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Government Will Meet Budget Target For Spectrum Revenue, Finance Secretary

Government, brokerage houses differ on impact of weaker-than-expected spectrum auction on budget

A telecom tower (Photographer: Susana Gonzalez/Bloomberg) 
A telecom tower (Photographer: Susana Gonzalez/Bloomberg) 

Lower than expected collections from the spectrum auction, which concluded on Thursday, will not dent the government’s fiscal math, finance secretary Ashok Lavasa told BloombergQuint. The government will be able to garner the amount that it had budgeted for from telecom revenues for financial year 2016-17, Lavasa said.

The auction closed with collections of Rs 65,789 crore, much lower than the estimate of Rs 5.6 lakh crore. Nearly 60 percent of the airways were left unsold.

While this may push the government to rework its auction strategy and pricing, Lavasa suggested that the shortfall will not impact the government’s ability to meet its fiscal deficit target of 3.5 percent of gross domestic product for fiscal 2017.

The government will get Rs 32,000 crore as upfront payment from this year’s auction, telecom minister Manoj Sinha said on Thursday. According to a senior official in the telecom ministry, the total proceeds from interconnect usage charges, spectrum usage charges and staggered spectrum payments from earlier auctions add up to around Rs 40,000 crore.

The government’s numbers don’t match those put out by some brokerage houses.

According to a report released by Nomura on Friday, the government had accounted for Rs 99,000 crore from telecom revenues in fiscal 2017. This included Rs 64,000 crore from the auctions, Rs 20,000 crore in recurring licence fees and Rs 15,000 crore in deferred payments from spectrum auctioned in previous years.

Given the shortfall in the auctions, actual collections should be Rs 67,000 crore as against a budgeted Rs 99,000 crore – a shortfall of Rs 32,000 crore (0.2% of GDP). 
Nomura Report

Nomura, however, added that the shortfall will not lead to a slippage in the government’s fiscal deficit target of 3.5% for the current fiscal. It expects better-than-expected indirect taxes collections and funds collected through the tax amnesty scheme to provide buffers to the government’s budget.

The government fiscal deficit hit 76 percent of the targeted amount in the first five months of the current fiscal, showed data released on September 30.

The shortfall in spectrum bids was largely due to lack of demand in the 700 MHz spectrum band as telecom operators found this spectrum very expensive.

Speaking at the India Economic Summit in New Delhi, Sunil Mittal, chairman of the Bharti Group said that parts and segments of the spectrum is extremely expensive.

“A lot of spectrum has been put out since April. Parts and segments of spectrum are extremely expensive. And I think missing out on the 700 MHz, which is truly a high quality spectrum… we should have been able to put it to good use,” said Mittal