2G Auction: Think before you criticize CAG

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.

Sonia Appears Before Gandhi

Congress president Sonia Gandhi made her first public appearance on Sunday after her surgery in the United States recently. Along with Prime Minister Manmohan Singh, the UPA chief paid homage to Mahatma Gandhi on his 142nd birth anniversary at Rajghat.

Sonia returned to India on September 08. Since then, Sonia had avoided public meetings and functions even though the UPA government witnessed a bitter clash between two of its senior ministers. She dealt with the crisis but stayed away from public giving rise to speculations that Sonia may be planning to pass on the mantle of the party to her son, Rahul Gandhi. Sundayz public appearance is being viewed as a signal that Sonia is still at the helm of the affairs both in the congress party and the UPA.

Sonia Gandhi is still recuperating from her surgery, but she has got herself into handling issues plaguing the Manmohan Singh govt including infighting and court developments in 2G scam and cash for votes scandal. Sonia is said to be working on alternate plans for a possible adverse court judgements post-Dussehra vacation, when hearing on several scams resume. The forced patch between two senior cabinet ministers over secret 2G note, effected by Sonia Gandhi last week was part of her alternate plans to navigate the government's ship through the turbulent waters of scandals and scams.

Sonia Gandhi's partial resumption of party work and her first public appearance at Rajghat on Mahatma Gandhi's 142nd anniversary comes at a time when the opposition is going berserk in its criticism of the scam tainted UPA government. Her public appearance also came a couple of days after Prime Minister Manmohan Singh alleged that there are forces at work to destabilize the government. With this in backdrop, Sonia Gandhiz appearance before Mahatma Gandhi's samadhi seems to be an attempt to make an emphatic statement that she is not losing grip over nation's politics.

Sonia Gandhi had given indications of taking command of the party affairs some days ago itself when she summoned Rajasthan Chief Minister Ashok Gehlot in the wake of Bharatpur communal violence and two state ministers being dragged into controversies surrounding women, one of them is traceless while the other has died. Also, Sonia Gandhi called on Lok Sabha speaker Meira Kumar last week, which according to sources yielded into Kumar giving sanction to prosecute BJP MP Ashok Argal in the cash for votes scandal. Clearly, Sonia wants to put her message in a very straightforward style, that has been typical of her in past two decades.

2G Scam: Manmohan Presides Over Corruption

Corruption has coexisted with governance since time immemorial. India has witnessed royal corruption throughout its history of administration. Favouritism and manipulation have always kept the stirred up the recipe of politics in the country. So, it was nothing new the the two successive UPA government resorted to the same age old (mal)practice of governance. And, there are many, including the public perception, saying that the Manmohan Singh's government is the most corrupt government post-Independence. The allegation does hold some water. Manmohan Singh's government has seen scams after scams at a pace that had been unprecedented. The NREGS scam, the NHRM scam, the CWG scam, the cash for votes scam, petroleum scam, the Air India scam etc etc and above all the 2G spectrum scam.

Let's focus on the 2G scam with a general background of the spectrum that finds itself in the centre of a huge controversy. Spectrum is an invisible band in atmosphere. It behaves in a certain way depending on the radio character of the waves passing through or hitting it. The scientists, say at ISRO or DRDO, spend crores of (tax payers') money to understand its behaviour in different bands and then they develop mechanism to use the bands or spectrum in the sky for all types of communication. Once created, the band is available for all but for costly technology it is controlled by govt through laws. The government has its own mechanism to let people derive benefit from this discovery made out of their money paid to the government through taxes. The mechanism involves an interface, we can call it telecom service providers or big corporate houses. They are given licenses to use a certain space in the spectrum (by means of frequencies) for operating their business of telecommunications. They provide service to people and then charge money for the same. Interestingly, people pay again for using something they have already paid for its creation! But, this is how governance goes.

In 2G scam case, the government had distributed band widths among the telecom companies on the basis of first come first serve principle. Such a principle is good for things that hold no price. The government, including the previous regime under Atal Behari Vajpayee, considered spectrum as just invisible object and is of no value (conveniently) ignoring the well known fact that the companies will mint money by facilitating chats among people. Auction was another option before the government, but it preferred to consider the spectrum created after investing people's money as an ordinary object. Just to digress, I would like remind people of the power of auction by recalling the same at the IPL auction. Had the government resorted to the second option, it might have recovered a good part of the investment made out of tax payers' money or might have afforded to give some relaxation to the populace by announcing some tax relief to them.

But, when alter things (agendas) prime the considerations, even the most common wisdom takes the back seat. The same thing happened with the 2G spectrum allocation. And, the CAG of India calibrated that the process or the dereliction of duties by the government has had cost the nation, the tax payers an income of about Rs. 1.76 lakh crore. Now, this was a huge amount that the collective wealth of the nation was deprived of. Government argues that the CAG calculations are not sound and whatever loss was incurred to the exchequer was only imaginary or virtual. The government did not have the money in the first place, which the CAG talked about. True, that the government never had that money in question. But, it is also true that the government was denied to have that amount of money by those running the government. But, then again, the people running the Manmohan Singh government are not honest enough to admit that they caused the nation a loss to the tune of what calibrated by the CAG, the most authentic audit body in the country.

Two things are more shocking in the entire episode. One, that Prime Minister Manmohan Singh let all this happen while every decision was approved by his cabinet. Secondly, Manmohan Singh is widely hailed as an able economist but surprisingly, he presided over the greatest loot of virtual money in India during his tenure as the Prime Minister. The changing organizational structures of the 2G spectrum allottees (companies) betray either the short-sightedness or culpability of the Manmohan Singh government. The latest secret note (which was seen and approved by Pranab Mukherjee) from the finance ministry to the PMO and former telecom minister Dayanidhi Maran's letter to the prime minister have broken the shield of defence of the entire UPA machinery.

In this context, Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee is holding an all important meeting tonight, ironically in the United States. Pranab Mukherjee's tussle with P Chidambaram is well known in the inner circle of the UPA establishment. But, ever since the spat came out in the open over the issue of 2G scam has eroded the thin crust of credibility to this government. Pranab Mukherjee has sought and got couriered (as reports suggest) a bunch of files related 2G spectrum allocation from his ministry all the way to New York. This meeting between the two topmost leaders of the country on perhaps the biggest scam at venue outside the country speaks volume about the mess that the UPA government presently finds itself in. The Prime Minister and UPA chairperson, Sonia Gandhi must be making all efforts to keep the 2G taint away from their respective offices. It is really tough on the economist and presumably honest prime minister to preside over perceptibly the most corrupt government ever.