2G auctions: Montek says reserve price too high; EGoM to decide course

The 2G spectrum pricing debate refuses to die down. Today, Planning Commission deputy chairman Montek Singh Ahluwalia said that it was clear now that the spectrum was over-priced for the auction and that there was a need to have a relook at spectrum prices. CNBC-TV18's Malvika Jain reports.

Last week, finance minister P Chidambaram had said that the spectrum EGoM is going to meet soon and is going to relook at the reserve price for four circles, which did not see any bidding.
Three major cities—Rajasthan, Karnataka, Delhi, and Mumbai—did not see any bidders, with telcos blaming the "high reserve price" for the lack of participation.
However, Chidambaram refused to answer the question on whether this reserve price would be lowered or not. He said that he would have to relook at it at the time of the EGoM meeting. But today, with the statement that Ahluwalia made, a key member of the EGoM, one can guess that reserve prices could be lowered and fresh auctions are going to be conducted.
"A healthy auction process will discover the price whether you fix it at one, or two, or 700. So, I think in hindsight it is clear that the reserve price was too high. But that doesn't matter. We are going to re-auction and you will discover a price," Ahluwalia told reporters.
"I don't know what the EGoM will say, but let us be clear about it. We were asked to auction. It is extremely easy to negate an auction by fixing – if we had fixed double the reserve price there will be no sale at all. So, if the government wants to discover the price by an auction, it has to auction. Now there are different ways of auctioning," he said. 
Now, whether the reserve price is actually going to be lowered or not in these four circles and also for CDMA spectrum, which did not see any bidding at all, is a question that is going to be answered only after the EGoM meeting.
But does the government really need to conduct fresh auctions in these four circles and for CDMA is a question, which is debatable. If you look at the fiscal deficit target, most certainly the answer has to be in affirmative, but otherwise it is an open-ended question.
Now, all eyes are going to be on the Supreme Court's hearing next week in the matter. The Supreme Court has said that it is not fully satisfied with the manner in which the government has implemented its order and sought an affidavit from the government in this regard.