Government and industry at loggerheads on who is to blame for the failure
The 2G spectrum auctions ended flat on Wednesday with nearly half the spectrum seeing no bids and the government winning revenues of only Rs. 9,407.64 crore, instead of the Rs. 40,000 crore revenue target.
Idea and Videocon won spectrum in 7 telecom circles, Telenor in 6 and Airtel and Vodafone in 1 circle each. Telenor which won spectrum in 6 circles, paid a total of Rs. 4,018 crore, of which 33% has to be paid up-front. The rest is to be paid in ten equal instalments from 2015 to 2024.
However, the downside is that Delhi, Mumbai, Karnataka and Rajasthan did not receive any bids at all. Additionally, there were no pan-India bidders for spectrum, which was pegged at Rs. 14,000 crore by the Cabinet, after it reduced the reserve price of Rs. 18,000 crore recommended by TRAI. Of the 290 MHz of GSM spectrum put on auction, only half received bids according to DoT sources.
Sibal defends government
Defending the dismal outcome of the auctions, Telecom Minister Kapil Sibal said: “The nature of the market was different in 2008, it was different in 2010 and is different in 2012.” In 2008, former Telecom Minister A. Raja had given out 122 licences. In 2010, 3G spectrum along with BWA had been auctioned and fetched the government over Rs. 1 lakh crore.
“As long as the government is given a free hand in the larger national interest to move forward — the government would love to move forward, but sometimes it so happens that we are not given a free hand and therefore we land ourselves in this situation,” Mr. Sibal added.
Against eight blocks, except the top up blocks the government received Rs. 8,977 crore. The bid against top up blocks amounts to Rs. 430 crore, Mr. Sibal said.
Industry blames high reserve price
Blaming flawed executive action as the reason for the poor outcome, Rajan Mathews, Secretary General, Cellular Operators Association of India (COAI) said, “The government had decided the amount of spectrum that had to be put up for auctions. I don’t believe that was specified by the courts. The reserve price was not something that the Supreme Court specified — that is something that the government accepted in terms of its deliberations.”
Leading jurist, Harish Salve, who has been deeply involved in the 2G litigation, also slammed the government. He said, “From the legal point of view they have very few options left. The government repeatedly painted itself into a corner.” In a statement that pointed to the government’s weak defence in Supreme Court, he said, “The government almost did not defend the 122 licences in court.”
The COAI, whose members primarily led the bidding said, “The results have been exactly what the industry had predicted. All along, the COAI has maintained that the reserve price was guaranteed to have a detrimental effect on auctions. That it would ensure that there were limited players coming into the market to bid and had also indicated that there would be extremely muted bidding, and for several circles there would be no bidders at all.”
“The root of problem lies with the procedure adopted by the government in executing the auctions. The COAI is in agreement with Supreme Court that auction is the best and the most transparent way to determine the allocation and market price of a resource as rare as spectrum for commercial use,” the COAI said in a statement.
Revenue doubtful this fiscal
In addition to the dismal performance, it is also likely that the government will not receive any of the Rs. 9,477.64 crore provisional revenue from the auctions in the current fiscal.
An analyst said that since only 33% of the bid amount has to be paid upfront, only Rs. 3,190 crore would be due in the current fiscal. However there are three operators whose cancelled license fee was adjusted against the earnest money deposited for the auctions. Idea’s Rs.1,000 crore, and Videocon and Telenor (earlier Uninor) Rs. 1,658 crore each. This itself totals to Rs. 4,300 crore. Using this as the moratorium of the payment, it is unlikely that any payment will come through during the current fiscal — unless of course some companies decide to pay upfront to save upon the 9% interest which under the current circumstances and prevailing market conditions remains unlikely.
Government to rethink strategy
Admitting that the market response was visibly muted, a DoT official told The Hindu that while bids in 18 of 22 telecom circles on the face of it, qualified for a 80% demand level, in reality, in terms of value, the impact was far more serious since the four circles for which there were no bids account for over 50% of the pan-India Rs. 14,000 crore reserve price. “Even in those 18 circles, where bids were received, only 69.44% of the spectrum has been sold,” he said.
