Different strokes PDF Print E-mail
Friday, 25 April 2014 02:30
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Can’t take different view on Taj and telecom

The stand the government finally takes on the Solicitor General’s (SG) opinion in the case involving the Tata Group’s hotel property on Mansingh Road in the capital will be an interesting one as it has ramifications not just on how scarce resources are to be priced in the future, it has an immediate bearing on a case being heard in the Supreme Court. In the current case, the Taj Mansingh lease had expired a few years ago and NDMC – the owner of the land—wanted to auction the property while, in the interest of fairness, giving the Taj a right of first refusal (RoFR), so that it had the option of carrying on with its business. The home ministry, that controls the NDMC, however, was not in favour of an RoFR; and that is when the matter reached the SG’s desk.

The SG has rejected the auction-cum-RoFR on the grounds that this is tantamount to a post-tender negotiation and violates the CVC guidelines. He has also rejected the idea of not renewing the licence on grounds that, were the Taj to challenge this in court, a long litigation would hurt everyone. In any case, he says, the Taj is sharing its revenues with the NDMC so, to the extent its business grows, so do NDMC’s revenues—so just renew the licence, he has said.

Given how it is logical for a business to expect its licence to be renewed, and on reasonable terms, the opinion is to be welcomed. The opinion, were the government to endorse it though, has obvious downsides. For one, if licences are renewed in perpetuity without revising their value, new players will never come into the market, defeating the very purpose of competition. Which is why the bid-cum-RoFR was really the most fair condition. But, in the case of telecom firms who had spectrum in the 900MHz band, and were legitimately expecting them to be renewed after the initial 20-year period expired, the government never gave them this option—they too were on a revenue-sharing arrangement. When the argument was made about a market price needed to be paid for natural resources, the telcos argued in favour of an RoFR. But this too was turned down and, just a few months ago, a fresh auction was held for the spectrum where the licences had expired. If the government accepts the SG’s view, how does it justify its stand in the telecom case? Also, since more 900MHz licences will continue to expire over the next few years, will these now be automatically renewed on the same terms? Either way, the case will be an interesting one.


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