Companies & Sectors
Spectrum auctions are crucially flawed, says Kapil Sibal
 Trust an ex-telecom minister who is also a legal eagle -- an attribute he shares with current incumbent Ravi Shankar Prasad -- to point out a "crucial flaw" in the on-going spectrum auctions.
 
Kapil Sibal says this is "a government of hiccups, that doesn't think things through and has come up with a flawed auction design".
 
He says his mobile phone drops calls on an average of four times during the few kilometres journey from his Supreme Court office to his current home in central Delhi. 
 
"This didn't happen earlier" when he looked after the ministry, Sibal told IANS. "It is because telecom infrastructure is severely over-stretched, and with the government taking all the money upfront, there will be even less available for building infrastructure," he said.
 
The crux of the problem, he says, is in the current auction where high base prices may mobilise large revenues for the government and may be seen as successful. But there is a flip side to this in the form of resource commitments by companies to buy scarce spectrum and the added pressure on an acutely stressed larger financial system. 
 
"The telecom sector is hugely in debt to the extent of Rs.3.4 lakh crore. Now, in paying for the high spectrum prices, there'll be no money for investment in infrastructure," the former minister said.
 
For instance, state-run State Bank of India has lent around Rs.40,000 crore to telecom companies. 
 
In the current ongoing auctions, Idea Cellular is said to have already committed Rs.30,000 crore. It is followed by Vodafone, at around Rs.24,000 crore, and Bharti Airtel at Rs.21,000 crore. They are among the eight companies that are bidding for spectrum.
 
"With such massive commitments, the companies won't be able to pay back to lenders, who then have to restructure these loans. Such bids would lower return on equity and force firms to raise call costs," Sibal said. 
 
The load on the larger system can be gauged from the fact that non-performing assets (NPAs), or distressed debts, of public sector banks rose to 5.33 percent of total advances in September 2014, from 4.72 percent in March 2014. 
 
Stalled projects have been adding to banks' NPAs and the finance ministry's latest Economic Survey says that, as in December-end, these amounted to Rs.880,000 crore-worth. 
 
Analysts estimate a drop in earnings of up to 33 percent for Bharti Airtel and Idea Cellular in the 2017-18 financial year, owing to the cost of renewing their airwaves in the latest auctions.
 
He pointed out how, instead of consolidating defence and commercial spectrum into discrete segments, the government is selling tiny slices of bandwidth across a wide range, thereby creating scarcity and driving up prices. 
 
It comes down to a question of models and of choices being made, Sibal says. 
 
"Auctioning will bring you more revenues, but it is not the only model. A government can also not choose to take all the money upfront and opt for production-sharing model over time, like there is for oil exploration," he said. 
 
Underlining that a government's main objective should be to increase production and generate employment, Sibal said the industrial policies of many Indian states are based on giving land at subsidised rates for industry.
 
"If auction is the only model, why don't they auction school land... Punjab is a good example where for industrial development, a lot of land was given at very subsidised rates.
 
"There are many countries where resources are not auctioned. The Chinese boom wouldn't have happened if the government didn't give land free to enterprises so that they could invest fully in production," Sibal said. 
 
Lamenting that the days of cheap mobile telephony were over, which could put paid to the country's mobile telecom revolution, Sibal said these auctions had sacrificed public good, which is the objective of governance.
 
"I have never said that the government will not earn more by auctions, of course it will, but that cannot be the objective. The government has to work to achieve the maximum benefit to help achieve the ends of public good."

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COMMENTS

Suketu Shah

2 years ago

Nice joke by Sibal.

Fadnavis sitting on ministers' assets details: RTI activist
Maharashtra Chief Minister Devendra Fadnavis is yet to take a decision on making public his cabinet members' declarations of their assets and liabilities,117 days after his government took office, an RTI activist said here on Wednesday.
 
"Transparency and clean governance were the two prime agenda on which the Bharatiya Janata Party-Shiv Sena government was formed in the state. However, nearly four months after assuming office, the twin agenda is being flouted by Fadnavis himself," said RTI activist Anil Galgali.
 
According to Galgali, information on the cabinet members' assets-liabilities was sought under Right to Information Act from General Administration Department under-Secretary D.K. Naik, who declined to provide the details on grounds of "non-availability".
 
"Since the same practice is followed at the Centre by Prime Minister Narendra Modi and also in Bihar, I again wrote to the state government demanding that the assets/liabilities details be posted online in public domain. Till date, there is no response from the government in the matter," Galgali told IANS.
 
Naik replied that Galgali's RTI query was lying with the Chief Minister's Office (CMO) in Mantralaya and would be made available only after Fadnavis' decision in the matter.
 
Galgali said all the current 18 cabinet ministers and 12 ministers of state, including the chief minister, have to declare their assets-liabilities to Governor C.V. Rao.
 
"My letter on November 14, 2014, and a reminder on March 9, 2015, to Fadnavis is pending in CMO since November 27, 2014. This is clearly a violation of the Citizens Charter and Right to Service Act," Galgali said.
 
Interestingly, he pointed out how he had pursued the same issue with the previous Congress-Nationalist Congress Party regime headed by then chief minister Prithviraj Chavan.
 
"Only the names of the ministers came in the public domain, not details of assets-liabilities as Chavan was against making it public. The new BJP-SS government elected on the plank of transparency and clean governance seems to have continued the same policy," he said.

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Hooda government favoured Vadra in land deals: CAG
The CAG has blamed Haryana's previous Congress government led by then Chief Minister Bhupinder Singh Hooda for showing undue favours to Robert Vadra, the son-in-law of Congress president Sonia Gandhi, in his multi-million rupee controversial land deal with realty giant DLF.
 
Vadra's company, Skylight Hospitality, sold a prime 3.5 acre piece of land in Manesar in Gurgaon district to DLF in 2008 for Rs.58 crore. The land had, however, only cost his company around Rs.15 crore and was sold to DLF after obtaining change of land use (CLU) and other permissions from the Hooda government.
 
The Comptroller and Auditor General report, tabled in the Haryana assembly on Tuesday, said that the "possibility of extending undue benefit to particular applicant (Vadra's company) cannot be ruled out". It has also questioned the "distinction" made by the Hooda government for Vadra's company in giving permissions.
 
The Hooda government, on its part, had obliged Vadra with quick sanction of the permissions required.
 
Senior bureaucrat Ashok Khemka had ordered the scrapping of the land deal, saying that it was illegal.
 
The controversy became a national issue with opposition parties alleging that the then Congress government was doing everything to help Vadra in his controversial land deals in the National Capital Region (NCR)and areas around Delhi.
 
Vadra had bought land in four districts of Gurgaon, Palwal, Faridabad and Mewat in Haryana adjoining Delhi. 
 
Alleging that Vadra's land deals caused loss of crores of rupees to the state exchequer, Khemka marked a probe into all land deals of Vadra and his companies since 2005. But the Hooda government gave Vadra a clean chit and instead charge sheeted Khemka for his actions.

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COMMENTS

Veeresh Malik

2 years ago

Once again it seems the present government is attacking the poor farmer in this Bob-the-Builder G-Jha-G dus number waale?

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