The Finance Ministry may permit telecom operators to raise external commercial borrowing (ECB) to facilitate payments for 2G spectrum auction. This proposal, along with other issues, is scheduled for discussion next week.
“The High Level Committee on External Commercial Borrowing is to meet on October 31 to decide about allowing ECB for forthcoming 2G spectrum auction. The meeting will also finalise guidelines for permitting ECB for affordable housing as announced in the Budget,” a senior Government official told Business Line .
The plan to allow ECB for 2G spectrum is coming at a time, when there is apprehension that the Government may not be able to garner Rs 40,000 crore (as estimated in the Budget) through spectrum auctions. However, the official believes that ECB will not just help the company but also the Government.
“Companies bidding in 2G auction have the option to go for staggered payment. But paying in instalments is a costly affair, as the company will have to pay interest at benchmark prime lending rate. To reduce the cost, the company can go for ECB, where interest rate is much lower than the domestic market and pay the spectrum fee upfront,” the official explained.
It may be recalled that the Government allowed telecom companies to use the ECB route to pay for 3G spectrum fee. It was a one-time facility and it did help companies.
Now, the 2G spectrum auction is scheduled next month where two bidders for CDMA and five bidders for GSM will participate. The companies also have to pay a one-time fee for spectrum more than a certain limit.
Affordable Housing
The meeting is also likely to approve final guidelines to allow ECB for low-cost or affordable housing. The 2012-13 Budget proposed allowing ECB for low-cost affordable housing projects with an aim to reduce shortage of housing for low-income groups in major cities and towns.
The official said the definition of low-cost housing has been finalised. It has been decided that house built on area up to 60 square metres with cost up to Rs 25 lakh will fall in this category. It has also been decided that entities such as National Housing Banks and housing finance companies will be included as eligible borrowers for financing such low-cost housing projects.
Now after the committee’s approval, the RBI will issue final guidelines, the mechanism for monitoring end users and eligible borrowers, besides others.
Overall ECB scenario
The Finance Ministry has set an overall target of $40 billion to be raised through ECB for 2012-13.
“It is estimated that around $28-29 billion has already been raised,” the official said, adding that there are enough room for new sectors to be included in the list of eligible borrowers. The limit can also be raised, if required.