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Friday, 06 June 2014 00:37
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Need clarity on automatic renewal of licences

That the Department of Telecommunications (DoT) has rejected Vodafone India’s request to renew its licences in the 900MHz spectrum band—this was for seven circles that expire in December 2015 —should not come as a surprise. After all, the same has been done for other licences. Indeed, it was this non-renewal of licenses that forced telcos to bid so aggressively in the recent telecom auctions —if the licences in the 900MHz band were to be extended, telcos would not have been so desperate to buy more spectrum. Indeed , though it will bleed the telcos, it is this non-renewal which will keep the bidding wars going as each licence expires in different circles.

What complicates matters, however, is the lack of uniform policy on the issue of automatic renewal, though at the prevailing market price. In the case of the Taj Hotel property at Mansingh Road in the capital, when the original lease expired, the Delhi government wanted to simply take back the property and auction it to the highest bidder. Though a final view has yet to be taken, the then Solicitor General’s written opinion was that it made sense to auction the property, but to give the Taj the right of first refusal (RoFR). This would protect both the legitimate expectation that the government would allow a company to continue its business as well as the government’s revenue needs. The same principle, however, was not applied in the case of the 900MHz telecom licences.

Matters are even more complicated in the case of oil/gas fields. Cairn India, for instance, has found more oil in its existing pre-NELP fields and wants its exploration licence extended for 10 years, but has been told the contract allows for only a 5-year extension for oil but 10 in case there is gas—the NELP fields, in contrast, allow an extension till the oil/gas runs out. Apart from the fact that 70-80% of all oil/gas recoveries accrue to the government anyway, surely there has to be a uniform policy for extending licenses? A view also needs to be taken on whether the RoFR principle is to be applied—it is clear, though, that it cannot be applied selectively.


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