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Sibal’s zero-sum game PDF Print E-mail
Saturday, 08 January 2011 00:00
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On the day No One Killed Jessica was released in cinemas across the country, telecom minister Kapil Sibal scripted his own version of ‘There was no telecom scam’. In an amazing display of reductio ad absurdum, he took the CAG’s estimate of the Rs 1,76,000 crore loss caused by A Raja’s licences in January 2008 and reduced it to zero. While this left many wondering if Raja was on his way back, Sibal dropped another bombshell: the PM did not direct Raja to auction licences, nor is it true he was not kept informed, indeed ‘the PM accepted this outcome regarding spectrum pricing’. Expect a huge storm in the days ahead as the Opposition further hardens its stance, hits the road and uses Sibal’s statements to allege the PM was party to the scam. Given Sibal’s statements, it is not clear what happens to the show cause notices issued to 85 companies for getting licences by submitting incorrect information. In principle, there is no contradiction between the two events, but it is likely the pressure to act on the notices will reduce. After all, if there was no loss to the exchequer, all this means is that another 85 firms should have got the licences—with no loss to the exchequer, how does it matter?

How Sibal demolished the CAG is interesting. He took the Rs 1,76,000 crore figure and first removed Rs 37,000 crore, which the CAG estimated was the loss caused due to the ‘extra’ spectrum given to the older telcos like Bharti, BSNL and Vodafone. Sibal said this was part of the approved policy—the CAG had included this as the Trai report of May 11, 2010, had said the spectrum was ‘extra’ though a subsequent TDSAT judgement last month said it was kosher. The Rs 1,39,000 crore left was reduced to Rs 99,000 crore because the government had given each of the 157 licensees 4.4 MHz of spectrum, not the 6.2 MHz the CAG had assumed—the CAG had assumed this because the licences say 6.2 MHz is to be given eventually (with no extra cost for the balance 1.8 MHz). This was then reduced by half after taking into account inflation (10% each year from 2008 to 2010 when the 3G auctions took place) and other factors. Never mind that with over 250 million more subscribers added on between 2008 and 2010, the addressable market was lower in 2010, so the prices in 2008 should have actually been higher. Sibal then says 3G spectrum is 3-4 times more efficient than 2G spectrum and reduces the loss to Rs 17,000 crore. There is, though, no global evidence that 2G and 3G pricing is different, which is why the Trai recommended using 3G prices to cost the ‘extra’ spectrum. As for what’s left, Sibal says you get 4.4 MHz of spectrum free with a licence anyway. Sibal’s defended Raja eloquently at a press conference. Raja’s best hope is to get him to do the same in the Supreme Court.

 

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