Cabinet decision on reserve price vindicates CAG

The Union Cabinet deciding a Rs 14,000 reserve price for 5 MHz of 2G spectrum in the 1800 MHz band is a comment on what Telecom Minister Mr. Kapil Sibal had told the nation about the findings of the Comptroller and Auditor General (CAG) and the methodology that it had adopted in arriving at the loss estimates due to 2G Spectrum scam.

The Telecom Minister had claimed during his ‘zero loss’ theory that consumer affordability through low rates and a bid to maximise public welfare was the primary driving factor behind allocating 2G spectrum in 2008 at 2001 prices. Telecom Regulatory Authority of India (Trai) and the Cabinet, in its wisdom, have rejected the proposition made by the minister linking spectrum auction/bid price to affordability.

The other argument that was put forth by the minister was that the CAG had erred by comparing 3G spectrum with 2G, and also highlighted the time gap between 3G and 2G spectrum auctions. But now, the exact same spectrum for 2G spectrum (and not 3G), will now be reallocated on the current reserve price decided by the Cabinet through a transparent auction process under the guidance and directions of the Supreme Court.

Further, even the start-up spectrum size of 4.4 MHz then and 5 MHz now are comparable in nearly absolute terms. On Wednesday, the Cabinet has shown that for approximately the exact same amount, band, and use of spectrum — nearly five years later — the base price has been set up at Rs 14,000 crore, which would recover even after five years a sum of Rs 1.47 lakh crore.

The minister’s third claim was that the government had followed the Trai’s recommendations. But in a twist of fate, not only has the government reduced Rs 4,100 crores per 5 MHz slot vis-à-vis the Trai’s recommendations, but has, in fact, done so without giving any explanation for their reasons, thus showing that government has sovereign right/powers of decision making.

The Cabinet decision has not only vindicated the CAG, but a review of key bid-related parameters shows the CAG might have been moderate in their calculation of the loss. The Cabinet decision on reserve price shows the CAG has been faulted for nothing.

The author is Member of Parliament