SPECTRUM AUCTION

Was it such a flop show?

THE just concluded spectrum auction, dubbed by the Congress as a flop show and a failure, reveals a different picture on closer scrutiny. The government has mopped up Rs 9,407.64 crore from 22 licence areas against Rs 9,280 crore from 122 licence areas in 2008. The market conditions were vastly different in 2008 from conditions today. The Sensex breached the 21,000 mark in January 2008; it was hovering around 18,500 at the time of the current auction. Unlike now, there was no dearth of international funding to the telecom industry in 2008. With a view to proving wrong the CAG loss figure of Rs 1.76 lakh crore and to help the UPA government recover from the taint of allotting spectrum in 2008 at a price arrived at in 2001, telecom companies had formed a cartel and only five participated in the current auction. In 2008, more than 575 companies queued up for spectrum, creating a virtual stampede when telecom minister A Raja came out with his first-come-first-served policy to favour a few pre-chosen companies. Spectrum is not a perishable commodity. It can be re-auctioned when market conditions improve. The government’s expectation of Rs. 40,000 crore from spectrum sale this fiscal was unrealistic. In 2008, India had only 234 million mobile subscribers with a market potential of 800 million. Nearly 20 million mobile subscribers were added every month during 2008-09. After the mobile subscriber base touched 900 million with a tele-density of 70 per cent as against 24 per cent in 2008, the subscriber growth has reached a plateau, making substantial investment in the industry risky.  The average revenue per user has also come down from Rs 316 in 2008 to Rs. 97 per month now.

It is shameful to see Congress ministers vilifying the CAG to save their face. Information and broadcasting minister Manish Tewari went to the extent of mockingly asking, “Mr CAG, where is the 1.76 lakh crore?” Had auction been held in 2008 when demand for 2G spectrum was at its peak, it would have fetched much more than the Rs 1.76 lakh crore the CAG estimated as presumptive loss. It ill becomes the Congress to blame the CAG and the Supreme Court for the spectrum mess the UPA government finds itself in. The Supreme Court direction on cancellation of licences and disposal by auction was solely to undo the illegality in procedures followed by the government in allotting 2G spectrum in 2008. Now is the era of 3G and 4G spectrum and the demand for 2G would naturally be low. Yet, garnering Rs 9,407.64 crore for 22 licences against Rs 9,200 crore for 122 licences is no mean achievement. Of the 22 telecom circles the country was divided into, there were no bidders in three ~ Delhi, Mumbai and Karnataka ~ as a result of cartelisation. There was no bidding in Rajasthan because of the high base price discovered during the auction of 3G spectrum in 2010. Failure to achieve the target does not mean that the CAG’s estimated loss was incorrect or that there was no corruption in the allotment of 2G spectrum.