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Why is the Taj special? PDF Print E-mail
Saturday, 14 January 2017 00:00
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SC backing Tatas on Mansingh lease is unfortunate

 

Though the last word on the Taj Mansingh case has not yet been heard, it is unfortunate that the Supreme Court has asked the New Delhi Municipal Corporation (NDMC) to consider extending the Taj’s lease as opposed to the open auction that the NDMC wants – NDMC has been asked to come back with a response to the SC after six weeks. The reason why SC wants NDMC to reconsider its position, it appears, is the opinion given by the Attorney General and the Solicitor General against an open auction. Apart from the fact that, at the end of the day, the AG and the SG are just lawyers – that’s why courts have not always gone by their view on a matter – what is being ignored is that auctions are recognized government policy for disposing off assets. They have been used for everything, from telecom licenses to airports, coal mines, roads, and more. It is not that giving spectrum to telecom firms based on the number of subscribers they had was unfair – after all, only firms with genuine subscribers got it, and they paid a hefty annual revenue-share as well – but the government decided that auctions were the most transparent way to go forward when the old licenses expired.

 

Nor is it true, as is being made out, that a right-of-first-refusal (RoFR) – which is what the Taj wants – is the same as an open auction; the SC wants NDMC to conduct an auction to discover a price and then have a discussion with the Taj. Both look the same since, in the RoFR case, the Taj will be asked to match the top bid – on the face of things, that is exactly what will happen in an open auction. But there’s a vital difference. If it is known that the Taj has an RoFR, chances are the bid may not go too high since all bidders know the Taj will get the lease – indeed, for this reason, many may not even bid. In an open auction, there is more competition and, with the Taj knowing it can lose its licence, it will also bid very aggressively – that is why, over the past few times, telecom auctions have fetched so much money as incumbents knew that if they lost the spectrum, they would lose all their existing subscribers. 

 

So, a logical question to ask is why the Tatas are so special? The judges have said the Taj was a deserving case since, over the 33 years, it has been paying its revenue-share on time and has not been litigious. But surely that would apply to others as well? Does this mean that when the license for, say, the Hyderabad airport runs out, this will automatically be renewed for the GMR Group? Or that coal or iron ore mines will not be bid out in the future if the licensees are paying their dues on time? If the SC proposal is indeed accepted, this will mean a complete reversal in the way the government allots licenses/rights to people. It also means it will become that much more difficult for newcomers to break into industries where control on resources like iron ore or spectrum is critical and these have already been assigned to people. 

 

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