TRAI released its recommendations on auction of spectrum on April 23, 2012. The recommendations are in pursuance of the Supreme Court order cancelling 122 telecom licences. The cancellation was ordered on grounds of procedural irregularities and arbitrariness in the first-cum-first-serve policy for allocation of spectrum. The recommendations, if adopted by the Department of Telecommunications, would change various aspects of the present telecom policy, including (a) relationship between a telecom licence and spectrum; (b) procedure for allocation of spectrum; (c) pricing of spectrum; (d) limits on spectrum allocation; and (e) use of spectrum. Relationship between telecom licences and spectrum Previously, under the Telecom Policy 1994 (updated in 1999), spectrum was tied in with telecom licences. Since 2003, licence conditions provided for award of two blocks of 6.2 MHz of spectrum for GSM technology and two blocks of 5 MHz for CDMA technology. As per the government’s decision of January 17, 2008 (as explained in TRAI's consultation paper, see page 3 paragraph 7) additional spectrum would be awarded on the basis of increment in the number of subscribers. Service providers had to pay a licence fee (on obtaining the licence), an annual licence fee and a spectrum usage charge determined on the basis of their adjusted gross revenue. TRAI has recommended that telecom licences and spectrum should be de-linked. The service provider would thus pay separately for the value of the licence and the spectrum. With this formulation an entity that does not hold a licence, but is eligible to secure one, may also procure spectrum. This would help in avoiding situations where licence holders have to wait to secure spectrum or offer wire line services in the absence of spectrum. Procedure for allocation of spectrum TRAI has recommended that spectrum be auctioned by means of a simultaneous multiple round ascending auction (SMRA). This means that the service providers would bid for spectrum in different blocks simultaneously. In the first round of auction a reserve price (base price) set by the government is used. Reserve price for auction and payment mechanism A reserve price indicates the minimum amount the bidder must pay to win the object. In case it is too low, it may reduce the gains made by the seller and lead to a sub-optimal sale. If it is too high, it may reduce the number of bidders and the probability of the good not being sold. Various countries have adopted a reserve price of 0.5 times the final price. TRAI has recommended that the reserve price should be 0.8 times the expected winning bid. It has also recommended that telecom companies pay 67% to 75% of the final price in installments over 10 years, depending on the spectrum band. TRAI has reasoned that a higher price would reduce the possibility of further sales upon bidders securing spectrum. However, this may lead to fewer bidders and ultimately fewer service providers. It is argued in news reports that this may increase investments to be made by the service providers and eventually an increase in tariffs. Spectrum blocks and caps TRAI has recommended that the spectrum cap should be determined on the basis of market share. A service provider can now secure a maximum of 50% of spectrum assigned in each band in each service area. However, a service provider cannot hold more than 25% of the total spectrum assigned in all the bands across the country. As per the January 2008 decision, additional spectrum could be awarded to telecom companies when they reached incremental slabs of subscribers. This could extend to two blocks of 1 MHz for GSM technology, and two blocks of 1.25 MHz for CDMA, for each slab of subscribers. TRAI has recommended that spectrum should be auctioned in blocks of 1.25 MHz. Each auction would at least offer 5 MHz of spectrum at a time. Smaller blocks would ensure that service providers who are nearing the spectrum cap may secure spectrum without exceeding the cap. However, experts have argued that 1.25 MHz block may be too limited for launching services. Also, TRAI in the recommendation has noted that a minimum of 5 MHz of contiguous spectrum is required to launch efficient services with new technologies. Use of spectrum TRAI has recommended that the use of spectrum should be liberalised. This implies that spectrum should be technology neutral. Telecom companies would now be free to launch services with any technology of their choice.
According to news reports, the Supreme Court stayed a Calcutta High Court judgement on the Singur Land Rehabilitation and Development Act, 2011 [Singur Act] on August 24, 2012. The apex court also issued a notice to Tata Motors seeking its response within four weeks, on the West Bengal government's petition challenging the High Court order. In 2008, the Left Front government acquired land in Singur under the Land Acquisition Act, 1894, for Tata Motors to build a Nano car factory. In its first year of coming to power in West Bengal, the Trinamool Congress (TMC) led government notified the Singur Act through which it sought to reclaim this land to return a portion of it to farmers. On June 22, 2012, a Division bench of the Calcutta High Court struck down the Singur Act terming it unconstitutional and void. In its judgment, the Court found some sections of the Singur Act to be in conflict with the central Land Acquisition Act, 1894. As land acquisition is a Concurrent List subject under the Constitution, both Parliament and state legislatures have the power to make laws on it. However, if provisions in the state law conflict with provisions in the central law, then the state law cannot prevail unless it receives Presidential assent. The Calcutta High Court held the Singur Act to be unconstitutional because: (a) it was in conflict with the central Land Acquisition Act, 1894, and (b) Presidential assent was not obtained for the Act to prevail in West Bengal. The central Act mentions that for the government to acquire land, it has to demonstrate: (1) that land is being acquired for a public purpose,[i] and (2) that the government will provide compensation to persons from whom land is being acquired. Provisions in the Singur Act that relate to public purpose and compensation were found to be in conflict with the corresponding provisions in the central Act. The Court was of the opinion that transfer of land to the farmers does not constitute ‘public purpose’ as defined in the central Act. As argued by the Tata Motors’ counsel, return of land to unwilling owners is a ‘private purpose’ or in ‘particular interest of individuals’ rather than in the ‘general interest of the community’. Second, clauses pertaining to compensation to Tata Motors for their investment in the Nano project were found to be vague. The Singur Act only provides for the refund of the amount paid by Tata Motors and the vendors to the state government for leasing the land. It does not provide for the payment of any other amount of money for acquiring the Tata Motors’ land nor the principles for the determination of such an amount. The High Court ordered that these provisions tantamount to ‘no compensation’ and struck down the related provisions. The matter will come up for consideration in the Supreme Court next on October 15, 2012.
[i] According to Section 3 of the Land Acquisition Act, 1894, acquisition of land for ‘public purpose’ includes, among others: provision or planned development of village sites; provision of land for town or rural planning; the provision of land for planned development of land from public funds in pursuance of a scheme or policy of the Government; and the provision of land for a corporation owned or controlled by the State.
