Telecom regulator TRAI on Monday proposed a steep minimum price for auction of 2G telecom spectrum, setting off fears of a hike in mobile phone tariffs which are at present among the cheapest in the world.

The Telecom Regulatory Authority of India recommended base price of Rs 3,622 crore for a megahertz of spectrum at pan-India level which is around 10 times higher than the price for 2G licences in 2008 when A Raja was the Telecom Minister.

According to Trai recommendations, a minimum of 5 Mhz should be allotted which would mean that a pan-India spectrum in 1800 MHz band will cost Rs 18,000 crore. The reserve price is five times the base price of Rs 3,500 crore for 3G auction.

Operators slammed the recommendations saying they are "arbitrary, regressive and inconsistent" and will hurt further investment in the sector and expansion in rural areas.

New operator Uninor whose licences has been cancelled by the Supreme Court, said, "... some of these recommendations will create severe negative impact on the entire industry. It is up to the political leadership of India to now ensure that gains of the past few years of affordable phone calls for India's people are not undone."

"The industry was looking forward to reasonable spectrum reserve price recommendations from Trai in the light of the government's own articulated policy directions on affordability and rural penetration," telecom associations COAI and AUSPI said in joint statement.

Trai Chairman J S Sarma said the recommendations should not lead to a hike in tariff and if warranted take necessary action will be taken. "We have already issued consultation paper on forbearance of tariff," he added.

When asked Sarma said, "Auction is open for all."

Telecom Secretary R Chandrashekhar said the industry should not look at just the initial price. There are many relaxations too, he added

"Trai has relaxed payment condition. Only 33 per cent payment has to be made on winning of spectrum initially. Rest of the payments has to be made over years. Also Trai has relaxed spectrum usage charge to 1 per cent which ranges between 3 to 8 per cent," Chandrashekhar said.