Allocation of natural and scarce resources by the government needs to be improved
Moneylife Digital Team 08 September 2012

"There is a fundamental flaw in the first-come-first-served policy as it involves an element of pure chance or accident,” Supreme Court judgement on 2G spectrum allocation by the government

The lesson learnt from the 2G second generation) spectrum allocation scam is leading to an improvement in government thinking and policy-making in the allocation of natural and scarce resources. The latest development in this regard were questions raised in the Rajya Sabha by Rajeev Chandrasekhar, an independent Member of Parliament: (a) Whether the government proposes to discontinue the First-Come-First-Served (FCFS) policy for allocation of all natural/scarce resources, in line with the recent Supreme Court judgement on the 2G spectrum allocation scam dated 2 February 2012; (b) if so, by when is the new policy framework and guidelines in this regard expected; and (c) “if not, the reasons therefor?”
In reply, minister of state in the ministry of finance, Namo Narain Meena, has placed a statement on the table of the House (Rajya Sabha). The salient points of the statement are as follows:
The Supreme Court, while quashing the licenses in the 2G spectrum allocation, observed, “There is a fundamental flaw in the first-come-first served policy as it involves an element of pure chance or accident.” The court further said that in matters involving award of contracts or grant of license or permission to use public property, it has dangerous implications. If the public authority does not adopt a transparent and fair method for making selections, there is a risk. Any person who has access to the power corridor at the highest or lowest level may be able to obtain information from the government files or the files of the agency that a contract is likely to be awarded or a license or permission is likely to be given, he would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim.”
Pinning the responsibility on the government in this matter, the Supreme Court has stated, “The State must always adopt a rational method for disposal of public property and no attempt should be made to scuttle the claim of worthy applicants.” Further, “It is the burden of the State to ensure that a non-discriminatory method is adopted for distribution, which would naturally result in protection of national and public interest.”
The Supreme Court has also suggested that in its view, a duly publicised auction conducted, fairly and impartially, is perhaps, the best method for discharging this burden. Other methods, like first-come-first-served, are likely to be “misused by unscrupulous people, who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values,” observed the Supreme Court.
The Supreme Court sums it up with the words, “While transferring or alienating the natural resources, the State is duty bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process.”
The minister Meena has replied further that in the context of the Supreme Court order, the government has filed a Special Reference No.1 of 2012 under Article 143 (1) of the Constitution of India seeking the following clarifications from the Supreme Court:
(a) Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?
(b) Whether a broad proposition of law that only the route of auctions can be resorted to? Does it not run contrary to several judgements of the Supreme Court including those of larger benches?
(c) Does the auction policy have the effect of unsettling policy decisions formulated and approaches taken by successive governments for valid considerations, including lack of public resources and the need to resort to innovative approaches for the development of various sectors of the economy?
(d) What is the permissible scope for interference by courts with policy making by the government including methods for disposal of natural resources?
Having raised these questions, the minister has concluded in his reply that the hearing in the Special Reference has concluded on 16 August 2012 and the judgement has been reserved.
We await further developments in this regard, with both the ministry and the Supreme Court working towards an improvement in policy on the allocation of natural and scarce resources. 
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