Illusory Gains?

With the auction of third generation (3G) spectrum having generated spectacular revenues, the government appears to have regained some of the credibility it lost on the subject after the mishandled allocation of 2G licences by Minister of Communications and Information Technology A Raja in 2008. However, even as the government enjoys a political breather with the budgetary windfall, the larger consequences of the auction in the key arenas of market structure, service provision and consumer welfare remain in question. Market consolidation and the share of the high spectrum charges that the consumer will have to ultimately pay are serious concerns, especially in light of the limited bandwidth that has been released.

Against the Rs 35,000 crore targeted in the 2010 budget from the auction of 3G and broadband wireless access (BWA) spectrum, revenues from the 3G auction alone crossed Rs 67,000 crore at the end of bidding. Needless to say, this gives the government a substantial budgetary cushion as it attempts to tackle the deficit, but the political proceeds are equally attractive. Already some commentators have renewed calls for the dismissal of Telecom Minister Raja given the large losses he caused to the exchequer in comparison to auction-revealed spectrum valuation, though a low-key inquiry by the Central Bureau of Investigation in the background has helped keep the heat off the government.