“The issues that have to be tackled within the next few weeks by first the DoT and then the EGoM, pertain to the unsold spectrum in four circles, CDMA spectrum, spectrum in the 900 MHz band, for which the TRAI has fixed a reserve price that is double that of the Rs. 18,000 crore that it had fixed for the 1800 MHz band, as well as the unsold spectrum in the 1800 MHz band,” the official said.
Keywords: 2G spectrum auction, telecom industry, Idea, Videocon, Telenor, Airtel, Vodafone
The fetching of just 9000 crore from a well transparent 2G auction is
way far behind the controversial figure of 1.76 lakhs crore.it doesnot
mean that spectrum's should be alloted on First come first serve basis
and also many questions need to be asked from the CAG office as on what
basis did he arrive at a controversial figure of 1.76lakhs ,this clearly
shows how bad the way of auditing he has done with less far sight and
less responsibility.
I am surprised how the public opinion changed on this overnight. They
are straight away playing into the hands of the powers that be by this
opinion. It is a clear case of collusion between the government and
the corporate sector to prove the CAG and supreme court wrong. Is the
government now trying to imply that there was no criminality involved
when A.Raja did the 2G auctions and used first first come first serve
basis to allot licenses to his cronies? The government is shamelessly
suggesting that what was done by them during that auction was the best
way out.
I suggest let all the left spectrum be given to BSNL and let them pass
the benefits to the end customers, and the move by corporates will
simply boomerang on them.
There are some viewer comments in the list that suggests that the 1.76 L Cr was wrong and the corrupt politicians involved be let free. First and foremost, it is not because of the loss to the exchequer that those were sent behind bars, but because of flawed implementation of policies with corrupt intent. Secondly, the teledensity or the population using the cellphones was 230Million in 2008 while it is close to 800Mn now. The buyers of the 2G licenses could pay up more on the auction in 2008 keeping this growth (230Mn to 800Mn) in mind, but given that we have already hit the saturation levels, they are not ready to bid at high prices. In addition to this, banks dont give them loans, dollar rates are high (in 2008 it was in mid 40s now it is in mid 50s), and with an increasingly uncertain economy, the telecom companies are playing it really safe this time. Please dont blame the CAG report but blame the government for this flawed reserve price
A ridiculous argument is being put forward by certain folks that the
2G auction was a flop because it was done 4 years late. Nothing can
be farther from the truth. Do they mean to say that the telecos would
have doled out 1.76 lakh crores for 2G spectrum in 2008,which they
knew would become obsolete in 2010 when 3G was auctioned.( 3G was
already a known technology in 2008).Then how would they have recovered
back the 1.76 lakh crores??.Either they would have gone bust like
Kingfisher or recovered it from us,customers,right??.Even after having
got the spectrum without auctions, most of the telecos are running
loses & want to increase tariff.so what would have been the effect if
they had to pay 1.76 lakh crores? In 2G scam,case as in the trail
court is not abt the CAG report. It is abt how Raja & co manipulated
this First come First serve policy
I can't believe some comments here. How can we judge the price of 2G
spectrum now? When the first auction was done, the demand was high. It
has to be judged looking at the demand on the first auction day for
1.76LC. Not this second auction time. I seriously can't believe we are
so stupid as a nation.
Because the government messed arround the first time. We as a nation
have to pay the price. And the loss we have incurred is 1.76LC - 9TC =
1.67LC.
Why is hindu not publishing an article to clear the air?
“As long as the government is given a free hand in the larger national
interest to move forward — the government would love to move forward,
but sometimes it so happens that we are not given a free hand and
therefore we land ourselves in this situation,”
Sibal is already laying the groundwork for arranging A Raja's
acquittal. so that the DMK's "suspense" over the FDI debate in
Parliament is cleared in time. Why should the govt be given a free
hand? Obama said something like this over the Obamacare lawsuit (okay,
he was a bit more direct), he was asked to explain his remarks by the
court with a three page long reply. Will someone please reign in this
ludicrous comment by Sibal?
