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2G auction sham shame


ADITI PRASAD | New Delhi, November 17, 2012 10:13
Tags : P Chidambaram | Kapil Sibal | Finance minister | 2G spectrum | 2G auction | Telecom Minister | Supreme Court |

2G spectrum auctionAfter the damp squib comes news of another fiasco-in-the-making.

Days after the flop show of the 2G spectrum auction, Union Telecom Minister Kapil Sibal has announced that the circles which went without bids in the current auction will be put up for sale before the end of this fiscal. The 2G spectrum auction organized last week only ended up garnering the government a measly 9,200 crores. To put that in perspective, the figure is not even a measly 10 percent of the Rs. 1.76 lakh crore that the Comptroller and Auditor General of India (CAG) had estimated as the loss accrued to the exchequer in the previous sale in 2008.

The tepid response must have come as a terrible blow to the Union Telecom Minister, right? Well, not quite. Try-as-he-might Kapil Sibal – the chief executive of the just concluded auction – simply could not wipe that expression of smug satisfaction on his face. Sibal in fact used the opportunity to slam the CAG for its assumption that A. Raja's decision to give away spectrum at rates fixed in 2001 had caused a presumptive loss of Rs 1.76 lakh crore to the exchequer. "Where are those Rs 1.76 lakh crore?" Sibal demanded after the auctions in an apparent reference to the CAG’s allegation. The Union Minister’s diatribe appeared almost indignant –as if the lukewarm response to the auction vindicated the government completely from the 2G spectrum scam – one among the series of high profile scams and scandals that have virtually torn the UPA’s credibility to shreds over the last few years.

The government’s propaganda machinery has also been in full swing with TV talking heads gesticulating wildly about the purportedly ‘zero’ loss suffered by the government on account of 2G spectrum and how the CAG report has now been shown up to be false.

But the mango people are nowadays not as easily convinced Mr. Sibal. Must be the 24X7 media exposure or just that we now happen to live in a more globalised (and aware) world. Somewhere the 2G auction last week smacked of being the worse kind of political farce played out in full public view, mainly to convince the mango people that the government was wrongly accused of the 2G scam and that the CAG’s estimate of losses to the exchequer were definitely overrated.

On the contrary, the blame for latest auction fiasco lies squarely in the government’s lap. The government insisted on retaining the high reserve price of Rs 14,000 crore for 5 MHz of airwaves, or spectrum, in the 1800 MHz band despite the industry making its opposition known to this even before the auction. Worse, the government says that the high reserve price was set on the basis of CAG's assumption of Rs 1.76 lakh crore loss to the exchequer. However, it is painfully obvious that the CAG’s estimates were based on demand for 2G spectrum in the year 2008, not end-2012 and certainly not at a time when the economy is on such a weak wicket and business sentiments so low. In 2008, the GDP growth rate was almost touching 10 percent as opposed to 5 percent today; prevailing interest rates in 2008 were 8 percent and today they are upwards of 15 percent; and let's not even compare the impact of the inflationary winds between then and now.

Worse, the telecom sector is already suffering from high ARPUs and low margins and in the middle of that you want them to pick up 2G spectrum at high costs (which may have appeared rational in 2008 when the sector was booming)? More importantly, the government must think telecom companies to be totally brainless. Why else were they expected to pay a bomb for 2G spectrum today when the world is seemingly heralding the arrival of 4G?

Let me give you an example. I gifted myself the latest iPad with a 64 GB ram on my birthday earlier this year and doled out a cool 35,000 rupees for the gadget. Four months later I decided I wanted an iPad 2 instead and one with a 3G data card so I tried to sell off the old iPad in the open market. I was offered only Rs. 15,000 for it. That was a four month window and that’s how fast technology becomes obsolete. In this case, we are talking of a full four year window between CAG’s estimation of the 2G pricing and the price that the spectrum is expected to fetch today. In fact, if the 2G auctions would have happened before the 3G auction, we suspect that the figures would have more than matched the CAG’s expectations. 

That there’s more to this sham auction that meets the eye is also evident in the fact that the government only auctioned a portion of the spectrum made available after the Supreme Court cancelled 122 2G licenses. The SC has even questioned the government on this issue and the powers-that-be are expected to clarify on the same in the coming week.

Mr. Sibal now says that there will now be another 2G spectrum auction before the end of this fiscal in March next year. If the UPA II persists with its present line of reasoning in determining reserve prices even for the next auction – guess we can once again get together to give a standing ovation to another farcical sham by the government to absolve itself in the 2G scam mess.


(Disclaimer: The views expressed in the blog are that of the author and does not necessarily reflect the editorial policy of The Sunday Indian)
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Issue Dated: Feb 5, 2017