First day, no show

But 2G auction is a strike for transparency. It also puts the scam allegations in perspective

After a bruising year for the Indian economy, in which the question of how to price scarce natural resources gathered a new visibility, the auction of the 2G airwaves on Monday holds significant lessons. Since there were no bids for the four costliest circles, including Delhi and Mumbai, and there were excess bids for only low cost circles like UP West and East, the auctions are practically over on the first day itself. The telecom companies that bid in the auction have all got the additional spectrum they wanted; the government stands to earn less than Rs 10,000 crore from the exercise and the quality and price of telecom services for consumers are unlikely to change immediately. That only 55 per cent of the spectrum on offer has been bid for, shows that the base price the telecom regulator had set for the auction, as a multiple of the 3G auction price conducted in 2010, was far off the mark. What it also demonstrated was that there had been no great loss to the exchequer in the first place. If that were true, telecom companies should have bid frantically for the slots on offer on Monday.

The big question is: did this auction do any good to the sector and for the economy? The answer will determine whether the government should proceed with auctioning of other natural resources as well. Certainly, auctions advance fairness and transparency. Auctions, in fact, demolish hype and the loose talk of lakhs of crores. Price discovery through auctions may be the best way even to put the scale of alleged scams in perspective.

This 2G auction has made transparent the price that each individual company will pay for the airwaves and has given all companies an equal chance to bid for slots they would have liked to capture. It has also signalled to the people that the government is capable of allocating resources fairly. For a country seeking to capture the global imagination again as an investment destination, this is a major gain from this auction.

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