2G Spectrum Auction Generates Plenty of Lessons

First, CAG’s astronomical figure – Rs 1.76 lakh crore – flies out the window on being tested on the ground. Booty amassed in 2010 from sale of a restricted amount of 3G spectrum was hardly a realistic revenue-garnering benchmark. This isn’t to say the latest auction couldn’t have scored better, had the reserve price been less eye-popping and India’s investment climate more propitious. But that’s exactly why the government shouldn’t have been bamboozled to rush into an auction, using TRAI’s play-safe floor price. Nor is this to argue that the FCFS policy wasn’t messed with by former telecom minister A Raja. This is merely to reiterate that mobile telephony wouldn’t have soared had we been fixated on maximising revenue.

Second, outrage over corruption scandals shouldn’t blind us to issues of jurisdictional propriety and economic sense. It’s not for CAG or courts to dictate policy. In its response to the presidential reference on allocation of natural resources, the Supreme Court made this clear. Identifying ‘common good’ as the key criterion for resource disbursal, it said policymaking is the government’s turf. Yes, government must work with institutional checks and balances. But institutional overreach can lead to unhappy denouements, as with the lacklustre spectrum auction.

Third, resources are best mobilised through the expansion of telecom which fosters overall economic growth. But the sector can’t grow to potential with exorbitant costs of entry that would mar competition by barring smaller players, financially burden companies and raise prices for consumers. It’s important here that spectrum distribution isn’t opaque, whatever the modality. For instance, single-step e-auctions can work well with safeguards. So can a technology-enabled system where all licensees can access pooled spectrum. What we need now is to focus on practical ways to boost telecom infrastructure and transparency in policy implementation. What we don’t need is sound and fury over controversies blown out of all proportion. As we’ve seen, that only makes policymakers bungle on the side of caution, which chokes off investor feel-good and raises prices all round.