And for people who think this vindicates Rja, think again. It has been
shown that the Telecom Secy and a few others physically shut counters
to stop the other than a few companies from submitting bids on the
orders of Raja.
UPA proves that CAG, SC ,IAC, common man, all are wrong.
UPA and Karunanidhi are perfect!
This is a clever attempt on the part of the Corporate bodies with the powerful
support of the media and a Minister like Kabil Sabil heading the Ministry to
scuttle all legitimate measures which are meant for the benefit of the common
man. They are out to demolish all constitutional bodies like CAG and pursue the
nefarious activities of looting the public coffers to the hilt with the connivance of
the corrupt ministers. It is patently clear that the Govt machinery is virtually being
run at the behest of the corporate bodies to serve their own interests at the
expense of the common man. The entire nation should see through the game and
throw the present government out of power at the next general elections.
If 2G licence sold in 2008 at 2001 price is wrong,then three methods adopted by CAG,based on subsequent events to arrive at the
loss figure is also absurd. Hence only CAG is to be blamed
Politicians once again proved that their point manipulating the outcome of the auction by putting the reserve price of 2G, i would say, exorbitant at a time when people are talking about 4G in India. In present economic scenario no one would bet so much on 2G in uncertainty and volatility.
Given all these conditions auction was a sure failure.
Some people are sensationalising it by blaming CAG for the failure, but the fact is as per the CAG report 'had it been auctioned in 2008' was used.
I think CAG has been doing the right thing by exposing such irregularities since at the end of the day it is us who is suffering.
Comments made by Mr.Laxmiram should be highly appreciated, Some people are crying that this is orchestrated by the Govt itself, They are saying by fixing an very high floor price the govt fooled the people, This is absolutely false, When the price was fixed and announced so many people welcomed and that too appear in this paper iself, It' irony that the same people cry foul. It's not 2G, 3G, or 4G. Companies who had paid heavily for 2G are in loss now, See the Financial records of all the telecom companies, Even Airtel is making loss.
3G and 4G Service is used by very minimal people in India, those who cry foul come up with figures how many people are using 3G, Be truthful.
CAG, media had created some unnecessary sensation among the people, If we start to doubt each and everything then life will not be peaceful, If you start to thing that every cricket match is fixed than what's the worth of watching it,
Definitely CAG should explain his stand now.
Why not Vinod Rai, Gowsami of Times Now and Subra swamy involve themself
& prove to the nation that they can bring more revenue than Raja in 2G
acution
This is reality. People should live in the real world. The revenues does
not justify the high reserve price of spectrum. The supreme court should
learn a lesson, that executive action is best decided by the executive.
When courts start putting unrealistic deadlines on executive action,
then this is what you get, a disaster. Last but not the least, the CAG
should not draft reports based on their assessments, but on market
assessments.
The CAG may be wrong about the quantum of loss but it is a clear cut
indication that how the things would be if the private sector is to led
the Industry. There would be cartels ,pressure groups who would dictate
the national policies. If the policies are not according to their
likening they will make it sure that it do not succeed
Mr Sibal, government was given a free hand to manage the 2G licenses in
the larger national interest; however it turned out that only private
interests were served and hence you have landed up in this situation.
Sad to see the lack of knowledge and intelligence displayed by so many. Why aren't the facts coming out?
Now that 3G is out of date, the govt is trying to auction 2G at an exhorbitant reserve price. Even with such a reserve, just 22 out of 122 segments went for 9,000 crore. Not only are there a 100 more segments available, only 2/3 of the available spectrum is being auctioned.
And how does this in any way impact CAG's assessment of what happened before 3G was available?
The demand for 2G back in 2008 was different. Those who stood to gain out of it have already made all their profits. The industry now has all its energies focussed on 3G and 4G. The outcome was natural. The government was right in refusing to lower the stakes.
