The government is set to auction telecom spectrum at a time when the COVID-19 pandemic has hit tax and other sources of revenue.
The Union Cabinet, on December 16, approved the auction of 2,251 megahertz of spectrum worth Rs 3.92 lakh crore (at reserve price) by the end of FY21.
The proceeds from the auction make an important chunk of non-tax revenue for the government, which usually earns its non-tax revenue from the telecom operators in the form of licence fee and spectrum usage charges.
The government hopes to raise Rs 3.92 lakh crore by selling airwaves in 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz. Analysts, however, expect the government to raise Rs 55,000 – 60,000 crore as a result of the highly priced 700MHz band.
"The auction is expected to fetch Rs 55,000 – 60,000 crore to the exchequer and even at this participation, the industry will have to shelve out around Rs 20,000-25,000 crore upfront, while the balance will have to be paid over 16 years, after a two-year moratorium," said Ankit Jain, Assistant Vice President, ICRA Ltd.
This is not the first time that the government will fetch only a quarter of its expected target, the revenue from the telecom sector has been falling short of the government's estimates since 2016 as a result of the financial stress in the sector.
The Department of Telecommunications (DoT) had last conducted the spectrum auction in 2016 with a base price target of Rs 5.63 lakh crore and had managed to raise only Rs 65,000 crore. The government had then put to auction 2355 MHz of spectrum and had sold 965 MHz across seven bands.
The government in its Budget Estimates for FY17 had pegged the non-tax revenue at Rs 98,995 crore, but had managed to collect only Rs 70,241 crore.
In FY18, the government in its Budget Estimates budgeted Rs 44,342 under communication services, but raised only Rs 32,066 crore.
The finance ministry expected a revenue of Rs 48,661 crore, but raised only Rs 40,816 crore in FY19.
The government expects a revenue of Rs 58,686 crore from communication services in FY20, revising the budgeted amount of Rs 50,520 crore.
The government has pegged the non-tax revenue from other communication services at Rs 1,33,027 crore in the Budget Estimates for FY21 which is 125 percent higher than the revised estimate of Rs 58,686 crore in FY20.