2G: Sibal and FM are eating their cake and having it too

The government, it seems, wants to eat its political cake on the 2G scam and have it too. This much is apparent from yesterday’s press conference addressed by Finance Minister P Chidambaram and Communications Minister Kapil Sibal.

To vindicate itself politically on the 2G scam, the UPA needs to emphasise three things: one, that the high reserve prices set for the recent spectrum auction were the main reason for their apparent failure; two, to justify the gifting of spectrum by Andimuthu Raja in 2008, the government has to keep maintaining the fiction that revenue maximisation is not a goal; and three, to confuse one estimate of presumptive loss by the Comptroller and Auditor General (Rs 1,76,645 crore ) with money that may have been paid as bribes in 2008.

[caption id=“attachment_526725” align=“alignleft” width=“380”]  Clearly, the idea of holding another auction this financial year is being driven by the need to maximise revenue. AFP[/caption]

However, reality-the exchequer’s empty coffers- is dragging the government in a different direction. To make ends meet, revenue maximisation has become UPA-2’s key goal. This is why Chidambaram and Sibal-despite blaming the flop auction on the CAG-want to continue holding more auctions, and all within this financial year.

More from Business

Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors How Indian fintech startups are driving Malaysia’s UPI-like digital payments revolution

If the time is not right for a successful auction right now, why hold another auction again in the same set of economic circumstances? Why not wait till the economy improves? May be next year?

Chidambaram is quoted by Business Standard saying: “The auction process has not ended. There will be another auction for the unsold spectrum before March 31. We are hopeful we will be able to achieve the target.”

Clearly, the idea of holding another auction this financial year is being driven by the need to maximise revenue-something Sibal has been at pains to deny. Conscious of the fact that the Rs 40,000 crore revenue target from spectrum auctions will not be met unless more spectrum is sold, the finance ministry wants to meet the target even in a bad market.

Impact Shorts

More Shorts

Tata Harrier EV vs Mahindra XEV 9e: Design and road presence compared

As Trump weaponises tariff, Fed sees a bigger worry: Not jobs, but rising prices in America

Next, there is a pretense that the recent auctions failed due to high prices. Let’s start by accepting this assumption, since it is clear that the government raised only Rs 9,407 crore, and even this won’t come in fully because bidders are allowed to pay the money in instalments.

But Sibal had different things to say at the press conference. The government, he said, got more than Rs 9,407 crore. And before the year is out, it will get all it wants. According to Business Standard, Sibal said the government actually raised Rs 17,343 crore from the auction of 1,800 Mhz spectrum in 18 circles when combined with the one-time fee in those circles (Rs 9,407.64 crore plus Rs 7,936 crore).

Sibal also said the combined value of unsold spectrum in the 1,800 Mhz (GSM) and 800 Mhz (for CDMA) bands and the refarming of 900 Mhz spectrum would be Rs 62,000 crore at the base price. He was quoted as saying: “Even if we get 50 percent of this value at base price, it would give us between Rs 25,000 crore and Rs 30,000 crore. That will be good enough for us to meet the target,” he said.

So Sibal is blaming high prices for the failure of the auctions, and simultaneously claiming success due to the one-time fee which is equally high, and claiming further that he will get even more money in future using the same high prices. How contradictory.

So are prices high or low? If he expects to make more revenues from the current high reserve prices, how is it possible to blame the media and CAG for pushing the government towards high prices?

Sibal is clearly running with the hares and hunting with the hounds.

Sibal also took the mandatory potshot at the CAG and the media. “We cannot extrapolate figures and sensationalise them, because by doing so, we ended up destroying the hen that laid the golden eggs. This resulted in what we saw a few days ago,” The Economic Times quotes him as saying. So, policymaking is “best left with the government”.

He just said he expects to earn more revenue from spectrum auctions, but now blames the CAG or the media for killing the hen which lays his golden eggs. If the hen is being killed, why not postpone the auctions till the bird gets better?

And since when did CAG or the media dictate UPA policy? Wasn’t the decision on the base price decided by the UPA government? If Sibal is claiming that media and CAG pressure forced the government to do what it did not believe in, it is tantamount to saying policy is being driven by public pressures alone. Can any government expect to evolve policy by wishing away the public?

In 2008, coalition pressure from the DMK forced the UPA to do the wrong thing on spectrum - which is what the CAG report pointed out. In 2012, Sibal would like to blame the CAG and media sensationalism for what he believes is the wrong price, but still wants to use the same price to earn revenues.

In one press conference, Sibal and Chidambaram have managed to claim the auction reserve prices were too high but they may still raise more money at this price; that the auctions were a flop, but not that big a flop; and that revenue maximisation cannot be the only goal but it is still the goal this year in view of the fiscal deficit.

Sibal also did a Manish Tewari by placing a red herring across our paths. “Where is the Rs 1.76-lakh-crore scam everyone was talking about some time back?” In asking this, he is trying to mix up three issues: the corruption that may be involved in Raja’s spectrum allocations, the estimated revenue loss figures in 2008, and the failure of the current auctions due to bad economic conditions.

The CAG report mentioned the Rs 1.76 lakh crore figure as one of its four estimates of potential revenue loss in order to goad the government towards market-determined pricing (Read what the CAG really said here ).

The government is clearly taking the CAG’s message, but is still inclined to shoot him.

The meaning of the government’s contradictory positions is this: it wants to pretend there was no scam in 2008. The scam was invented by the CAG and the media. It is still in denial of reality.