If there is one event that has
obliterated all trace of constructive
decision-making in India it is the 2G scandal.
Former cabinet minister and present Tihar Jail
inmate, Mr Andimuthu Raja, has succeeded in
paralysing the central government in ways that no
other politician has in the post-independent history
of the land. His selling spectrum at artificially
low prices on a ‘first-come-first-served’ basis has
not only landed him in jail since February 2011 —
which is of little consequence to anyone except
himself — but also put an end to all sensible
A stellar example of senseless, risk averse
posturing that is the recent note of the Telecom
Regulatory Authority of India (TRAI) regarding the
auctioning of 2G spectrum. Nothing could be more
absurd and deleterious to the growth of mobile
telephony in India.
Let’s step back a bit. On 3 February 2012, in
response to writ petitions filed by Subramanian
Swamy and others, a two-member Supreme Court bench
comprising Justices G.S. Singhvi and A.K. Ganguly
scrapped mobile network licences issued after 10
January 2008. After making a somewhat doubtful case
that any alienation or transfer of all scarce
natural resources owned by the State must
necessarily be done through auctions, the learned
duo went on to declare 122 mobile licences illegal
and had them quashed. They also opined that the
cancellations must be operative in four months; and
that within two months of the judgement the TRAI
must recommend how to grant licences for
re-allocation of such 2G spectrum by auction, as was
done in the case of 3G.
On 23 April 2012, Dr J.S. Sarma, Chairperson of the
TRAI, submitted the Authority’s recommendations.
Shorn of tedious and repetitive details, the TRAI
has suggested a reserve price of Rs.3,622 crore for
each mega-hertz (MHz) for the 1800 mega-hertz (MHz)
band pan-India spectrum. This is almost ten times
the January 2008 price at which 2G licences were
bundled with 4.4 MHz spectrum under Raja.
Moreover, the TRAI has suggested that bundles of 5
MHz of spectrum should be allotted for each auction.
Thus, if the government were to follow the TRAI’s
recommendations, pan-India spectrum in the 1800 MHz
band will command a reserve price of Rs.18,110 crore.
This is absurd on two counts.
First, the price per MHz is ridiculously high — not
only compared to what was paid in January 2008, but
also in relation to the economics of the mobile
telephony business in India. At that price, it will
be almost impossible for operators to make the
profits needed to ensure an adequate return on
capital. Second, the spectrum size is inadequate,
which arises out of bundling bids into 5 MHz lots.
In plain English, what the TRAI has suggested is a
very high reserve price for a relatively small
bundle of spectrum. Why so?
There is no reason to believe that Dr. Sarma of the
TRAI is an unlettered man. That brings me to an
interpretation which might accurately describe the
state of play for all key government decision-making
processes since Raja and others were sent to the
Today, the two cardinal norms among bureaucrats in
Delhi are: (a) “It is seriously unsafe to stick your
neck out and say the truth, even if it ultimately
beneficial for the nation”, and (b) “Doing the right
thing will get you no kudos. Instead, you can get
whacked by the Central Bureau of Investigations, the
Comptroller and Accountant General, the Central
Vigilance Commission or the Supreme Court. Doing
nothing is safer. You will still get promoted, and
peacefully receive your pension.”
Dr. Sarma is very close to retirement. He has seen a
cabinet minister and a secretary to the Government
of India languish in jail. He doesn’t want to rock
any boat, real or mythical.
So the best tactic is to recommend a high reserve
price for the auction. That way, nobody can blame
Dr. Sarma for being ‘soft’ on the industry. By being
holier than God, he has removed the Damoclean sword
hanging over him and can expect to live a quiet
retired life after 37 years of service as an IAS
officer. It is a different matter that the
recommendation will pole-axe the industry. That’s
his successor’s problem.
But his successor can’t be expected to make the
recommendations more sensible. That will not only
change a high government revenue outcome, however
improbable it might be, but also be construed as
being ‘business friendly’ — which is not what any
civil servant wants to be today. Changing the
decision will need huge political guts, which is
abundantly absent in New Delhi.
No doubt, mobile telephone providers and subscribers
alike will be shafted by the TRAI pronouncement.
Telecom will be badly hurt. But the babus will be
safe. That’s what matters today more than anything
else. So much for India’s manifest destiny!
Published: Business World, May