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The Department of Telecom is finding it difficult to get an auctioneer for the upcoming sale of spectrum. The reason: Poor compensation.
According to the Request for Proposal floated by the DoT, the auctioneer will get a small percentage of the difference between the base price and the final bid price. The DoT has also fixed a minimum fee of Rs 10 lakh in case the auction fails or the bidding does not go beyond the base price.
Some of the auctioning firms fear that as the proposed reserve price is already high, the expected final bid price may not be significantly higher, unlike the 3G auctions held in 2010.
Bigger difference
For the 3G auctions, the Government had set a base price of Rs 3,500 crore but the final price was nearly five times that. The auctioneer, Rothschild, got a decent commission as the difference between the reserve price and the final bid price was large.
For the upcoming 2G auctions, TRAI has proposed a reserve price of Rs 18,000 crore. While the Government is yet to finalise this price, auctioneers feel the final bid price may not be significantly higher, even if the proposed base price is reduced by 10-20 per cent. Therefore, they had asked the DoT to raise the minimum fee from Rs 10 lakh to Rs 1 crore.
The prospective auctioneers had also sought other relaxations during a pre-bid conference with the DoT recently. For example, one company had asked the DoT to lower the minimum paid-up capital required to be eligible from Rs 2.50 crore to Rs 2.20 crore.
Delayed deadline
However, the DoT has refused these demands, putting off the prospective auctioneers. As a result, the DoT has had to extend the deadline for receiving bids from auctioneers to July 20. This is expected to further delay the auctions itself. The Supreme Court had set a deadline of August 31 to conduct the auctions.
Meanwhile, an Inter-Ministerial Committee that met on June 29 has advised the DoT to seek more time from the Supreme Court to hold the auctions. The Committee observed that even after selecting the auctioneer, the company selected will need time to design the auction and get its software certified. In addition, the crucial decision on reserve price is yet to be taken for the Group of Ministers has to be reconstituted.
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