|CAG's spaced-out losses|
|Wednesday, 27 July 2016 06:04|
Thanks to CAG, a $672-mn award and more on way
While the government can be expected to delay the payment of various arbitral awards from overseas tribunals by challenging them in local courts—Isro’s arm Antrix has already done that with the $672-million award given against it and the White Industries case has been pending since 2002—the real question is how long it can hold out without the Antrix-Devas case becoming, like Vodafone and Cairn, a global cause célèbre, of expropriation by the government instead of tax terrorism. The Permanent Court of Arbitration (PCA) ruling the government action of cancelling the contract in 2011 as an act of expropriation is the second global arbitral award in the matter—hearings on the quantum of damages are likely to start soon—and there is another case, by Deutsche Telekom, which is pending hearing at the PCA. While the $672-million award was based on a case filed by Devas against Antrix for cancelling the contract, the PCA cases are against the Government of India under various bilateral investment treaties (BITs) it has with different countries. More important, the case also points to the extreme distortion in Indian policymaking that, as soon as the CAG expresses its dissatisfaction with any deal, the government of the day is expected to treat this as the gospel, failing which it will be tarred with the brush of corruption.
There can be little doubt the CAG got it right on the A Raja scam, but applying the same logic to the Antrix-Devas deal was a stretch—while the CAG did not come to a ‘loss’ figure as it did in the Raja case, but an unnerved government constituted two committees which recommended scrapping the deal. As compared to the pittance Devas was paying to Antrix for the two satellites it was building/launching that came bundled with 70 MHz of spectrum, the argument made was that the 2010 auctions fetched Rs 642 crore per Mhz for the BWA spectrum and Rs 3,340 crore for 3G spectrum—this would suggest the ‘losses’ ranged from Rs 45,000 crore to Rs 235,000 crore, depending upon whether you use the BWA or the 3G spectrum as the comparator. This, of course, was incorrect since there were many differences. For one, the deal was for satellite spectrum which is 800-900 times less efficient than telecom spectrum which can be reused again and again. More important, had Devas started offering Bharti-Airtel-type services, the government would have levied the same fees it did on telcos. The real lesson is that, while CAG has played a valuable role in cases like the Raja one where the licences got cancelled, its reports are not the gospel, they have to be examined critically. In the Coalgate case, as this newspaper had pointed out, the CAG looked at revenue streams over 20-40 years and did not even discount them. The still-unfolding Antrix-Devas drama holds valuable lessons for both the CAG as well as the government, in terms of the need to sniff out wrong-doings but to be very careful about jumping to conclusions.