NEW DELHI: The reserve price for new cities getting channels in FM radio Phase III auctions will be the highest bid price received during Phase II auctions for that category of cities in that region.

In the case of FM Phase II cities which already have channels and are to get new channels, the reserve price will be the highest bid price received for that city in Phase II.

Information and Broadcasting Ministry sources said in case the benchmark from Phase II for a particular region is not available, then the lowest of the highest bid received in other regions for that category of cities shall be taken as the reserve price.

For new cities in border areas with a population less than 100,000, the reserve price will be Rs 500,000.

A total of 839 channels in 294 cities will be covered in the FM Phase III auction, which will take place ascending e-auction as in the case of the 3G auction conducted by the Telecom Ministry.

The sources said that the e-auction may be spread over a period of three years.

Carrying forward its decision to e-auction the third phase of FM Channels, the Ministry has decided to take the help of the Empowered Group of Ministers (eGoM) that finalised the rules for the 2010 3G spectrum auction and slated 2G frequencies.

The eGoM will be responsible for the request for proposals to select an e-auctioneer as well as to decide on the fee for migration of Phase II FM licencees to Phase III.

Unlike Phase II in which licences were issued for a 10-year-period in 2006, Phase III licences will expire after 15 years.

According to the 2012 media and entertainment industry report by Federation of Indian Chambers of Commerce and Industry and KPMG, the radio broadcasting sector is expected to grow at a compounded annual growth rate of 16 per cent till the phase III stations begin operations by mid-2013. After the phase III stations start, the industry is expected to grow by 22% CAGR. The radio industry?s media ad spends too are estimated to increase to 5 per cent in 2016 from around 4 per cent currently.

The report estimates that the government will earn around Rs15 to Rs 17 billion from the third phase. Phase III is expected to cover 227 new cities, in addition to the current 86.

In the four metros, only Kolkata will not get a new FM channel. Mumbai will get two while Delhi and Chennai will get one each.

Under the current phase II, 245 FM channels are operational in 86 cities, with a population of over 300,000 or more each.