The Union Cabinet’s decision to fix Rs 14,000 crore as the base price for 5 Megahertz of 2G spectrum in the upcoming auctions must surely bring closure to the contentious debate over exactly how much the 2G scam cost the exchequer. For one, it validates the Comptroller and Auditor General’s Rs 1.76 lakh crore upper-end loss calculation and methodology for the 2008 2G spectrum sale. Broken down, the CAG’s figures lead to a Rs 3,350 crore/MHz value for 2G spectrum. Ironically, the same government that had discredited the CAG, splitting hairs between ‘notional’ and ‘presumptive’ loss, has now itself estimated the value of spectrum at Rs 2,800 crore/MHz. Except that this is just the price at which bidding begins. The expectation is that the final bid price will be higher. The Cabinet seal for a high base price, supported by the Telecom Regulatory Authority of India’s rigorous analysis of a near negligible increase in customer tariffs, confirms that spectrum was as valuable in 2008 as it is now. This should effectively silence the claims of Cabinet ministers and even some economists that high spectrum costs would lead to higher tariffs. If tariffs didn’t go up in 2010 after the 3G auctions, they wouldn’t have gone up in 2008, simply because the bid amount is amortized across the 20-year licence period.
Spectrum pricing should be determined by scarcity and consumer tariffs by competition and if that fails, through TRAI intervention. The government has itself established the flimsiness of its excuse that revenue must be foregone in order to subsidise consumer tariffs for spectrum and other natural resources. Another important learning is that institutions must be allowed to do their job free from political pressure. Investigating and estimating losses to the exchequer on account of flaws in policy implementation are very much in the CAG’s domain. Telecom Minister Kapil Sibal’s attempt to discredit the CAG at a press conference in January 2011 by insisting there was “zero loss” from A. Raja’s 2G spectrum sale did as much damage to the credibility of the government as the original audit report. Since the United Progressive Alliance government is reluctant to learn from the CAG — whom it has ridiculed without remorse since November 2010 — or the Supreme Court, whose licence cancellation judgment of 2012 it challenged immediately through three different petitions, it is best that it learn from itself. And the top lesson is this: if due process — including the engagement of an independent regulator and the adoption of a transparent price discovery mechanism — is followed, scams and shame can be avoided.
Keywords: 2G spectrum scam, 2G scandal, A. Raja, spectrum auction price, CAG loss estimate, zero-loss theory
The revenue earned by the govt.has to come from the pockets of the consumers.the telcos
are not going to subsidize the consumer.what is the input from the govt.the industry wii go
the way of airlines very soon
Your editorial has laid bare the claim of Kapil Sibal who in his anxiety
to defend the govenment spoke with his foot in the mouth and instead of
defending landed the govnment in more trouble.Sibal should learn that
politics is not law to knowingly defend falsehood and maintain a small
amount of decorum and truth so long he is a minister.
Thanks to the supreme court of india and CAG the national resourse of india could be saved.The government should take lesson from this act.
We are enjoying 10 p per minute because of first come first serve policy
adapted by then BJP and congress governments.Due to the pressure from
supreme court to auction all the natural resources government is forced
to fix minimum price.I am sure going forward we will see the increase in
the mobile charges.This will affect the poor
Dear Editor,
Right from the beginning UPA is straining every nerve to defend
FCFS policy and to justify Raja's action. Kapil Sibal who is a well known Lawyer was one of those to defend that policy. Tightly cornered by Sardip Desai he was driven to wall in the discusion.
In the heat of moment Sibal went to the extend of prounouncing 'Zero Loss' which ultimately become his nick name as Zero Loss Champion Sibal. Ironically the same Sibal has to eat his theory by subsequent action in his ministry.
For enlightening public in that scenario the contribution by The Hindu is in no small measure. Only two pillars are sustaining our Indian Democracy- One Supreme Court and the other pillar is The Hindu like paper. Ur editorial is hitting the nail on the head. Jai Ho? Carry on ur mission as u did during post independent India.
Yes,if due process — including the engagement of an independent regulator and the adoption of a transparent price discovery mechanism — is followed, scams and shame can be avoided.However if the corrupt elements in the government of the day are after private gains, they will not be taken in by this advice. After all, all corrupt practices do not become scams and the corrupt people know that.
Debunking the govt theory is good but should a reputed and a serious newspaper stop at writing the Editorial? That is the moot question.The Editorial has given a sage advice for the future. but what about the past? How much money has gone down the drain and who were the beneficiaries/culprits? Who will bring them to book, except making A.Raja , a model for future.
Sibal will be famously called Zero Sibal hereafter forever. Supporting him to the hilt and patting the back of A.Raja for his achievement Manmohan Singh has proved himself an Absolute Zero. Long live these zeros. Afterall we are the nation who invented Zero and zeros abound in this hapeless Mahabarath.
Every minister in the Government knew already that there in no ZERO loss.The Mala fide intensions are made public by CAG SC and others.
Under coalition Dharma it is Zero.The purpose of the coalition is made clear.All natural resources are available to them for Zero loss.
Under political compulsions they will not correct. We can not punish any politician for a misleading statement.After all he has done his job perfectly well.The entire system and the people who deal with are to be corrected.Else every minister and the ministers to come will articulate " After all ZERO leave it sir" Political parties are responsible for this chaos.Save India.
As you have rightly mentioned, the GAG has a right to check for errors/mistuse where public expenditure is concerned. Politicians should not undermine agencies such as the CAG. However, if the past is any guide, it is unlikely that people like Sibal will be pulled up their party bosses.
I think the CAG's loss estimate and the present base price fixed by the Govt. cannot be compared, for the CAG's figure is for 2008 and Govt's base price is for 2012.
