Wednesday, March 2, 2011

Wasteful defence, ridiculous deflection


(First appeared in The Pioneer dated March 2, 2011)

It beats reason why the Prime Minister, Mr Manmohan Singh should continue to defend a telecom policy that has reduced his government to shame and ridicule. If the idea is to constantly remind the people that the policy is the creation of the NDA regime, and therefore, the NDA is to blame for all the subsequent ills, it has not worked. The policy was framed in 2001 when market conditions were substantially different from those of today. Corporate houses had then to be cajoled into providing services whose financial viability was yet to be tested. Today, with the market expanding and the demand for Law mobile phone services growing at a blistering pace there is a scramble for securing licences, with operators willing to pay huge sums as fees to get them. Surely, the policy ought to have been tweaked to exploit the situation and gain the maximum revenues for the public exchequer.

That apart, let us understand what the Prime Minister said in Parliament recently. He stated that the implementation of the policy had been faulty. In doing so, he has further implicated himself, because then Mr Singh presided over a government which wrongly executed the telecom policy – even assuming for argument’s sake here that the policy was appropriate for the moment. What did he do about it? He cannot say that he acted immediately after the matter came to light. The Pioneer was the first to report on the shady dealings in December 2008, and it went on unravel layer after layer of the scam in a series of reports thereafter all through 2009 and 2010. That in turn triggered a flurry of activity, with the Comptroller & Auditor General, Central Vigilance Commission, the Central Bureau of Investigation and the courts turning the heat on the government. Mr A Raja, who presided over the scam as Telecom Minister had to depart and was eventually arrested.

But, at least a year before The Pioneer launched its scathing expose the matter had come to Mr Singh’s notice. Besides the official correspondences involving the Telecom Ministry, the Law Ministry, the Finance Ministry and the Telecom Regulatory Authority of India in late 2007, that showed how the then Minister was manipulating the policy to favour a select few, the Prime Minister too had written to Mr Raja asking him to implement the policy in a fair and transparent manner. All of this is in the public domain now, as is the fact that Mr Singh took no action over the defective implementation. For the Prime Minister to now regret that the policy execution was faulty is meaningless, unless he squarely takes the responsibility for that.

Mr Singh also said that the government’s aim was to provide quality service to the largest number of people and not to maximize revenue. Interestingly, this is in keeping with the now discredited Mr Raja’s contention that his decisions had empowered the common man by making 2G services accessible at affordable rates. The argument is supposed to provide legitimacy to the decision of not auctioning the licences but distributing it at discretion. It goes like this: had the government auctioned the licences, the service providers would have had to pay a heavier price for getting them, and thus would have charged the consumer more for the services they would provide. Why has the government then auctioned the 3G spectrum licences? Interestingly, despite having paid market price for 3G spectrum in competitive bidding, the service providers have rolled out the service at rates that are in some cases even lower than those of the 2G service providers.

The absence of bidding leads to – as it did in the 2G issue -- the cartelization of service providers, and that, the Prime Minister will agree, is not in the long-term interests of the consumer. Nor is such a development healthy for the country’s corporate sector, already beset by deep rivalries. In such a situation, the government’s intent also comes into question, because it is seen as favouring a select group of business houses at the cost of others. In the old times of licence-quota-permit system governments used to employ such tactics to extend their patronage to those they favoured and harm the ones they considered as ‘hostile’. Several high profile business clashes that hit the ordinary shareholders besides creating obstacles in the country’s economic growth, had their genesis in this sort of discretionary system.

Let us now return to the telecom policy itself, a policy that the central government has defended not so much because it likes it but because it wants to grill into the opposition that the policy is the NDA’s creation. Telecom Minister Kapil Sibal said in Parliament, with a smirk on the face, that the government had merely implemented the first-come-first-served provision of that policy.

There are two basic differences in the approach of the NDA government and that of the present one on the policy. During the NDA regime, the first-come-first served provision was implemented in letter and in spirit. Secondly, every major decision was vetted and cleared by the Cabinet. But in the UPA’s case, Mr Raja handpicked applicants and helped them jump the queue by various means such as arbitrarily advancing the cut-off date for submitting applications along with the necessary fee, which ran into several crores of rupees. Caught off guard, several legitimate applicants were stranded for time and cash, and thus eliminated. Messrs Singh and Sibal must, therefore, stop indulging in illogical analogies and concentrate on stemming the rot.

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