|Et tu, Montek?|
|Tuesday, 18 January 2011 00:00|
If the Raja scam wasn’t confusing enough with all its technicalities, it’s just got more confusing. As long as it was confined to a CAG versus a Raja, it was obvious who you should be supporting—the CAG has unearthed several scandals in the past and Raja never had any great reputation to begin with, right from his environment ministry days, and his being relatively inarticulate and not being a PLU helped. Things got a bit confusing when a Kapil Sibal—successful, articulate, suave, honest, a Delhiwallah, a PLU if there ever was one—joined the fray in support of Raja. Whom do you support now? If that wasn’t enough, the government got in Montek Singh Ahluwalia, its most credible voice when it comes to attacking crony capitalism, given how he’s stood in splendid isolation, sometimes publicly, opposing many unsavoury deals in the past.
All of which makes you wonder where the others are now that the CAG is being trashed in the manner it is? The BJP, which made so much of the Raja scam, is completely silent. A few more weeks like this, and the scam will die a natural death, JPC or no JPC. Since, presumably, this is not what the BJP wants, it’s difficult to understand what its strategy is. It’s equally curious that none of the older telcos are making any statement, since it is they that got hit the most by Raja’s decision to hand out the spectrum in the manner he did—Raja’s decision to give out 691 MHz of spectrum ensured they had no spectrum for their expansion plans—this is the main reason why they had to pay over a lakh crore rupees in the 3G/BWA auction. Perhaps, it’s good business strategy to keep quiet? A big telco like Bharti or Vodafone, for instance, would be more interested in ensuring it gets to pay a lower price for its ‘extra’ spectrum. The Trai recommendation in 2010 that the government charge them at the 3G rates when their licences come up for renewal—another 6-7 years from now—must also have these companies worried enough not to want to risk taking on the government beyond a point. More so when all indications are that Trai may revise its recommendations on this quite dramatically.
What are we to make of what the good Montek has said? Much of it, of course, is the same argument made by both Raja and Sibal, and is largely just an attempt to distract from the main issues.
Trai said no auctions: Perhaps the easiest argument to dismiss from the Raja-Sibal-Montek stable. Also the most self-serving. In 2003 itself, when the UASL licences were given, the Cabinet agreed that all future licences would be auctioned. So, the 2007 recommendation by Trai, that 2G spectrum should not be auctioned, was bad in law. In any case, Trai very clearly said its recommendations were predicated on there being enough spectrum for all players—how else can you give spectrum/licences on a first-come first-served basis. By October 1, 2007, however, there were 575 applications against 157 licences that could be given. So how could Trai 2007 even be implemented? In any case, not all Trai recommendations are implemented—even in 2007, Raja left out crucial recommendations, which allowed Swan and Unitech to cash out.
Raja-Sibal-Montek use Trai 2007 to justify their lack of auction. But when the CAG’s Rs 1,76,000 crore loss figure is based on Trai 2010 recommendations, they trash it!
Auctions hike tariffs: “Revenue maximisation is not the objective. You have to weigh that against the benefits you lose by lesser spread of telecom services at a competitive price,” Montek told Karan Thapar on Sunday. Well, when Vodafone paid $10.7 bn for Hutch, it never raised tariffs, and Tata DoCoMo’s 3G prices are lower than the current 2G tariffs.
BJP did the same: The CAG said the BJP caused a loss (Sibal put this at Rs 1,43,000 crore in one TV interview) when it moved from fixed licence fees to revenue-share in 1999—so, the argument goes, the CAG was being a petty auditor then, as it is being now. Certainly in 2001, the CAG took the accountant’s view, as that is also one of its jobs. In 2010, the industry was mature and not giving these licences would not have hurt the industry—in 1999, however, not moving to revenue-share would have finished off the industry. Indeed, the government has lost revenue in two ways. One, in terms of the auction-based entry fee. Two, if the same spectrum was to be given to a Bharti or a BSNL, who have more subscribers and more revenue than the new telcos, the government would get more annual licence/spectrum fees.
Level playing field needed: “Earlier guys,” to quote Montek, “had got it at Rs 1,658 crore … later fellows are at a disadvantage, they haven’t got a big subscriber base. Therefore, if you raise the price, you’d be putting these fellows at a disadvantage ...” So when you ask a new steel mill to pay an auction price for coal and iron ore mines, let’s keep in mind that Tata Steel got them free decades ago! Also, what of the lack of level playing field for the 343 other applicants who lost out due to Raja’s decision to stop processing applications from September 25, 2007, though he said he would process applications till October 1?
Expanded equity not an equity sale: Unitech got Rs 6,120 crore for selling a 67.25% stake to Telenor but this money remained in Uninor, so how did Unitech benefit? This is obfuscating the issue. Uninor took care of Rs 2,000 crore of debt raised by Unitech to pay for the licence, so the company had Rs 4,120 crore of cash left over. If the company is valued at Rs 12,000-odd crore, as it was at that time, this means the pure licence itself was worth around Rs 8,000 crore. And Unitech owns a third of Rs 8,000 crore, just because Raja liked Sanjay Chandra’s face!
Which part of this didn’t Montek get? And what part of this is so complicated that those like Arun Jaitley in the BJP don’t want to take Raja-Sibal-Montek head on?