Sure, Mr Tewari. Let's hang CAG, not Raja, for 2G scam

There must be something grotesque if a political party wants to celebrate its own crowning failures. But that is exactly what seems to be the case with the air of triumphalism Congress party spokespersons have adopted over the flop 2G spectrum auction.

“Mr CAG, where is the Rs 1,76,000 crore?” asked Manish Tewari , as though Vinod Rai is responsible for the auction decisions of UPA-2. One wonders whether the job profile of the Information and Broadcasting Minister has been revised to Misinformation and Propaganda.

Kapil Sibal was equally unsubtle. “It is dangerous to look at the situation in 2010 and relate it to 2008,” he said, again with reference to the Comptroller and Auditor General’s (CAG’s) “presumptive loss” figures on A Raja’s spectrum allocations. Sibal also seemed to fault the Telecom Regulatory Authority of India (Trai) for suggesting such high reserve prices this time around.

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[caption id=“attachment_525957” align=“alignleft” width=“380”]  Has the minister been too premature in his assessment? PTI[/caption]

As for the irrepressible Digvijaya Singh, the less said the better. But this time his comment was the most sober of the lot. “The CAG should reconsider how far its estimate was right with regard to the report which it had earlier given and the losses that it had computed.” Fair enough.

But the aggressive observations of Tewari and Sibal need greater rebuttal.

Tewari asks, “where is the Rs 1,76,000 crore?” The answer is with Kapil Sibal.

The presumptive loss figure relates to 2008, when the economy was growing exuberantly, and the telecom sector was booming.

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Sibal says 2010 should not be compared to 2008, but if one agrees that 2008 was booming more than 2010, one should ask why not?

The answer to Tewari is this: the Rs 1,76,000 crore is missing today because 2012 should not be compared to 2010. In three years, UPA-2 has managed to run the economy into the ground and smash business confidence to pulp. Hence the weak pickings at the auction. When the economy recovers - assuming the likes of Tewari and Sibal want it to - the Rs 1,76,000 crore, or the bulk of it, will reappear at the next spectrum auction.

Moreover, the assumption that the 2012 auction is a complete flop is unwarranted. It is a flop only in the sense that much more revenue was expected from it; it is not a flop when juxtaposed against Raja’s collections in 2008, where he literally gave all-India spectrum at throwaway prices.

As CPM’s Nilotpal Basu told a TV programme: “A Raja gave out 122 licences for Rs 9,200 crore. Thus, the 22 licences which were out on auction this time have already fetched more than what they had got for all the 122 licences then.”

Business Standard puts the auction story in perspective and points out that Delhi, Mumbai and Karnataka accounted for nearly half the total reserve price for national spectrum. These overpriced circles drew no bids whatsoever. The real failure of the auction is thus in these circles alone. Says the newspaper: “The three circles together constituted as much as 48 percent of the total base price of Rs 14,000 crore for pan-Indian spectrum of 5 Mhz… If these three circles are kept aside, the total earnings of the government do not look so bad: The collections are 67.9 percent of the total base price - not really a failure.”

But even in Mumbai, Delhi and Karnataka, spectrum auctions may well succeed the next time. One should not underestimate the power of the telecom lobby that may have collectively decided to stay away to send a message to the government.

The tendency to blame Trai for the high reserve prices is also questionable. Many people believe that Trai suggested a high reserve price in order to avoid attracting the charge that it was trying to favour corporates. Let’s assume this is true, but how does this make Trai the sole party responsible for the auction’s weak earnings?

Trai’s recommendations were vetted by the Telecom Commission, an empowered group of ministers, of which Kapil Sibal was a part, and also the Union cabinet. If, in Sibal’s judgment and that of the cabinet, Rs 14,000 crore for 5 Mhz of all-India spectrum was too high (they had reduced it from Rs 18,000 crore to Rs 14,000 crore), what stopped them from offering Raja’s price as the base price, and letting telcos bid for the balance on the basis of revenue share?

If anyone chickened out - especially after the Supreme Court accepted the government’s argument that auctions need not be the only way of alienating scarce resources - it was the UPA government, including Sibal.

As for Sibal’s other argument - that 2008 ought not to be compared to the 3G auction prices in 2010 - it appears valid at first glance. He has said before that 3G is not viable due to the high prices paid.

But his views have to be taken with a pinch of salt. How did he decide just two years after the 2010 spectrum allocations that 3G is unviable?

When the spectrum is valid for 20 years, is it not likely that the price paid will be profitable over the long term? Especially when 3G is meant more for data than voice - the so-called aam aadmi segment?

Also, what did Sibal do to make 3G viable? His ministry actually prevented telcos from sharing 3G spectrum, making it less viable. If he was so concerned about the high prices paid for 3G, why did he prevent telcos from sharing 3G spectrum by offering roaming services? If 3G spectrum belongs to company A, why can’t it optimise usage by sharing it with company B which does not have spectrum in a particular circle? Remember, a company is only sharing the spectrum it has already paid for. There is no robbery here.

Sibal is clearly trying to eat his cake and have it too.

The chorus of criticism coming from telecom lobbies after the auction flop - a cry taken up by the pink press - is also motivated. Given the stress the sector is currently in - after years’ of Raja’s easy money days - it would like nothing better than cheap spectrum.

As for the UPA, it is now using the partial failure of the auctions to retrieve its political fortunes by claiming CAG’s Rs 1,76,000 crore loss figure as being responsible for the mess. In short, shoot the messenger.

But the reality is different.

The 2G scam did happen. Raja and others are on trial for precisely that.

The PM and the FM did want auctions, but they went along with A Raja’s vicarious plans even when they knew where it would lead.

The country did lose revenue - even if it was not precisely Rs 1,76,000 crore. An auction in 2008 would have given the UPA exchequer at least half that money. Instead it went into the pockets of telcos and possibly the people who aided the scam.

If Manish Tewari had his way, he would rather hang the CAG, not the real scamsters or those who who allowed the scam to happen. He even wanted an apology from the opposition for their campaign over 2G.