Modi govt to hold auctions for third batch of FM stations, industry unhappy with base price

Radio station (Representational image) | Commons

The base price had led to a dismal response in the auction of the second batch when a number of private players stayed away.  

New Delhi: The Modi government is preparing to hold auctions for the third batch of private FM radio frequencies, under its FM Radio Phase-III policy.

But private players continue to red-flag the government’s decision to assign reserve prices for the frequencies.

As many as 683 radio frequencies across 236 cities will be up for sale in the electronic auctions tentatively scheduled for December.

The government says that the third batch of auctions would bring all 29 states and six union territories under the FM radio network while fetching it revenues of Rs 1,100 crore.

Its plans, however, could hit a major roadblock as private players in the sector continue to have misgivings about the base prices, which range between Rs 5 lakh for Kargil and Leh and Rs 18 crore for the airwaves in Hyderabad.

The base price was among a number of factors, private players say, for the dismal response to the second batch of auctions in 2016, which saw the government earn a mere Rs 200 crore after selling just 66 channels of the 266 frequencies that were up for sale in 92 cities.

For instance, the base price for airwaves in Chandigarh was set at around Rs 15 crore, which the private players say make it unviable.

In contrast, the government had earned Rs 1,187 crore from the first batch of auctions held in 2015, when it sold 97 channels in 56 cities. While there was a base price even then, the majority of the stations that went under the hammer were in tier-1 cities.

The government had then also earned over Rs 1,200 crore as migration fee for 245 stations that were moving to phase 3 from phase 2.

Sources said the third batch of auctions, for which no date has been finalised, will be conducted on the lines of the second batch, and no changes have been made in the existing FM Radio Phase-III policy for the upcoming auctions.

ThePrint has learnt that the Information and Broadcasting ministry had last year sent a cabinet note recommending a few amendments in the FM Radio Phase-III policy, but that has not been approved yet.

A senior ministry official said that it would not be possible to amend the reserve prices at this stage.

“It won’t be possible to change the reserve prices at this point. The auctions would be held as per the existing policy,” the official said, adding that it would be considered at a later stage if the ministry deems fit.

Radio players upset over high reserve prices

Private players from the industry say that the proposed auctions could end up like the 2016 sale due to the high reserve prices for even smaller towns.

Asheesh Chatterjee, the chief financial officer for Big FM, told ThePrint that several issues had to be addressed before the government went in for auctions.

“Radio is one of the oldest and the most reliable and hyperlocal media… But there are challenges,” he said.

“Before the auctions, the reserve prices should be brought down to minimal levels so that the price discovery can happen naturally,” he added, “Additional frequencies should be made available in bigger cities by reducing channel spacing and the medium should be made FDI [foreign direct investment] and M&A [mergers & acquisitions] friendly.”

“Only then will there be a hockey stick growth that will lead to a win-win situation for all, the industry, consumers and the government,” he said.

“Ideally there should be no reserve prices,” Uday Chawla, secretary general of Association of Radio Operators for India (AROI) told ThePrint.

“After the poor response to the second batch of auctions, the government should have revised the reserve prices of frequencies. Why would a small radio operator pay such a high reserve price for a frequency for a smaller city?” Chawla asked.

In July 2016, AROI had written to Modi raising several concerns with the existing FM radio Phase-III policy under which the government is holding auctions.

The industry body had sought the drastic slashing of reserve prices to attract bidders. It claimed that high reserve price was the reason why 35 frequencies in the first batch of auctions had failed to attract any bidders.

Other concerns highlighted by AROI included the existence of a three-year lock-in period for the channels, a clause restraining a broadcaster from operating more than 15 per cent of the frequencies available nationally and 40 per cent of the frequencies available in a town.

The body had also red-flagged restrictions not permitting news and current affairs on private FM radio channels and called for making all private FM broadcasters use Prasar Bharati’s premises and towers wherever they are available.

It had also urged the government to ensure a deferred payment plan, instead of making successful FM bidders to pay 100 per cent of the bid amounts upfront.