The Hindu Business Line : Telecom players want ECB cap to be raised

New Delhi, Oct. 23 In a bid to tide over the liquidity crunch due to the global financial crisis, telecom operators have approached the Finance Ministry seeking further relaxation to raise funds through the ECB route.

In a joint letter to the Ministry of Finance, the Cellular Operators Association of Indian and the Unified Telecom Services Providers of India said that the limit of $500 million per borrower per financial year be increased to equal the total cost of acquiring spectrum for the 3G mobile services.

The two industry bodies, representing GSM and CDMA operators, have also sought that the funds raised through the ECB route should also be allowed to be used for acquiring spectrum for broadband wireless services as well.

Fine-tuning needed

The Reserve Bank of India, on Wednesday, had announced that telecom operators could raise as much as $500 million through the ECB route for bidding for 3G auction. The industry said that though this was a step in the right direction, more fine-tuning was needed.

“The guidelines have been liberalised keeping in mind the needs of the infrastructure sector. However, some key concerns pertaining to the telecom sector have not yet been addressed. We have requested that keeping in mind the present state of credit market, the liquidity position and the interest rate scenario in India, it is necessary to widen the market access for the successful bidders,” said an industry representative.

While the industry is facing a credit crunch, the Finance Ministry wants the auction for 3G to be completed quickly to raise funds for the Government to address deficit financing issues. The Ministry of Communication is expecting to get more than Rs 30,000 crore from 3G and broadband auction.

The Department of Telecom has already pushed the auction from December to January to enable the telecom companies to take advantage of the new financial year when institutions may have more funds to lend. The RBI’s move to relax ECB rules will add to the operator’s chances to raise adequate funds for the auction.

“The 3G/broadband wireless access spectrum auction is a unique event and we believe that the same requires unique treatment by the RBI. We, therefore, request that the limit of $500 million per borrower per financial year be increased and this should be allowed under the automatic route rather than the approval route,” said the joint letter.