The Telecom Regulatory Authority of India (TRAI) is standing by its suggested reserve price for 3G spectrum to be auctioned next month and has questioned the government for asking for the price to be increased by 43 per cent.

A TRAI representative also criticised the Department of Telecom (DoT) for only putting 5MHz of 3G spectrum on sale in a market with a severe bandwidth shortage. The person said that the higher price for the 2.1GHz band as well as the limited supply would likely end up “restricting competition, rather than stimulating it”, the Economic Times reported.

He said the situation could slow future investments in the industry and would likely benefit only operators with deep pockets, the Times said.

In early January the DoT rejected TRAI’s suggested price for 3G spectrum and recommended the regulator raise the base price by 43 per cent to INR38.99 billion ($612 million) per megahertz.

DoT has said it wants the 3G base prices indexed with the 2010 auction price. TRAI said this would only be relevant if the sale was held within the same year. The representative asked that if the DoT already knew the revenue price it wanted to offer, why would it ask for TRAI’s suggestion?

The auction is scheduled for 23 February and will now include 2G and 3G spectrum in the 800MHz, 900MHz, 1.8GHz and 2.1GHz bands.

TRAI’s complaint comes less than two weeks after the Cellular Operators Association of India (COAI) requested that the DoT review the reserve price of the 900MHz spectrum to be sold next month, complaining that the price is too high and could lead to higher mobile rates, slowing the government’s Digital India initiative.

The COAI also is pushing the ministry to free up at least 15-20MHz of 2.1GHz spectrum for the auction. TRAI recommended at the end of last year that 20MHz be auctioned off, but the government has said only 5MHz can be made available.

The telecom minister has said the department of defence has agreed in principle to swap 15MHz of 3G spectrum for the DoT’s 2G airwaves, but an actual swap has not been worked out.

COAI has said releasing only 5MHz would lead to “artificial scarcity” and raise bids during the auction and likely lead to higher mobile rates.