NEW DELHI (Reuters) - A panel of Indian ministers decided on Monday that the annual fees companies pay to use mobile phone frequencies be capped at 5 percent of revenue for spectrum they will buy in an auction next month, Telecom Minister Kapil Sibal said.

The move scraps the 3-8 percent fee range the country currently levies in an effort to coax previously reluctant operators into taking part in India's third attempt at auctioning off two frequency bands for billions of dollars.

A sector regulator had recommended the annual fee for spectrum to be fixed at 3 percent of the operators' revenue.

Sibal said companies like Reliance Industries Ltd, which bought 4G spectrum in a 2010 auction, will continue to pay 1 percent of their revenue as annual fee for that spectrum.

(Reporting by Devidutta Tripathy; Editing by Subhranshu Sahu)