In the light of the Union Cabinet Decision fixing 2G Spectrum Price, 'Zero Loss Kapil Sibal', who had befcome a Hero during the debate, should now become a Zero. Etiquette demands that he sould resign or be dismissed.
I beg to differ with the editorial. Here the assumption is that the decision of the Govt fixing Rs.14,000crores/5MHz is correct. Only time will tell us how wrong it was. Is there a validated method today to calculate the spectrum pricing? A big NO. All the figures and statements ( including from Kapil Sibal ) are based on unqualified assumptions. Presently the cabinet has taken a safe decision but not a workable one. Wait for a year. 'The Hindu' will say that Govt has goofed up in pricing the spectrum very high.
Excellent piece of editorial. I hope Mr. Kapil 'no loss' Sibal gets to read this!
The government should auction rights to exploit other public and natural
resources, ensuring a decent starting price and ensuring that the big players don't
collude with each other in fixing their bids.
One also hopes that the other big telecom "scam", namely the refusal of Vodafone
to pay overdue taxes related to its acquisition of Hutch will also be settled. It
cannot be permitted that Vodafone is allowed to evade taxes in such a manner
through the use of offshore transactions when the actual object being bought and
sold is in India.
India should condemn to the wastebasket the agreements with Mauritius and UK
which Vodafone is using as a cover. That would also put pressure on the Tories.
After all, Vodafone has also been evading taxes in the UK.
Attracting foreign investment is one thing, but the whole purpose is also that the
foreign investment in telecom brings revenue to the exchequer. Nowhere is this
more apparent than in sectors where FDI seeks to exploit scarce resources.
It was indeed evident that Govt incurred loss due to spectrum sales in 2008. The zero loss flag cannot be flown high by the Government. Am not sure how could The Hindu compare 2G and 3G technology pricing. 3G technology's demand in India is way too low and their reserve, auction price did suffice the telecom operators. Had that been the case for 2G auctions in 2008, the spectrum costs would have been passed down to the consumers in the form of tariff even if the bid amount is amortized for a period of 20 yrs. As a corollary, India would not have been able to boast itself of 800 million mobile users.
Well written article which has laid to rest the Zero loss theory.The
analysis part is extremely professionally done.Kudos to Hindu.I hope
Mr.Kapil Sibal would respond to this.
The CAG can now take up the notional loss calculations on two issues.
1. How much revenue loss is there because the basic income for income tax has been hiked from Rs.3000/=p.a. ( ie in the 60s) to Rs.2,00,000 to-day.
2. How much added revenue would have been earned, if we had adopted the
marginal rate of 90% (adopted sometime during the 70s.)instead of the lower %ges being adopted from time to time.
Well articulated editorial which brings out the hollowness of the arguments of the likes of Kapil Sibal. One cannot fail to notice the incisive and forthright analysis of various events by The Hindu, in the recent past. May be, it is an indication of the changing Times due to change in guard at The Hindu. Well done Hindu!
A well written editorial.There is a moral in this issue that the
government is duty bound to protect scarce state resources and ensure
it does not lead to exploitation by a few groups inflicting losses to
the exchequer.The public stand of the government that revenue
generation from them can be foregone for providing affordable service
to the common man stands repudiated by the govt's revised bid amount
itself.However,it is all the more important that the proposed auction
does not result in the high rates to the disadvantage of users.
The government has decided to sell 5MHz of 2G spectrum at Rs.14000/-
crore. This works out to Rs.2800 crore/MHz. So the Zero loss theory
of telecom minister Mr. Kapil Sibal stands exposed in the sale of 2G
spectrum.
The part of the CAG needs to be hailed. The time has now come that the
CAG should be made a free and independent body
Dear Sir, You just read the fine blog in TOI from Mr. Prashant Pandey - The Real Truth about the matter. Just because govt has conceded to the public sentiments keeping elections in mind, does not prove that CAG's point is absolutely right. And it is all about market penetration and viability of business. Telcos can report losses for few quarter before calling it a day. Just take the example of civil aviation - AI and KF. Just today there is news that Bharti has posted net loss for tenth consecutive quarter. As per your assumption companies may bid with higher prices but at the end of the day they will have to charge more if their procurement charges are skyhigh. So I think from the Hindu editorial itself somebody should write the counterview.
The Zero loss theory of Mr. Kapil Sibal stands exposed. In order to
save his government and his colleague he has over reacted and criticized
the CAG report. He should now take the responsibility and resign as
telecom minister.
Now, Kapil Sibal should respond and am quite interested to see the new theory he is going to bring in to support his stance and blame the CAG for calculating the loss by using a Non-Sibal formula, which will show that 2008 auctions have actually brought tremendous profits to the government.
Exchequer excuses and shocking scams have been a constant challenge
for India.People's participation and role are a necessary for shaping
bright future for India.
Very well said! And, Kapil "Zero-loss" Sibal should be invited to write
an op-ed piece on the current auction price.
An excellent editorial demolishing many “economic and regulatory
myths” being bandied about in the recent past.
Prof Ronald Coase, Econ Nobel Laureate, considered the "father" of
reform of the policy for allocation of the electromagnetic spectrum,
published “The Federal Communications Commission” in the Journal of
Law & Economics back in 1959, and Western countries auctioned their
spectrum. However, the Indian policy makers preferred to use FCFS,
which eventually led to the critical CAG Report and the SC’s
intervention to protect national interest.
The SC has also recommended the auction route for licensing India’s
OTHER NATURAL RESOURCES. Adapting what the Hindu Editorial says, the
guiding principle could be, “Licence Pricing of Scarce Natural
Resources should be determined by scarcity and consumer tariffs by
competition, and if that fails, through intervention of appropriate
Govt Regulatory Authority, accountable to Parliament and subject to
challenge in the SC, if need be.”
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