Is it conflict of interest for Venugopal as Ministry seeks AG views on allotting Spectrum without auction?

History

Earlier, the Telecom Commission was slated to take up the issue in its meeting on May 1. However, it was removed from the agenda at the last minute after The Wire report published on April 27, 2018. Similarly, it had to change its plans after The Wire report in November. After this report, the telecom department has appeared to have camouflaged the allotment process by creating a new category of users – ‘captive commercial users of MWA and MWB Spectrum’ for backhaul of telecom service providers. The spectrum would be allotted using the ‘first-come, first-serve’ (FCFS) method at an administered price, which in the past has been controversial due to its role in the 2G spectrum scam under the UPA-II regime. Given the backdrop of the 2G case and the Supreme Court’s subsequent order in the matter, the Narendra Modi government had also pledged that spectrum and other public resources will be auctioned in the future. Spectrum in E-band and V-band is a part of MWA and MWB spectrum. It has very high potential for commercial use. The decision to allot spectrum on FCFS basis will raise many eyebrows as a handful of leading business houses will likely benefit immensely in the election year (to be held in May 2019). “How can someone use the word ‘captive’ for backhaul spectrum?” asked the former TC member. “It means that all spectrum can be categorised as captive as it is for use of only crores of subscribers of an operator. The Supreme Court order is very clear that any spectrum for commercial use should be allotted only through auction.” It is difficult to quantify the real loss to the exchequer if spectrum in V-band and E-band is given on FCFS basis, as the real value can be realised only through an auction. However, if we go by the methodology adopted by former CAG Vinod Rai under whom the national auditor had calculated notional loss, the size of potential revenue loss could be at least Rs 4,77,225 crore from 7,000 MHz of V-band and another Rs 7,00,000 crore from 10,000 MHz of E-band spectrum. In October 2016, the government sold 965 MHz of spectrum in various bands ranging from 800 MHz to 2,500 MHz for Rs 65,789 crore. The price achieved through auction for 1 MHz of spectrum was Rs 68 crore. In the V-band, 7,000 MHz of spectrum is available. Hence, loss to the exchequer could be to the tune of Rs 4,77,225 crore. Similarly, loss in E-band would be about Rs 7,00,000 crore.

Judgment

In the 2G judgment, the Supreme Court made it mandatory that spectrum, which is a scarce natural resource, would be allocated by the government only through a transparent auction process. This was affirmed by a Constitution bench judgment related to the allocation of natural resources in which the Constitution bench said that as far as Spectrum is concerned, it can be allotted only by auction. In its February 2, 2012 judgment in the 2G case (Centre for Public Interest Litigation, (2012) 3 SCC 1) the Supreme Court verdict says: 96. In our view, a duly publicised auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first come-first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. In other words, while transferring or alienating the natural resources, the State is duty-bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process. The constitution bench affirmed this order when the government sought presidential reference. Presidential order by the constitution bench clearly says: 83. …. we are convinced that the observations in Paras 94 to 96 could not apply beyond the specific case of spectrum, which according to the law declared in the 2G Case, is to be alienated only by auction and no other method. A few DoT officials, however, appear to be deliberately misguiding decision makers by citing the non-spectrum natural resource allocation part of the judgement with spectrum allocation (which can be done only through auction). It may be noted that when DoT sought TRAI’s opinion on this issue, the regulator didn’t give its opinion. It simply stated: “From letter dated 08.06.2015 it emerges that the main issue is that in view of the judgement dated 02.02.2012, whether spectrum can be allotted by a means other than auction… It is for DoT to take a policy decision as to whether it is legally tenable to allocate spectrum by any other mechanism (viz. administrative) than auction in consultation with the Ministry of Law”. Spectrum in V-band and E-band is becoming important in view of the explosion of broadband services. It is used for providing both the high speed access services at data transfer speed of up to 7 Gbps and for backhaul spectrum.