Make the right call

Smooth the way for telecom auctions instead of introducing new issues like refarming

The essence of an auction-based allocation of scarce natural resources is the discovery of a fair price for all. Any concomitant rise in the revenue of the state is an added benefit. The concern the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, has expressed on telecom spectrum allocation in a note to the EGoM must be seen in this context.

As Ahluwalia has pointed out, the entire exercise of the upcoming auction in November stems from the Supreme Court judgment of February this year, when the court overruled the allocations made by former telecom minister A. Raja, freeing up the airwaves for fresh allocation. But the move has already been complicated, first by the Trai and then by the EGoM, with the insistence on a high reserve price for the auction. This scenario has been further complicated by the proposed decision to refarm spectrum. The government is considering asking companies that occupy the 900 Mhz spectrum to vacate it in favour of the less efficient 1,800, the rationale being that the price that companies like Bharti, Vodafone and Idea paid for the 900 band earlier is far less than that discovered in the 3G auctions, hence it must be reset.

Ahluwalia has not said so, but refarming can vitiate the upcoming auction. This would mean that the government will earn far less than the Rs 40,000 crore it had expected to in this fiscal as companies will bid lightly at the auction to conserve resources for the more bitter fight over refarming later. But even on principle, this is a subject the Trai has touched upon only obliquely and one that needs to be debated in detail. The time available is admittedly short — a year and a half — but that can be no excuse for not going through the process as it has huge financial implications. The refarming agenda does not serve the interests of the government in terms of generating money through the auctions; it does not create an incentive for the companies to invest more in the sector as their surplus gets savagely cut and, whatever the outcome at this stage, is guaranteed to keep one of the lobbies unhappy. Most of all, since the state-owned MTNL and BSNL will lose about Rs 22,000 crore, it penalises taxpayers too.

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