G spectrum, the finance ministry had demanded that the base price for 3G be doubled to Rs 4,020 crore and that for Broadband Wireless Access (BWA) technologies such as WiMax to be risen upto Rs 2,010 crore. In line with the finance ministry's proposal, the base price for Delhi, Mumbai and category A circles will be Rs 320 crore. For Kolkata and category B circles, it will be Rs 160 crore and for C circle will be Rs 80 crore.

In an attempt to satisfy both the parties, Cabinet is likely to settle on Rs 3,540 crore as the base price for 3G spectrum. It is interesting to note that this figure falls between the Rs 2,010 crore proposed by the DoT and the Rs 4,020 crore put forward by the finance ministry. Though, the cabinet’s diplomacy cannot be taken for granted as it is also seriously considering another proposal by the DoT. This one talks about doubling the reserve price for Delhi, Mumbai and category A circles and increasing it by 1.5 times for Kolkata and category B circles while retaining the current base price for category C circles.

Telecoms minister A Raja has revealed that the government could raise the upper limit of returns from the auctions to Rs 40,000 crore even as most analysts said the auctions could fetch only Rs 20,000 - Rs 30,000 crore. The primary reason to hike the base price is the poor response to the 3G pre-bid conference by new firms, including foreign players, who feel that the auction guidelines have been crafted to favour existing Indian operators. The absence of foreign players, who were expected to bid aggressively, could result in the government falling short of its target of acquiring Rs 40,000 crore. Hiking the minimum price, on the other hand, would ensure that the downside is protected, if telcos choose to put in conservative bids.