Centre opens ECB doors to 3G players

This rupee payment could be later refinanced through the route of External Commercial Borrowing (ECB) within 12 months. The move will help telecom companies to raise funds from the domestic market for the payment upfront, and give them flexibility to refinance the fee through cheaper overseas borrowings later.

The government is expected to complete the 3G auction by March and it had estimated in July last year the spectrum allocation could raise up to Rs 35,000 crore.
“The fee for spectrum allocation may be met out of rupee resources by successful bidders, to be refinanced with a long-term ECB under the approval route,” the finance ministry said amending the existing guidelines regulating the ECB.

The overseas borrowings would have to be raised within 12 months from the date of payment of final installment to the government, it said. Explaining the reasons for amending the ECB guidelines the ministry said in terms of the guidelines issued by the Department of Telecommunication, the successful bidders would be required to pay 25 per cent of the bid amount within five days of the close of the auction and the balance amount within 15 days of the auction closure.

Given the short window available between the date of application for the auction and the date of payment, the bidders find it difficult to raise ECB to meet the payment obligation for bidding.  As the amount involved will be huge and has to be raised within a limited period of time and payable directly to the government, it has now been decided that the fee for spectrum allocation may be met out of Rupee resources by successful bidders, to be refinanced with a long–term ECB, under the approval route.

However, the government has put a condition that domestic banks will not be permitted to provide any guarantee for raising the funds through the ECB route.

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