The Politicains are very clever, they are trying to sell 2G now at a high price when the advanced technologies are available now. The operators are not fools to buy an outdated Technology at a higher price. This will Help Congress Govt to make CAG report as a false one and Congress Govt will get Mr. Raja out of the 2G spectrum case
only Rs. 9,407.64 crore, instead of the Rs. 40,000 crore revenue target. Why not the Govt. wait for the CAG to participate in the bidding just after his retirement?
when you have 4G & 5G in the US will any company like to buy License for 2G which @ this time when you know that 5G exists?
Why doesnt INDIANS never questions Politicians and their Arguments?
I am glad that the Readers of Hindu has seen through the Charade.
The Govt has achieved three goals.
1.Ridicule the CAG for the 175,000 Cr.Loss Estimated
2.Give a "helping"hand to Mr.Karuna Nidhi -by way of going to SC
to prove the Ïnnocence"of the Ministers indicted.
3.Give a "fitting"response to the cancellation of licences by Apex Court.
4.USE the Same Argument in the Coal Allotment to Score BIG points
against the CAG observations.
Unfortunately Many Others writing in other News Papers have Bitten
the bite and have started commenting on CAG in very derogative manner.
We forget that the 2012 Financial Position of Govt.is NO WAY NEAR
the situation in 2008-9 period.
Intentional 2G auction failure scam, to take revenge against common people and IAC, CAG, SC. We can't afford blunders by politicians at expense of common people.
This is govt's failure. This govt is for defaming the CAG. Hence they
are in collusion with corporate lobby for lower price.
This is reality. People should live in the real world. The revenues does
not justify the high reserve price of spectrum. The supreme court should
learn a lesson, that executive action is best decided by the executive.
When courts start putting unrealistic dealines on executive action, then
this is what you get, a disaster. Last but not the least, the CAG should
not draft reports based on their assessments, but on market assessments.
I am little confused to see the way government dealt with this
spectrum issue. I personally believe that this spectrum issue would
have been dealt by government more profoundly rather than haphazard
manner. For instance Raja's intention on selling spectrum in very less
cost was to allow the consumer to enjoy the less call rates, but it backbite him mainly because he did not expect or predict the
consequence of it. The strong rules before bidding would have saved
him from landing into a trouble. Here government should take the
consideration of the common people while bidding the spectrum.
Moreover government should strike a balance to gain a profit for
country. Over all government did not researched and learnt from the
past mistakes.I would suggest all the ministries to have one research institute to involve before taking any steps which involve large chunk
of public money.
'...The government repeatedly painted itself into a corner.”
~ Exactly, Mr.Salve.
“The root of problem lies with the procedure adopted by the government in
executing the auctions. The COAI is in agreement with Supreme Court that auction
is the best and the most transparent way to determine the allocation and market
price of a resource as rare as spectrum for commercial use,”
~ you said it, COAI
'The government rigged it.
~ You have a point, Mr.Vishwas
Viswas has made the right point. Thanks.
This is expected - and a huge failure of the government agency. It is a failure of the
leadership w.r.t to timing. If the same auction happened in 2008 - this news would
have not been there. It is because of the wrong decision made by the leader and the
government. Ultimately people are paying the price for it.
In politics and governance, timing is very important. At least now, all political parties
should realise, doing the right thing at time.
This auction was rigged by the UPA government to fail. This was not about revenue generation or telecom access to everyone - but a fight with the CAG and the supreme court - to prove a point that auctions dont always work well. First Raja and his UPA sponsors arbitrarily gave away spectrum to preferred companies, regardless of whether they actually intended to use this resource. This appropriation of spectrum, as with other public resources like land and mining was actively encouraged by the ministry and created an artificial scarcity for genuine operators. The 2010 3G and BWA auctions determined a high price for spectrum in this situation. In a openly cynical move, the TRAI and DoT went ahead with the plan to set an artificially high reserve price for the 2012 2G auctions - with the clear intention of making the auctions fail. Someone - the CAG or the Courts - has to step in to stop the telecom policy being mishandled in this way. This is bad for employment and bad for the economy.
