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The telecom debate: jumping to flawed conclusions

Sunday October 23, 2011 03:41:16 PM, Arvind Padmanabhan, IANS

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What is the 2G spectrum scam about?

As the so called 2G case continues to engage national attention, a matter that continues to be sidestepped is whether there was indeed a presumptive loss of $39-billion to the exchequer due to allocation of spectrum, a scarce natural resource, to mobile telephone companies, rather than through an auction, as made out by India's official auditor.

The reality lies elsewhere. The role of telecom minister A. Raja is being probed on this matter and the courts are hearing the case as well. There is also no doubt that official coffers may have been fuller if spectrum was, indeed, auctioned. But was that desired?

There are several reasons behind this line of argument -- stretching from level playing field in the telecom industry, to the role of executive and its authority over policy matters. Then, there is also the issue of what is the intended design of a policy.

The current second generation (2G) spectrum case involves the allotment of spectrum, not to the existing players but to new aspirants. Therefore, the level playing field would have certainly been uneven if exorbitant prices were to be charged to the new players.

Existing players, some of them big names today in the world of business, were allotted licences without any payment of fee towards spectrum. As Raja himself put it, revision of entry fee the second time around would have been discriminatory, arbitrary and capricious.

That was also what was communicated in response when some reservations were raised in a letter to Raja written Nov 2, 2007 by Prime Minister Manmohan Singh where he wanted to know if revision in entry fee for new players and a transparent auction was possible.

Clearly, the Central Bureau of Investigation (CBI) had doubts if Raja and his policies were transparent, and not manipulative, like the decision to advance the cut-off date for new players and based, on its probe, it not only took him into custody but also filed charges against him and 13 others.

If there was even a minor mala fide intent on the minister's part, the court will pronouncece its judgment based on the evidence at hand.

That still does not take the debate away from the basic point, even though one has today the luxury of hindsight: whether spectrum could still have been auctioned or was it okay to award it for free.

A decade ago, when Sukh Ram was at the helm in the telecom ministry, some players made some crazily-inflated bids for licences. The process also got mired in courts and the proces derailed telecom growth. But that part of history is conveniently forgotten.

In the present case, apart from the argument over level playing field with allotment of spectrum versus discriminatory action if this resource were auctioned, there is also this larger question: Should the people of India not benefit from the telecom revolution?

Few can deny that the main reason why a mobile phone today has become an indispensable tool even for people in the lower end of India's income spectrum is affordability. The decision to give spectrum cheap forced competition and call rates dropped like never before, making it perhaps one of the cheapest call rates in the world.

This, with cheaper handsets, led to India adding 500 million mobile phone connections between 2006 and now, taking the base to around 900 million today. Compare it to the three million mobile phones that were there in 2001! And studies in the past have articulated well on how jump in tele-density adds to overall growth and prosperity.

In these were the reasons why the government of the day decided to allow allocation of spectrum rather than an auction of this resource. One can still debate on its merits, but not with an accusing finger of scandal or a scam born out of mala fide intentions.

The scam, if any, lies in the manner in which the policy was executed, which is being tried in courts. The scam does not lie in the policymaking, in the fact that the government decided to allot spectrum to new players based on the same cost charged to earlier operators.

In this light, the presumptive losses to the exchequer estimated by the Comptroller and Auditor General of India (CAG) is faulty for two reasons: One, to assume an auction was the right choice. Two, to retrospectively extrapolate a price arrived two years later.

Certainly, two wrongs cannot make a right. But in this case, the first wrong -- that spectrum should have been auctioned and not allotted -- is not a wrong at all. And the other on policy is being tried in the courts.

Let us not mix matters and jump to conclusions to mar what is undeniably an Indian success story!


Arvind Padmanabhan is Executive Editor-Business with IANS. The views expressed are personal. He can be reached at







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