Sunday, August 5, 2012

No No No….Government setting 2G base price at Rs 14K crores does not prove CAG was right….

Before I come to the main subject of this post, it is necessary to consider the kind of convoluted and senseless logic that prevails in Indian politics and media today. Let me show how it goes with an example. Say, the opposition presses charges against some minister or the other for something random. The government obviously denies the charges but then, in order to placate the opposition and to prove it has nothing to hide, concedes the opposition’s demand. As soon as this happens, the opposition screams “See, our charge must have been true. Why else did they remove the minister”! The government’s action catches the opposition by surprise. They never expected the government to actually remove the minister. Their own accusation was never really a serious one. Those were just sound bytes for the media! The government was plain stupid.

The Government has now learnt this lesson. That is perhaps why it didn’t want to set up any SIT against the ministers as demanded by Team Anna. Had they set it up, Team Anna would have said “See that proves our point. They have admitted the ministers are corrupt”!

Now coming to the subject matter on hand. A similar logic as described above is now being applied to the so called 2G “scam”. The government has now fixed Rs 14000 crores as the base reserve price for 2G spectrum auctions. The argument now being made is that this proves that the CAG was right all along and the government’s claim that the loss was zero was a lie. This is the worst form of inane logic I have come across in my life. Let’s look at the entire thing from a distance and see how this makes any sense at all.

The government wanted to (it did not have to) give 2G spectrum cheap to telcos so that they could pass on cheap rates to consumers. That is why – in spite of knowing that spectrum was a precious commodity – it continued with the NDA policy of giving spectrum away cheap. Did it succeed in its objective? Resoundingly! Did anyone loot the country? No! (just check out profits of Indian telcos and the story becomes clean).

In the same way, the government gives away diesel, kerosene and LPG cheap, knowing fully well that it can and perhaps should charge much higher market prices for these fuels. Suppose at a later date, the CAG calls this a scam, and puts some random number on it. Suppose also that the government then starts charging full market rates for fuels, then will that be considered to be a vindication of the CAG? No way! This is the kind of balderdash that seems to be going around everywhere these days.

The fact is that it is the government’s prerogative to price something cheap or expensive. What it does depends on its own political vision. The UPA believes in subsidies for the poor; much more than the NDA does. It believes a lot more in sharing the spoils of the progress with the poor – calling it inclusive growth – than the NDA does. Don’t believe this? Check out how much MSP (Minimum Support Prices) increased during 5 years of NDA rule and 7 years of UPA rule (mostly UPA-1). During the 5 years of NDA rule between 1999 and 2004, the MSP moved up at a snail’s pace. In these five years, farmers managed to get only 25% more prices for rice and just 15% more for wheat. In contrast, in the last 7 years of UPA rule, the MSP of rice has gone up by 96% and that of wheat by 78%. Increasing MSP faster is a government policy….just like keeping 2G spectrum price low was a policy. There is a difference between a policy and a scam. The scam was never in the pricing. The scam was in the way Raja abused the policy. That scam was much smaller than the CAG’s number… the last count, Raja’s been charged with receiving Rs 200 crores from DB group on behalf of his party, the DMK. That’s it.

The fact that the UPA is now charging market rates for the 2G spectrum – and this is something I have consistently opposed – is not proof that it was wrong in the past and that the CAG was right. In reality, it is doing the wrong thing now, as even the TOI’s and ET’s editorials finally understand. It only shows that it is acting on the SC’s orders and that its hands are tied, though I do believe that it could have kept the reserve price much lower. The UPA is under pressure to manage its fiscal deficit, and has started to look at telecom as the proverbial golden goose. It must realize that it is going to sound the death knell of this vibrant revolutionary sector….but the UPA must be thinking “What the hell. If this is what everyone wants, so be it”. In doing so, the UPA is falling into a trap. It should have waited for the SC to overturn its own decision on 2G spectrum auctions, but it has chosen instead to take advantage of the situation.

So no, the high price does not show the CAG was right. Or Kapil Sibal wrong in saying that there was no loss to the government. By charging this high base price, 2G growth will be stunted. Penetration will drop as pricing rises through the roof. What happened to 3G (only 20 million subscribers) will soon happen to 2G. That’s when we will know how wrong the CAG (and the UPA now) was….

The real truth is pricing 2G base price at Rs 14000 crores does not prove the CAG was right. The CAG was dead wrong and it will be found at a later date that the present CAG is a political person with political ambitions. First pushing the government to do something and then using that piece of action as a proof of corruption is unacceptable logic…..

1 comment:

  1. Excellent piece! Incisive insight ... Always like the bluntness, backed by facts, in your pieces!