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On the same wavelength

The 2G ruling shows the government and the court think alike on resource allocation.
Hindustan Times | By HT Correspondent
UPDATED ON FEB 02, 2012 09:02 PM IST

By cancelling licences issued by the UPA government to telecommunications companies in 2008, the Supreme Court has ruled against discretion in the allotment of natural resources like radio frequencies. This is in contrast to the view of this government and that of its predecessor, the NDA, that big upfront costs like spectrum fees, which must be passed on to customers, don’t serve the larger goal of universal telecom access in India.

Ergo, radio frequencies need to be farmed out cheap. The court, however, finds the method used by the then telecom minister A Raja to distribute permits tied to bundles of spectrum unacceptable. This is a noteworthy development in Indian policy-making. But while this should lead to a new transparency in policy-making, the question is whether such a decision will inhibit making policy at all. In the country’s current industrial and economic atmosphere, pushing the pause button just to avoid future judicial reproach can be debilitating.

The country’s learning curve in telecom regulation has been steep: it has taken us 15 years to realise that the most efficient way to allot radio frequency, as with any other finite natural resource, is through open bidding. Fortunately, the government has, on its own, come to the same conclusion as the courts. Spectrum auctions are the way forward in a country that has nearly 900 million cellphone subscribers and among the cheapest call charges in the world. From here on, calls are going to cost more and the number of new customers signing up will slow down from the eye-popping 20 million a month.

The older telecom companies, which among them share 90% of the market, will get a chance to stop the insane price war the government’s free-for-all policy had set off. The telecom watchdog reckons not more that 5% of India’s mobile subscribers have signed up with the new players. When the government reverts with a new set of rules, it should squeeze out the spectrum that was traded for equity or is currently being hoarded. These rules will have to address the genuine grievance of the foreign partners of new telecom companies that paid top dollar to get into one of the hottest markets in the world.

The lower courts will now go into fixing accountability within the government for undue favours in the ‘first come-first served’ licences of 2008 while investigators are to hand over their evidence to an independent anti-corruption cell. Thursday’s two other decisions signal the court’s intent to conduct the trial transparently. The UPA argues the decision was isolated to Mr Raja, who, along with his predecessor Dayanidhi Maran, engineered the necessary concentration of powers in the telecom ministry that allowed them to exercise wide discretion in the grant of licences.

On his part, Mr Raja has argued that all decisions he took had kept the entire Cabinet in the loop. The trial court could ask P Chidambaram to explain why as finance minister in 2008 he did not insist that spectrum be auctioned to start-up telecom companies, establish whether the government has been able to limit its embarrassment.

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