To encourage private sector participation in the FM radio broadcasting sector, the government is considering a proposal to replace the existing system of bidding for licences with revenue sharing.
In March 2000, when the bidding process for FM radio stations was undertaken, companies were paying large sums for the licences. The 11 FM radio stations in Delhi sold for Rs 7.125 crore each.
The government, while implementing the revenue-sharing policy, will also have to work out a migration plan for companies which have already bagged licences and started operations. The stringent norms in the present policy also prevents companies from rolling out services. Bank guarantees of several firms were even forfeited.
As per the present policy, wherever the number of successful applicants exceed the number of available channels, allocations are made through open auctions in which the reserve price continues to be enhanced by 10 per cent till such time as the number of applicants equals the number of channels.
Applicants also have to submit an earnest money deposit, which again is different for each category. Moreover, the bank guarantees submitted by the companies are also high.