How to kill an auction

The government wasn't in favour of auctions — Trai's sharp hike in base rates ensures auctions won't happen

The drama of the telecom sector continues. Telecom regulator Trai recently announced reservation prices for 2G spectrum, the very same spectrum that has been the focus of everyone's attention for the better part of the last two years. In order to understand what Trai has conceived, a bit of history.

In India's days of innocence a few years ago, licences were parcelled out as favours, and at throwaway prices. In other words, corruption was rampant, and arrogant, that is, I, as a government minister and/ or bureaucrat, can do what I want, and catch me if you can — but you won't succeed. Then along came the details about the 2G licences handed out in 2008, and handed out for a pittance. In September-October 2010, two corruption scams broke out near simultaneously — out and out corruption in the staging of the Commonwealth Games, and the CAG report on 2G licences.

For reasons quite unknown, but possibly political, the CAG took a valid story and facts about corruption and blew it out of proportion. In particular, the CAG report alleged that Rs 1.76 lakh crore was lost to the government because of not holding an auction. Nobody ever lost money questioning the mathematical competence of the CAG, a bet that was validated when the CAG issued a report on the money lost to the government by the handing out of coal licences. This time, going by the motto "angels never fear when alleging corruption, so the largest imaginable size is best", the CAG calculated that Rs 10.7 lakh crore was lost to the government. Where did this money go? In the hands of evil capitalists, of course.

In the case of 2G spectrum, most calculations of loss centred around Rs 30,000 crore, or one-sixth the CAG amount. In the case of coal, saner calculations suggest that the money "lost" due to non-auction was about 5 per cent, or one-twentieth the alleged CAG size. The slippage, from one-sixth to one-twentieth, may have been due to a new entrant into the "imagine the level of corruption" contest — the Supreme Court.

... contd.

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