Auction, reaction: SC view gives Kapil Sibal no reason to gloat

There is nothing more unsightly than a suppressed smirk, and nothing more grating than the self-righteous gloating of those who have nothing to gloat about.

Within minutes of the Supreme Court bench giving its opinion on the government’s reference to it asking for broad-sweep clarifications on its policy of allocating natural resources, Kapil Sibal (he of the infamous ‘zero loss’ theory) was in front of the cameras to claim that the ruling had provided “enormous clarity” on the issue, on the basis of which the government can “now start taking decisions without fearing that there will be interference from other Constitutional authorities.”

In his defence, Sibal cited the bench’s observations that policymaking (in respect of how natural resources were allocated) was, and ought to remain, in the domain of the executive; that auctions are not the only way to allocate such resources, and in fact in some cases ““mandatory auction may be contrary to economic logic”; and that revenue maximisation ought not to be the only policy objective in allocating natural resources.

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[caption id=“attachment_466160” align=“alignright” width=“380”]  Kapil Sibal is being more than a little disingenuous in interpreting the Supreme Court’s observations on the UPA government’s policy. Reuters[/caption]

On the face of it, those are points of view that may appear to validate Sibal’s - and the UPA government’s - argument in response to the flaming criticism that the government has been subjected to over its allocation of 2G spectrum licences and, more recently, the coal block allocations. In particular, Sibal’s reference to “interference” from “other Constitutional authorities” is intended to score polemical points against the Comptroller and Auditor-General, whose reports in both the 2G case and the coal block allocation laid bare the scams.

Yet, the entirety of the Supreme Court’s observations on Thursday actually damns the manner in which the UPA government went about allocating scarce natural resources in both the 2G case and the coal blocks cases. And the bench has expressly stated that if the government’s policy is challenged legally on grounds of criminality or arbitrariness, “the courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are_ultra vires_and_intra vires_the provisions of the Constitution.”

In both the 2G case and the coal block allocation, the allocation process was characterised by criminality and arbitrariness. Telecom Minister A Raja shifted the goalpost for the cut-off date for allocation of spectrum licences and was criminally complicit in the unjust enrichment of some of the licencees, and personally profited from the exercise. Everyone from Prime Minister Manmohan Singh downwards knew that much mischief was afoot, at great loss to the exchequer, and yet did nothing to stop him, which in the broadest definition under the Prevention of Corruption Act, render them just as culpable.

Likewise, in the coal block allocation too the “common good” that the Supreme Court cited as the benchmark to determine constitutionality of the allocation process was not at all served by the manner in which it was done. And here too, there was unjust enrichment on the part of private operators, including some fly-by-night operators who had no prior experience of operating in the mining space. Most of them leveraged their political connections - across the spectrum, from the Congress to the BJP to other regional parties - to secure the coal blocks, and profited enormously, without any “reciprocal consideration” (as the Supreme Court said) accruing to the government or to the common good.

As Firstpost has argued earlier ( here , in the context of the Supreme Court judgement of February 2012 cancelling 122 telecom licences), India’s experience of experimenting with both the First-Come-First-Served route for allocation of spectrum and the auction route - as a way of realising revenue from the sale of scarce natural resources, right from the early 1990s, makes for a nuanced narrative. Any policy of a certain time must be judged on the basis of the objectives that it sought to achieve, and the manner in which it was implemented. And, as we argued then, in cases where auction is not the preferred route, if the government had been transparent in articulating both its policy objectives and the the process of allocation, it could have averted the taint of corruption.

In both the 2G and the coal block cases, the “common good” was ill-served by the manner in which the government went about the allocation; and, yes, there was criminality and arbitrariness in both the cases.

The “vindication” of the government’s case that Sibal and others cite - in respect of the proper domain for policymaking, the fact that auctions may not always be in the best interests of achieving a stated policy objective, and so on - comes through only in areas where there is no real dispute.

It was no one’s case, least of all the Supreme Court’s or the CAG’s, that policymaking lies in any domain other than the executive. It is only because the UPA government’s policymaking (in both the 2G and the coal block allocation) were patently shown up to be both criminal and arbitrary that the “interventions” by both the Supreme Court and the CAG were warranted - and justified

And Sibal is being more than a little disingenuous to claim that the Supreme Court’s observation validate the government’s decision not to go in for an auction. Justice Jagdish Singh Khehar observed on Thursday that “auction, which is just one of the several price discovery mechanisms, cannot be held to be the only constitutionally recognised method of alienation of natural resources.” But in his very next sentence, Justice Khehar noted: “That should not be understood to mean that it (auction) can never be a valid method for disposal of natural resources.”

That’s exactly what Sibal appears to be doing: invoking the Supreme Court’s measured view on the context in which auctions make sense (and where they don’t) to claim that auctions are invalid in their entirety.

The Supreme Court’s observations of Thursday are a finely balanced critique of the government’s policy. If today the government were to go about allocating spectrum and coal blocks in precisely the manner in which it did would undeniably be hauled over the coals today too.

The Supreme Court’s opinion gives Kapil Sibal or the UPA government nothing to gloat about. Perhaps he should wipe that half-smirk off his face.