The Cabinet, headed by Prime Minister Manmohan Singh, decided to fix the reserve price at the lower end of the Rs 14,000 crore to Rs 15,000 crore band that was recommended by an Empowered Group of Minister (EGoM), official sources said.
The EGoM had suggested a reserve price at Rs 14,000-15,000 crore for 5 Mhz of airwaves as against around Rs 18,000 crore recommended by sectoral regulator Trai for the auction of spectrum vacated from cancellation of 122 licences by Supreme Court.
Sources said the Cabinet approved levy of annual spectrum usage charge of 3 to 8 per cent on different slabs of revenue as was recommended by the EGoM headed by P Chidambaram.
Chidambaram has been made the Finance Minister in a minor Cabinet reshuffle early this week.
The apex court had in February this year cancelled 122 licences issued by the then Telecom Minister A Raja in 2008 and asked the government to conduct fresh auctions by August 31. But this deadline may not be met and the government may approach the apex court for extension of the timeline.
The reserve price fixed would be a disappointment for the telecom industry which had been pitching for a 80 per cent cut in the reserve price suggested by TRAI which they felt would lead to up to 100 per cent hike in mobile telephone charges.
The auction is crucial for companies like Uninor and Sistema Shyam Teleservices, who have time till September 7 to offer their services after which they will be forced to close down their operations in case they fail to get a licence.