2G spectrum auction at high reserve price is set to roll back the telecom revolution

[Yusuf]

Hahahhaha. First cry hoarse about loss of revenue and corruption and now cry about big mobile bills. Now blame the govt for killing the telecom revolution. I have been saying from day one, 2G was not a scam when it was not auctioned. Scam or corruption part was when money was made under existing policy and rules by showing favoritism.

Abhi bhukto sub.

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Prepare for inflation to catch up with an area relatively immune to it so far - your telecom bill. Government policy is set to raise the price and possibly also lower the quality of an important productivity tool that had empowered the masses. The cabinet has decided to fix the base price for auction of 2G spectrum for GSM operators at a whopping Rs 14,000 crore, and that for CDMA operators at 1.3 times that amount. Shockingly, the GSM reserve price is four times what had been fixed for 3G services, meant for higher-end consumers. It should be remembered that 2G spectrum is for basic services such as voice, used by all classes of Indian society.

Step up auctions with high reserve price, which push up resource prices artificially and make discovery of true market price impossible, have never been very helpful to business or consumers. This is because high prices of auctioned inputs like spectrum will hike retail prices of final products and services and restrain overall improvements in productivity and efficiency of the economy. They amount to rent extraction by the government, which may swell revenues in the short term but also kill it in the long term if the sources of economic growth are undermined. Auctions of this type also allow very large and established companies to bid exorbitant prices and monopolise control over scarce resources, inhibiting the entry of new and innovative entrants. With competition absent, such companies are left free thereafter to squeeze consumers badly.

Due care needs to be exercised as India's experience with auctions hasn't been particularly encouraging. The first auction of telecom licences in the early 1990s - which led to excessive bids by operators and huge accumulated revenue arrears to the government - forced a migration to a revenue-sharing regime. And the more recent 3G spectrum auction has dented the rapid growth of services. Similarly, the outcome of the bids for oil exploration rights or running airports is poor. It's unlikely that the experience of the new round of spectrum auctions will be any different.

Telecom is now a basic developmental input, like roads and power. And the telecom revolution has been a major tool for empowering disadvantaged groups and promoting inclusive growth. Snuffing it out now is a luxury that neither the country nor the UPA government can afford.

The Times of India on Mobile

 

[ejazr]

Re: 2G spectrum auction at high reserve price is set to roll back the telecom revolut

It doesn't matter, 2G now means 1.7 lakh crore scam. Forget the fact that the CAG itself said it was notional and was calculated using a dubious method of using 3G premium spectrum auction price as a base for a 2G basic spectrum FCFS policy. And forget the fact that even the CBI has placed the "Scam" at 30,000crore as well and focussed on actual crimes like bypassing procedures rather than the actual policy of FCFS vs Auction.


The sad thing is that the real culprits in the scam who held extra spectrum illegally (many have not even been charge-sheeted)or got the spectrum in questionable circumstances are in the background or are left of and those who made or sanctioned the "policy" of using the FCFS route instead of the Auction route is being held as the biggest crime. Nto realising that the price crash and the high mobile phone density that started post 2008 was in direct consequence of these new players entering the market with low cost spectrum which would not have happened otherwise.


This article does a good job explaining this concept. Also check out the graph that shows how the cellphone tarrifs reduced starting FY09 which directly benefited consumers

Monetary Benefit to Consumers by the 2G scam accused telecom players : Rs 72,500 crore

Who benefited from grant of 2G licenses? Those who sold stake or those who issued fresh equity?

 

[nrj]

Not happening, COAI is just trying to attract attention. They will eventually spend more time behind close doors than the court room.

 

[Predator]

Re: 2G spectrum auction at high reserve price is set to roll back the telecom revolut

The "notional" money looted is sitting bank accounts of jain brothers

Research and Analysis Wing alleges A Raja had 'hawala' links; CBI initiates probe - Economic Times

The Research and Analysis Wing (RAW), India's overseas intelligence agency, has told the Central Bureau of Investigation and the Enforcement Directorate that it has unearthed hawala transactions allegedly linked to former telecom minister A Raja.

The note from RAW alleges that one of the promoters of the Chennai-based JG Group, Rajesh Jain, is associated with "hawala dealings" of Raja and his "other associates".

"Rajesh Jain, a Dubai-based individual and one of the promoters of the Chennai-based JG Group is reported to be associated with hawala dealings of Shri A Raja, former Union minister for Telecommunications and his other associates," RAW has told the agencies. The note, whose contents were described to ET by people familiar with it, has not specified who these associates are. It alleges that Jain has established a number of "dummy" companies in the UAE, Hong Kong, China and other countries which are used "for the purpose of money laundering".

The other two owners of the JG Group are Daulat Jain and Mahesh Jain, brothers of Rajesh Jain who look after the Chennai and Delhi offices of the group. The CBI had searched the offices of the Jain brothers as part of a sprawling investigation into decisions by the former telecom minister who is facing trial for awarding telecom licences and spectrum to companies that were not eligible.

So far, none of the Jain brothers have been charged by the agency in the socalled 2G scam. But the information provided by RAW has got investigators excited as it could provide evidence of a "money trail" to the 2G case, says the official quoted earlier. There is no mention of hawala dealings in the charges filed by the CBI against Raja and there is no reference to any consideration received by the DMK leader for the decisions for which he is on trial.

The note from RAW refers to three companies allegedly set up by Rajesh Jain in Dubai — Euro eagle General Trading FZC, Global Trade Commodities DMCC and King Power Industrial Limited — which were, according to the intelligence agency, used to "park considerable amounts." The document mentions accounts held by two of the companies, Euro Eagle and King Power, in the Emirates NBD bank.

Two of these accounts, according to RAW, contain fixed deposits in excess of $20 million and are linked to the former minister. Based on the fresh information provided by RAW, ED has sent letters rogatory, essentially, requests for information, to Dubai seeking further details on the bank accounts mentioned by RAW. The CBI will summon the Jain brothers for questioning, says a senior official in the agency, and is also likely to question Raja on the matter.