Here is the latest calculation of losses from the CAG:
Losses already calculated = 1.76 lakh crores
Losses in this auction = 1.76 lakh crores - 9 crores received = 1.65
lakh crores
Total losses = 3.41 lakh crores.
This is pure case of either we do idealistic purchase or totally corrupt purchase. Any procurment strategy has to be a win win practical strategy so that all stake holders can make some profit. Normally a procurement strategy get skewied to either side & end in a disater.
Governement should have policy that balances public and enterpreneur otherwise we will keep going in circles as has happened in recent past.
That the CAG has erred causing serious damages to the ruling party and the Minister concerned unfairly is now proved.
The only remedy seems to be making CAG a multi member body.
I think its a good job done by the government at lat, Some people argue about not getting the enough money.I think a loss and profit is based on buy and sell. Since the government has not yet sold the spectrum in the four circles its clearly at no loss. May be in the mean time the Govt take this as an opportunity and give the spectrum to BSNL. So that the revenue generated goes directly into the govt kitty until it finds the right bidders.I don't find fault with private companies either, they are doing what suits there business. If they have to bid for higher prices certainly there would be drop in the consumers taking up that particular connection due to high tariff rates which to me seems fair enough.
Govt should have kept a clause that there would be quarterly bids with those not participating in a bid rendered ineligible for the successive bids. Even now, after 3 months, let there be a bid with this clause. We may well witness bidders rushing then!
SO the CAG's notional loss is nothing but a fiction, conjured up by the CAG and his able deputies, who display penchance for publicity. The reserve price has to be set. The question is what is the reserve price. If the reserve price is set too low then the self-styled civil societywallahs, ably supported by Press, will train their guns saying the government is deliberately set the price low and has caused loss. If the reserve price is kept high, no one will bid. No point in blaming cartel (imaginary or otherwise). The price is market-driven and highly technical. Neither, Bushans nor Swamys can throw light. Can someone enlighten us how to arrive at a market price and also how to conduct auctions. May be CAG will have some great ideas. Since they are straying into Policy Making, they should guide the Government. What a waste of time, energy and money. The corruption can not be condoned. But one can not see corruption in every move and in every action. Some sanity should prevail
Bad governments/goverance can do only two things; either follo TELECOM RAJA model or blame game. Good Goverance: either take experts views and call for open bidding/tenders or give responsibility to autonomous institution and just monitor from backend.
Hi,
This happens only in India , Another Great Indian Tamasha is unfolding.It is really surprising the Government gave away 122 license two years back and now no takers at all.This Figure of 1.73 lakh crore loss , where was it derived from? The higher the prices go , the higher the consumer suffers.This is the only nation where the consumer is suffering because of the lacadisical approach of all the officials involved.
Regards
This is a clear case of collusion between corporates similar to insider trading.The power of corporates have been underestimated by common people interms of their nuisance value.
Let us not forget that a President of Chile, Mr Salvador allende have been eliminated through money power of transnational corporations!
Govt., should not be disheartened. Reserve prices are must. There seems to be cartel of the prospective Bidders. A Pre -Plan.Govt should wait and try again.
I sincerely request Mr. Sibal and the UPA Govt. to forfeit their
constitutional rights of taking decisions by observing Statutory rules
in this case and instead give the responsibility of selling 2G to the
CAG & Co., Mr. Swamy, English News Channels/panelists, Acitivists
etc., through the Supreme Court, by referring a special mention. The
CAG, the best brand ambassador for market strategy on natural
resources, will have a free hand to fetch the revenue of more than
1.78 lakh crores. If they fail, as a sincere tax paying citizen, I
earnestly request the Supreme court to take appropriate further action
in this regard.
I guess CAG can redo their calculation to come up with loss to the exchequer.
Is the response to the auction a deliberate attempt by vested interest to show that CAG was wrong in its assessment of the loss and to bring disrepute to the institution of CAG. May be after some time, the circles would be given to the existing players under one pretext or the other at a much lower price. As usual the same nexus of Politicians, Corporates are at it.
