The Telecom Regulatory Authority of India (TRAI) has proposed drastic cuts in the price of 2G spectrum, recommending that any valuation linked to 3G spectrum prices in an upcoming auction – a link India’s cash-strapped government has so far favoured – should be ignored.

Specifically, TRAI recommends the minimum reserve price for 900MHz spectrum – in the relatively lucrative metro circles of Delhi, Mumbai and Kolkata – should be 60 per cent lower than the prices set for 2G auctions in November and March (to which there was a lacklustre response).

For pan-India 1800MHz frequencies, TRAI proposes a 37 per cent cut, to INR14.96 billion, from prices set previously.

While India’s operators will no doubt welcome the recommendations, TRAI says Bharti and Vodafone will still have to re-bid for spectrum they currently hold in the 900MHz and 1800MHz bands.

The two biggest operators in India have been locked in dispute with the Department of Telecommunications (DoT) about having to renew their 2G licences in the circles of Delhi, Mumbai and Kolkata, arguing that the terms of their existing concessions (which expire in November 2014) gives them the right for an extension should they make an application to do so.

Other TRAI proposals are that the government should provide a roadmap of spectrum availability before an auction takes place, and that spectrum trading should be permitted for auctioned frequencies (including the 3G spectrum bought in a 2010 sale).

TRAI further suggests 3 per cent of annual gross revenue (AGR) as SUC (spectrum usage charge). Operators now pay between 3 per cent and 8 per cent of the AGR as SUC, depending on the quantity of airwaves held. A maximum AGR charge of 5 per cent for frequencies not purchased through auctions is also recommended.

In response to subdued operator interest in India’s previous 2G spectrum auctions, an inter-ministerial panel on spectrum, in June, asked TRAI to recommend fresh reserve prices.

As part of that process, TRAI published a consultation paper seeking stakeholders’ responses before making its recommendations.

TRA’s proposals need to be cleared by DoT and the cabinet of India’s government if they are to come into effect.