According to sources, a draft Note has been prepared by the Department of Telecom (DoT), seeking Cabinet approval "for waiver of spectrum charges for usage by Defence in bands other than 2G/3G bands amounting to Rs 1,18,666.59 crore for the period June 1, 2004 to May 31, 2011 for pan-India usage."

It has also sought waiver of spectrum charges for usage of airwaves in 2G and 3G bands amounting to Rs 1,124.69 crore, of which Rs 937.24 crore (for period from June 6, 2004 to July 31, 2009) has already been waived off by the Ministry of Finance, while Rs 187.45 crore for the subsequent period from August 1, 2009 to July 31, 2010 remains.

The slugfest between the telecom and defence ministries had started when DoT dismissed the Ministry of Defence's (MoD) demand for waiving off spectrum charges. MoD objected to the levy of charges, saying that its usage is not for commercial purpose but for national security.

DoT, however, had said that since other state units like the police, paramilitary including BSF and CRPF pay spectrum usage charges, the armed forces should not be exempted.

Later, DoT initiated discussions to waive off spectrum usage charges by defence forces based on the understanding that defence will vacate spectrum in phases.

According to a memorandum of understanding (MoU) signed between the two parties in 2009, MoD had agreed to vacate 25 MHz of 3G spectrum and 20 MHz of 2G in phases.

In return, DoT had committed to set up an exclusive defence band and defence interest zone for the armed forces. DoT was to also commission an optic fibre cable network at a cost of Rs 10,000 crore, to be built by Bharat Sanchar Nigam Ltd, for the defence services.

The defence ministry, however, vacated only 15 MHz of 3G spectrum which was auctioned last year and the government earned over Rs 1 lakh crore, including airwaves for wireless broadband. It had also vacated 15 MHz of 2G spectrum, which has been allocated to new operators.

Under the agreement, the remaining spectrum — 10 MHz for 3G (for two operators) and 5 MHz for 2G — is to be vacated only after the OFC network is completed.

Recently, the defence ministry had refused to release more spectrum for civilian use as the finance and telecom ministries have not kept up their end of the bargain.

DoT has proposed that the amounts waived off may be provided as part of the Defence Expenditure with an equivalent amount assumed as non-tax receipts.

"Treatment of this amount in the MoD and DoT books of accounts will be worked out with the approval of MoF," it added.