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Thursday, 14 January 2016 00:00
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SC right in asking for lifting of corporate veil


Though there are, undoubtedly, valid points in the public interest litigation filed by Prashant Bhushan’s Centre for Public Interest Litigation (CPIL) against the 4G or Broadband Wireless Access (BWA) spectrum allocation to Reliance IndustriesLtd (RIL), the Supreme Court has done well to ask him there was genuine public interest involved, or whether it was, to coin a phrase, a private interest litigation. There have been, in the past, several PILs that the courts have either dismissed as frivolous or which have in one way or the other espoused the cause of corporates. Since most decisions taken by the government will benefit—and therefore hurt—some corporate or another, it is critical to ensure private interest litigations do not masquerade as public interest ones since such PILs end up delaying policy action or, in case the action has already been taken, in causing uncertainty in the minds of investor companies.

Bhushan’s point on the 4G bid having been won by Infotel Broadband—and then transferred to RIL within hours of winning the bid—serves little purpose from the public’s point of view. It was an open auction with the rules of the game spelt out in writing beforehand—in this case, Infotel Broadband was competing with the likes of Qualcomm and Bharti Airtel among others, so whether it was a front for RIL or not, the market price of spectrum was paid and that price was determined by Bharti Airtel which had planned to offer both voice and data services on the 4G spectrum. The allegation of RIL getting a backdoor entry into voice telephony is titillating, but not accurate. At the time of the auction, telcos could bid under a voice telephony licence (Unified Access Service Licence) or an internet service provider (ISP) licence—Bharti Airtel bid under UASL while Qualcomm and Infotel bid under ISP. The 4G auction terms allowed users to change from one to the other later but the reason why Qualcomm/Infotel bid under ISP and not UASL was that this was the only licence available—thanks to then telecom minister A Raja’s benevolence, there were 500-plus UASL applications pending when the 4G auctions took place in 2010. Since the government had, from 2010, been auctioning spectrum instead of bundling it free along with a UASL, it came up with a Unified Service Licence in 2013 (USL had been in the works since 2003) which was priced at Rs 15 crore and allowed users to offer whatever service they wanted—no spectrum was bundled with it. When, a few months later, RIL paid R1,658 crore (plus R15 crore) for migrating its 4G ISP licence to a 4G USL one, it actually paid Rs 1,658 crore extra since this was the cost of a UASL in 2002 which, at that time, came bundled with free spectrum. Presumably, if the PIL is admitted, this point will be made by the government counsel.

Where Bhushan is right is on why RIL—this applies to others like Bharti Airtel also which is not named in the PIL but has 4G spectrum in the same band as RIL—is paying a 1% spectrum usage charge (SUC) while other telcos pay 5%. In 2010, when the government started auctioning all spectrum, it realised it was unfair to charge telcos high SUC rates since the spectrum was market-priced. At that point, it announced a 1% SUC for both 3G and BWA. Later on, when it was argued it would be difficult to separate 2G and 3G traffic and that telcos would mask one as another, the 3G SUC was kept at the same rate as 2G—but BWA remained at 1%. This is a big anomaly and has to be fixed to avoid arbitrage possibilities, as Bhushan is pointing out, but this doesn’t apply to just RIL.


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