The Union Cabinet has decided on a reserve price of Rs 14,000 crore and Rs 18,200 crore for 5 MHz of GSM and CDMA spectrum, respectively. The only good news, perhaps, is that the uncertainty on the pricing has finally ended. It appears that the Government’s fiscal math would improve significantly after the auction, though it might not have a positive result for the telecom sector.

The 10-time increase in spectrum price would deter new players from entering the fray and force existing players to focus on high-ARPU (average revenue per user) customers only, leading to tariff hike.

Telecom players who won spectrum in 2008 and started operations are yet to make money at EBITDA level, leave aside the spectrum and hardware costs they incurred.

The number of slots available for auction (out of the total spectrum vacated from cancelled licences) would ultimately lead to a price higher than the base price paid in category A and metro circles.

New litigations due to such higher price and fewer slots may crop up, given the money operators have already spent in building the network.

Telecom is a great enabler of GDP growth, catalysing other sectors such as healthcare, banking, agriculture, education, retail and so on. According to a World Bank report, “Each 10 percentage point of broadband penetration results in 1.38 per cent increase in per capita GDP growth in developing nations.” Is the Government more interested in GDP growth or collecting money to reduce the fiscal deficit?

North blackout forces energy rethink

Recently, North India witnessed its worst blackout in a decade. Apart from the Capital, many places including Punjab, Haryana, Himachal Pradesh, Uttar Pradesh, Rajasthan, and Jammu and Kashmir were badly affected by the power disruption. According to sources, Uttar Pradesh, Haryana and Punjab drew more power than authorised from the Northern Grid, leading to grid failure.

The three States faced a severe power crisis this summer due to the non-availability of fuel for power plants. A poor monsoon is worsening the situation for the entire country.

According to current estimates, 85 per cent of power generation is dependent on oil, natural gas and coal. It is estimated that by 2030, the country’s total energy requirement would increase to 4 lakh MW from 1.85 lakh MW at present.

The chart below indicates where the potential for energy security lies, and ways to reduce dependency on oil/coal and save on foreign exchange.

The politics around river-linking

India’s distinctive climate conditions throw up unique challenges when it comes to managing water requirements.

Recently in Gangotri, 25 houses were washed away by a flash flood in the Bhagirathi river. Seven villages near Sangam Chatti remained cut off from the rest of the world. The August 3 cloudburst created havoc in Uttarkashi, with the estimated at around Rs 600 crore.

Meanwhile, the Maharashtra government has informed the Centre that around Rs 2,857 crore is needed to tackle drought in the State this year. Around 228 tehsils have received less than 50 per cent rainfall. Four districts have received above normal rainfall, while 18 districts have received 50-75 of normal rainfall. The State’s agriculture department estimates that 89 per cent of kharif sowing was interrupted in most districts due to inadequate rains.

The linking of rivers is projected as the solution to the country’s water woes — both of flooding and drought. But there are no concrete moves in that direction yet. Perhaps Gujarat could offer some learning from its experience of interlinking 21 rivers.

(This article was published in the Business Line print edition dated August 20, 2012)
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