It will take many years to recover from A Raja’s corrupt policies


IT’S NOT often that you see a person rejoicing at his own misfortune. But this is exactly what the Congress leaders seemed to be doing on the evening of 14 November, when they appeared on television channels celebrating the government’s failure to generate high revenue from the auction of 2G spectrum. Against the target of Rs 40,000 crore set by Union Telecom Minister Kapil Sibal, the two-day bidding process received bids only worth Rs 9,407 crore. The flop show has conclusively shown, argued the Congress, that the CAG’s estimates of the notional loss from the 2G scam were erroneous. But if at all the debacle of the 2G auction shows anything, it proves that the telecom industry would take many years to recover from the damage inflicted by A Raja’s corrupt and unconstitutional policies. While some of the harm, particularly the loss of revenue to the government, would never be reversed.

Consider these facts: In 2007, there were 575 applicants. In the just-concluded auction, the number of applicants didn’t even cross the double-figure mark. In 2007, there were 240 million existing subscribers with at least 750 million Indians who had yet not switched to mobile phones up for grabs. Today, the potential new customers number between 40 and 100 million. Because between 2007 and 2012, more than 600 million untapped subscribers have already bought the mobile connections. More than 90 percent of them have gone to the incumbent operators, i.e. those who were in existence before Raja distributed the 122 licences (a majority of the new licencees only hoarded the spectrum and never rolled out the services, thus forcing the new customers to go to the incumbents). In 2007, the average monthly revenue per mobile user was approximately Rs 300. Today, it is less than Rs 100. In other words, the revenue margins for telecom companies have sharply declined.

The question today is, who in his right mind would pay Rs 14,000 crore for 5 MHZ pan-India spectrum and then invest another $6-7 billion to set up shop in India? At least five major global players were eager to start operations in India in 2007, and willing to pay the market price for the spectrum by participating in an open and transparent bidding. Their CEOs were making the rounds of New Delhi to explore the investment possibilities. Those were also the days when the global recession had yet not set in, the Indian stock markets were at an all-time high, the country’s GDP was growing at more than 9 percent per annum and India was a preferred investment destination. But what did Raja do? He turned these companies away. He told them that they would have to stand in the first-come first-served queue, which the companies knew they would never be able to beat and which, by the way, was already rigged in favour of Raja’s cronies. A few international players such as Telenor and Etisalat made a backdoor entry by buying stakes in companies such as Unitech and Swan that existed only on paper. Four years later, both the companies have written off the billions of dollars they had poured in the Indian telecom market.

Today, when the corporates are strapped for funds, telecom is no more a sunrise sector and India’s standing as an investment destination lies in tatters, the government bizarrely set the base price of 2G spectrum at Rs 14,000 crore. Sibal and his Cabinet colleagues ignored the industry’s pleas of lowering the base price to Rs 7,000 crore (when the base price for 3G auction was set at Rs 3,500 crore and still generated record revenue). Also, no tangible efforts were made to reassure or woo foreign telecom majors, who alone are in a position to invest more than $10 billion. Instead, the government placed only a little more than 40 percent of the total spectrum vacated from the cancellation of the licences given by Raja and thus created an artificial scarcity. Given these circumstances, the auction was doomed to collapse.

But what is more disturbing is that this government is more keen on proving the CAG and the SC wrong, than putting key sectors such as telecom back on track. The failure of the 2G bidding does not prove the CAG wrong. Nor does it prove the government right. Nobody would know the revenue that could have been realised had Raja adopted a just and fair policy. The loss to the exchequer would always remain in the realm of conjecture. But what we do know is that one of the key triggers for the crisis in India’s economy and democracy was the 2G scam.

Ashish Khetan is Editor, Investigations with Tehelka.