Foreign investors in the telecom sector such as Telenor and Sistema should be given a special dispensation on the 2G spectrum issue, the National Manufacturing Competitive Council (NMCC) has said.

In a note, the Council, set up under the Commerce Ministry essentially to promote manufacturing, has told the Department of Telecom (DoT) that foreign players should be allowed to buy back the spectrum by matching the market-discovered auction price. According to NMCC, these players have done no wrong and must be given the opportunity to continue their business.

Auction price

A number of foreign investors have been affected by the Supreme Court order cancelling all licences issued on or after January 10, 2008. “These licences were cancelled by the Supreme Court due to infirmities in the process of grant of licences to these companies. These infirmities occurred well before foreign investments came into these firms,” the NMCC said in the note.

“As there has been no wrong-doing by the foreign sovereign funds, this is a fit case for providing them with the special dispensation of matching the market-discovered auction price for spectrum and getting the spectrum they had had so that they can continue their business with their existing customer base,” it added.

While the DoT has referred the investment-related issue to the Attorney-General, industry sources said the proposed dispensation does not mean much given the high reserve price for the upcoming auction. “The base price is being pegged at Rs 14,000-15,000 crore so foreign players will have to shell out at least that much to buy back the spectrum. If they want to buy it at the highest bid price, they might as well participate in the auction,” said one of the foreign players.

The NMCC note on this issue has raised eyebrows because it is not related to manufacturing. Although Government agencies are free to comment on any policy issue, it is not clear how giving special dispensation on spectrum would encourage manufacturing.


But notwithstanding the effectiveness of the proposal, this is the first time any government unit is admitting that the foreign investors have not done any wrong in the entire 2G spectrum scam. This could strengthen the legal action being taken by the companies under the various bilateral investment protection treaties.

(This article was published on July 26, 2012)
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