The auction bomb of 2G spectrum for telecommunications stands practically defused now. The two-day auction of the 2G mobile phone spectrum has proved to be a flop show measured even on the government’s yardstick. Notwithstanding that the UPA government wanted the auction to be a flop show, the establishment is surprised itself with the outcome of the auction. But, it is unhappy for another reason.
The UPA government had its hopes pinned on the auction amount to meet its target of keeping the fiscal deficit at 5.3% of the GDP in 2012-13. It expected to earn Rs 40,000 crore the least from the auction of 2G spectrum, but it could not fetch even Rs 9.5 thousand crore. Nonetheless, the UPA government stands vindicated on the presumptive loss figure of Rs 1.76 lakh crore as calibrated by the Comptroller and Auditor General of India in 2010. It has always maintained that the CAG’s figures were wrong.
The above paragraph explains why the government has been rather circumspect in responding to the low earning from the auction. But, the attack on CAG’s authenticity is only round the corner. It may come from either the ministers or the Congress party or pro-government media houses. However, we need to think before criticizing the CAG over the poor interest shown by the bidders in the auction of 2G spectrum licences. Too much water has flown under the bridge since 2G spectrum bomb exploded some two years ago after a CAG report.
The CAG calibrated the loss due to government’s policy for not opting bidding to allocate 2G spectrum based on the market situations and realities of 2008; and, the CAG did its calculations in 2010. But, since then, the market’s concept and preferences vis-à-vis future of mobile phone communications in India have undergone a great change. 2G spectrum is now a thing of the past and future gains cannot be big when 3G technology is already there and 4G is creating a new buzz. The same companies, which either bid at a lower price or stayed away from the auction, may (definitely) have behaved differently in 2008. And, the fierce competition would have been witnessed had the same policy been adopted in 2008, giving the same UPA government handsome amount of money to fight its ever worrying fiscal deficit.
Some people in the UPA ladder understand this conundrum genuinely. This may be the other explanation why the government has not gone out lambasting the CAG like it did in the recent past after the auction of 2G spectrum. Moreover, the low bidding prices are being attributed to perceptively high base price set for different circles in the auction.
Of all the 14 circles put on auction, mega-circles of Delhi and Mumbai attracted no bids at all. Interestingly, Delhi and Mumbai account for more than 40% of the total earning from the mobile phone communications. The base price for these two circles was Rs 14,000 crore for 5MHz of 2G spectrum. Moreover, none of the companies, which took part in bidding, bid for pan-India spectrum for which the reserve price was set at Rs 14,000 crore. It further reflects telecom companies’ mindset towards Indian mobile phone communication market.
So, before concluding that the CAG had wrongly and deliberately calibrated the loss figure (at Rs 1.76 lakh crore), must bear in mind the market realities of 2008.
