The government on Friday appeared to have agreed on a floor price of Rs 4,040 crore for the auction of 3G spectrum, double of what was initially mooted by the department of telecom.

The auction may fetch the government around Rs 40,000 crore and is being considered as one of the important sources of funding its budget deficit.

On Friday, finance minister Pranab Mukherjee and telecom minister A Raja met Prime Minister Manmohan Singh where the issue of fixing the base price was discussed.

In the first lot, six operators besides the state-owned BSNL and MTNL would be auctioned the 3G spectrum that would unleash value-added services on a mobile set such as videos, high-speed internet, etc.

The auction was originally scheduled for February but was postponed due to failure to arrive at a consensus on the base price and also because of the unavailability of the spectrum.

The government is now banking on the defence services to vacate them before it initiates the licencing process. It has plans for awarding five licences per circle with BSNL and MTNL already having one each.

Agency reports quoted Raja as saying that during their meeting with the PM "there were several options discussed. The reserve price and Rs 4,040 crore, as suggested by the finance ministry, was one of them," he said. According to him, the announcement will be made within a week.

On Wednesday, the telecom minister had met the finance minister and given him a detailed presentation on the 3G spectrum and the ministry's proposal for setting the base price.

Apart from divesting its stake in PSUs, the sale of spectrum will offset a part of the budget deficit. In its interim budget, the FM had projected a gross borrowing of Rs 3.62 lakh crore. With the full budget to be presented on July 6, increased allocation on infrastructure and social welfare schemes is likely to push the gross borrowing bill to more than Rs 4 lakh crore.