The 2G verdict


I had blogged before as how government botched a great opportunity by auctioning 3G spectrum. Today Arun Shourie, in his analysis of the SC and HC judgements with respect to cancellation of 2G licenses and Chidamberam’s role in it tells us how government must decide the policy.

Consider, drinking water – it is scarce in every city of India. Should it be auctioned? Should water flowing down the Rajasthan Canal be auctioned? Should uranium – extremely scarce, be auctioned? But the point seems to be that resources with which are with government, which are scarce, and which are being transferred to private entities should be auctioned. Consider, seats in IITs, IIMs, – all extremely scarce – all to be filled by private individuals, to be auctioned?

Or loans from nationalized banks to private companies. You want them auctioned? Or lifesaving drugs produced or imported by government companies? Or beds in AIIMS hospital? Hence, I do think that if the observation of the court is to be taken to be a general prescription of policy, it is too simple.[Source]

Shourie again enlightens us as to what is meant by “policy” the word which we so loosely use.

First, FCFS is not a policy. It is just a rule for administering a licensing policy. The policy would be whether government should seek to maximize tele-density and thereby ensure the boons that flow from it, or it should to maximize revenue.

Note that when CAG said that 2G policy caused loss of Rs 1.7 Lakh crores it was assuming that maximizing revenue should have been government’s policy. Obviously the CAG was wrong. Government is free to consider the other policies which had objectives other than maximizing revenue. The problem was never with the FCFS the problem was that Raja did not follow “any” policy.

In case of 3G the government followed revenue maximization policy. Government got money to hide it’s fiscal poor performance but the society has lost. Had this been sold cheaper to the player promising better technology and unlimited plans, today we could have built a few billion dollar industry on top of it.

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