Government to blame for 2G auction flop

Published: 15th November 2012 11:20 PM  |   Last Updated: 15th November 2012 11:20 PM   |  A+A-

As against the target of Rs 40,000 crore, the latest 2G spectrum auction fetched only Rs 9,407 crore. This is much less than the reserve price of Rs 28,000 crore fixed by the telecommunications ministry. Poor response to the 2G telecom spectrum auction is bound to make it difficult for the government to keep in check fiscal deficit and meet the revised target of 5.3 per cent of the gross domestic product (GDP) in 2012-’13.

Unfortunately, instead of doing a genuine soul searching to find out what went wrong and why, the government has sought to use its flop show to score brownie points against the Supreme Court for asking it to allocate the telecom spectrum only through auction and the Comptroller and Auditor General of India (CAG) for its assessment of loss incurred by the government through the opaque process of allocation adopted by former communications minister A Raja. While present incumbent Kapil Sibal has claimed that the government would have received more attractive bids if it had a free hand in policy-making, Union information and broadcasting minister Manish Tewari has lampooned the CAG.

This is perverse logic. The government’s failure to attract bidders does not mean that the auction itself is an imperfect mode of resource allocation. The auction failed because of the government’s inability to understand the current market. Things would have been better had the government been more sensitive to the current market realities. It erred in not putting on auction the entire spectrum freed up by the apex court and ended up setting an unrealistically high base price in a hurry to make up for the resultant shortfall in revenue. If the government has failed to realise the revenues that were projected, it has only itself — and not the auction process — to blame. A flop auction does not mean that there was no 2G scam. Nor does it mean that the CAG’s estimates about the losses, which were based on the 3G auction of 2010 — the best available benchmark at that time — were imaginary.

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