All the hype of the Rs. 1,72,000 cr required of preparing a case for those who
wanted to prove that number and those that did not want it. The CBI said the losses
were around Rs. 40,000 cr and that too was a number that was conjured from thin
air. If the CAG were to rewrite their report after all auction is done, as is common
practice, which I believe it will not, it will be part of the solution. This cannot be
allowed to go down easy, lest some other maverick be allowed to start coming up
with Rs. 10 Lakh cr figures claiming that they follow international standards.
The amount of time wasted on debating the loss figure needs to accounted. Next,
the government needs to put in place a figure that's not going to waste the rest of
the time needing to prepare the infrastructure for the telecom sector.
The media should also come with an educated debate on what went wrong in the last
two years and how to focus on the problem rather than a figure, lest we waste time
on another big number.
I think from another angle, this proves how wrong the CAG had been on its 1.73 lakh crore loss theory.
The CAG used sensational numbers rather than focus on the actual audit and irregularties of which there were plenty. The debate instead of focussing on that was restricted to only this mythycal auction route which was supposed to have garnered 1.73 lakh crore when the reality was that 3G prices were being used to compare with 2G and even the time and market environments were also quite different. I wonder if this would result in CAG to re-assess its position - highly unlikely though
Now the Market has proved that the CAG, the Opposition Parties, Press
(including The Hindu) and the Supreme Court ALL were totally wrong in
"marketing" the Rs. 1.76 lakh crore "loss" to the exchequer on 2G
spectrum sale in 2008.
Finally, A. Raja got his last laugh! The criminal case against him, Kani
and others must be immediately dismissed by the Supreme
Plz...10 licences proced 10k crores vs 122 licences in 2008 produced less than 10K crores..is this tepid? + can u give me a heading like if 10 licences produced this much how much did v actually lose in 2008?
My comments are without prejudice to the corruption cases against the
former Telecom minister and others accused.I am glad that the
newspapers ( including this esteemed one) TV Media, CAG and the SC
who proclaimed that that auction is the only method and the government
failed miserably to maximise revenue are now to reckon with the
inexorability of events. Each one of the actors above mentioned
pretended to know more than the people who have to take the call on an
ongoing basis to allocate spectrum. Newspaper columnists ferreted out
noting from files given to them by competing companies who perhaps got
these from disgruntled babus, TV anchors waved these in front of
cameras, CAG merrily added any number of fanciful zeros. To top it,
the SC did not hesitate to put everyone into a spin; the cabinet, the executive,the regulator,
telcos, consumers( they do not know what call charges will be next
time they talk)and pushed us downhill.
Fantastic! Atlast The Govt had received the so called illusive figure of
Rs.1.76 Crores, Now it is proved that all the figures are illusive only
not an realistic, Come on opposition parties, what is your stand now?
Please note that if the auction had happened as per the CAG's note, no
one in this country will able to talk for single paisa per second. I am
not saying that there is no wrong doing in that allocation, of course
there were some wrong doings in that one, but the things it is not as
much as claimed by the CAG. Be realistic.
The media should commit as many pages into the miscalculation of the CAG
as it did to the allegations against the Ministers a couple of years
ago.
Dear Editor,
The CAG came up with a presumptive loss of Rs 1.76 lakh crores to the
exchequer,now we know his calculation based on 3G auction price was
terribly wrong . How can 3G & 2G be compared in the first place? Now can
we come out with a mechanism by which CAG can be brought to check
,prevented from making outlandish conclusions ?
Going by the bids received so far, it appears that the Zero loss theory is going to gain ground in the coming days..The CAG will have to substantiate the ground on which the loss figure was arrived at..
This is similar to what happens to the foreclosure properties. The Real
Estate giants would not submit any bid at the first instance forcing the
institutions to bring down the reserve price. Finally, the properties
get sold at low prices and the giants stand to reap huge benefit.In the
case of spectrum auction, the giants know how to twist the arm of the
Government. Sad state of affairs.
Is this an attempt by the Govt. and the Corporate houses, hand-in-glove,
to make the people of India realize it is either their way or no-way?!
I'm not sure, how many are going to fall for this stunt...
Please Email the Editor