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MIB releases NIA for FM Phase III, auctions start in April

MUMBAI: The Ministry of Information & Broadcasting (MIB) has finally come out with its notice inviting applications (NIA) for the commencement of the first batch of the FM radio Phase III auctions.

The NIA has invited prospective bidders to submit applications for participating in the auctions of 135 frequencies in 69 cities in the first batch. Based on the applications, the government will pre-qualify applicants who meet the eligibility criteria for participation in the auction.

The objectives the government has set for the auction include obtaining a market-determined price of FM radio channels through a transparent, fair, and impartial process, stimulating competition in the sector, and promoting rollout of FM broadcast services.

As per the NIA, 29 April 2015 has been set as the tentative date for the start of the auctions. A pre-bid conference will be held on 10 March at 2:30 pm and the last date for seeking clarifications on the NIA will be 12 noon, 11 March.

The ministry will explain the NIA on 16 March and radio operators will need to submit the applications by 5 pm, 23 March.

The publication of ownership details of applicants has been slated for 7 April, while the deadline for bidder ownership compliance certificate is listed as 5 pm, 10 April.

This will be followed by the pre-qualification of bidders on 17 April or completion of requisite formalities, whichever is later, followed by the mock auctions that will be conducted around 21–22 April.

The start of the auction process is listed as one week after the mock auctions, which indicates that the auctions would commence on 29 April.

The auctions will be followed by the payment process of the bid amount. 25 per cent of the bid amount has to be paid within five calendar days from the close of the auctions and the remaining amount has to be paid within 15 days. The government will notify the successful bidders after this.

The auction process will be conducted as per details mentioned in the information memorandum released by the MIB earlier. Auction of additional channels that may become available due to reduced channel spacing to 400 KHz could be considered after feasibility studies are completed. The bids made in the auction shall be valid up to 31 December 2015.

C1 India Pvt Ltd is advising the government on the auction. Administration of the e-auction shall also be the responsibility of the company.

The ascending e-auction process for granting permission for channels in this batch under Phase III shall consist of four stages. Stage I shall be the invitation stage for prospective bidders to submit their applications. Screening of applications, publication of ownership details, and the pre-qualification test will be done in Stage II, also called pre-qualification stage. Applications received from the prospective bidders will be scrutinised, ownership details published, net worth of the applicant company verified, and security clearance issued. A list of eligible prospective bidders will be prepared by the Application Review Committee (ARC). The list of eligible prospective bidders will be forwarded to the e-auctioneer.

Only applicants qualifying in accordance with prescribed eligibility criteria will be invited to the auction stage (Stage III) for bidding for specific channels in different cities. Stage IV will be the grant stage, wherein payment of the winning bid amount and issuance of letter of intent (LOI) are subject to fulfilment of relevant conditions.

In terms of financial competence, for two or more C category cities in the same region, a net worth of Rs 1 crore will be required. If the two C category cities are in two different regions, a net worth of Rs 2 crore is required. In case the applicant does not wish to publish details and wishes to have the option to take part in any or all categories in all the regions, the applicant company must have a minimum net worth of Rs 10 crore.

The MIB also mentions that if during the permission period, government policy on cross-media ownership is announced, the permission-holder shall be obliged to conform to the revised guidelines within a period of six months, failing which it shall be treated as non-compliant of the grant of permission agreement and liable for punitive action.

It also states that in case of multiple permissions to an entity/related entities in a city, the attempt should be to distinguish programming on each channel based on the era, language, and genre of music to the extent possible to ensure diversity of programming.

An entity will be permitted to network its channels in its own network within the country. However, it is also to be ensured that at least 20 per cent of the total broadcast in a day is in the local language of that city and promotes local content. This may include the RJs speaking in the local language or programmes focused on local culture/folk music or other permissible programmes/advertisements in the local language.

Moreover, the permission-holder shall fix or modify the channel identity, which is the brand name of the FM radio channel, only after prior approval of the ministry. This could cause a major blow to the operators who have built their brands by the frequency they operate in.

Prospective bidders for a channel shall be required to deposit earnest money, along with the application for pre-qualification, in the form of a bank guarantee from a scheduled bank, which shall be 25 per cent of the reserve price of that city per channel. Applicants should deposit the earnest money based on the number of channels in A+, A, B, C, and D cities for which they would like to participate in the auctions.