ECB Policy amended for payment for Spectrum allocation

Posted on    28 January 2010

ECB Policy amended for payment for Spectrum allocation

The External Commercial Borrowing (ECB) policy is regularly reviewed by the Government in consultation with Reserve Bank of India (RBI) to keep it in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, the external sector and lessons of experience. Consequent upon such a review and in order to develop the telecom sector in the country, the Government had earlier permitted eligible borrowers in the telecommunication sector to avail of ECB for the purpose of payment for Spectrum allocation.

In terms of the guidelines issued by the Department of Telecommunication, the successful bidders would be required to pay 25% of the bid amount within 5 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, subject to the following conditions:

i. The ECB should be raised within 12 months from the date of payment of the final instalment to the Government;

ii. The Authorised Dealers should monitor the end-use of funds;

iii. Domestic banks will not be permitted to provide any guarantee; and

iv. All other conditions of ECB, such as eligible borrower, recognized lender, all-in-cost, average maturity, etc. should be complied with.

The above amendments in ECB policy will come into force on the date of Notification of Regulations / directions issued by the Reserve Bank in this regard under the Foreign Exchange Management Act, 1999.

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