Mallet-hit

EDITORIAL

Auction of scarce national resources, such as telecom spectrum, is a good way of ensuring transparency and maximum revenues for the exchequer. But revenue maximisation cannot be the sole goal of a government in a welfare state. Revenues are not an end in themselves but only a means to ensure development of a country and the welfare of its people. It is by now a well-established principle that the state, or the government, is the custodian of national resources such as land, water, minerals, oil and gas, forests, flora and fauna, airspace and special economic zones. As a custodian, the government is not expected to give away these resources for private profit, but for the benefit of the people. The prime objective in allocating resources is not, therefore, maximisation of revenue but the development of the country. Auctions do not always meet that objective. In the telecom sector we have had umpteen instances where licences given to the highest bidders became a recipe for disaster. Remember Himachal Futuristic in Sukh Ram’s days in the 1990s? As the highest bidder, it cornered licences in 22 circles in India’s first attempt at opening up the sector that was till then a complete state monopoly. The company, having bid aggressively, did not use the licences and thereby put the entire process of developing telecom infrastructure in jeopardy. Then came the national telecom policy of 1999. High bid fees became an albatross around the neck of the telecom companies. They turned sick and made services very expensive. The government had to introduce universal access service licences and switch over to the more pragmatic revenue-share model to bail out the sector. There is no denying that had the government looked only at maximising revenues from auctions of licences and spectrum, there would have been no telecom revolution in India. Today, it has the second largest user base in the world and one of the cheapest tariffs. Having said that, it must also be recognised that a spectrum auction as done for 3G services in 2010 could in certain cases deliver the goods. But giving away licences and spectrum to the highest bidder in all cases may not be such a good idea. After all, it is the government’s responsibility to also ensure that resources such as spectrum are most optimally and efficiently used for the common good. The government, especially in a democracy, is mandated to hold national resources in trust. It must use the most appropriate method to ensure that allocation of resources meets all its obligations that trusteeship entails. If prevention of the so-called loss to the exchequer becomes the sole objective, the state will cease to be a welfare state. It will become extortionist if it only auctions out all national resources to the highest bidder. It now is established, for instance, that gas resources are no one’s private property and belong to the nation; but it is the government that has the rights to fix the price and decide on its allocation. Just imagine if all that gas were sold on auction to whoever paid the highest price! Would that have ensured that this scare resource was deployed for its best possible or most priority use in the country? Auction is not always the best way.