Pins hopes on spectrum auction after cut in base price

The Finance Ministry has expressed confidence in meeting the fiscal deficit target of 5.3 per cent during the current fiscal.

This seems to stem from the hope that telecom companies will bid ‘aggressively’ for spectrum at the next round of auctions, and the “good show” on the disinvestment front.

“5.3 per cent is the fiscal deficit target for this year. And 5.3 per cent it shall be,” Economic Affairs Secretary Arvind Mayaram said while talking to reporters on the sidelines of the Delhi Economics Conclave. Though the budgeted target was 5.1 per cent, it was scaled upwards on expectations of lower revenue and higher spending. Most economists apprehend the Government will exceed even the revised target.

A key aspect to capping the fiscal deficit within the revised target will be the success of the next round of spectrum auctions. The Government has budgeted Rs 40,000 crore from spectrum sale. However, with poor response in the earlier round, the Cabinet decided to slash the base price by 30 per cent for four circles (Delhi, Mumbai, Karnataka and Rajasthan) in which there were no bidders during the auction held in November.

Taking cue from the Cabinet’s decision, Mayaram said, “I do believe spectrum is a scarce resource and every company which is in the telecom sector would wish to expand, and for expanding, spectrum would be required. So if you consider that, I am quite confident companies will now bid more aggressively than they did.”

Green shoots

Earlier, the Economic Affairs Secretary said, “There are several decisions that the government has been taking which have led to green shoots that we are seeing now. That is yet to be built upon. The approval of the Cabinet Committee on Investment, we are very confident, is something that will create tremendous energy for investment in the coming months and years.”

Echoing the same sentiments, Chief Economic Advisor Raghuram Rajan said that the Government would ‘do its best’ to take further steps to improve economic growth and expressed confidence that the recent reforms would boost investor sentiment. He also said that the Government would continue the reform momentum. “You have to clearly wait and watch. We need to continue the momentum and we will do our best,” he added.

(This article was published on December 14, 2012)
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