Column : Brave new world—no place to hide

Nov 28 2012, 01:07 IST
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SummaryThe 2G auction was a flop. Who says, and more importantly, for whom? Certainly not a flop for economic rationality, or for the identification of the true culprits behind the 2G scam.

2G auction has revealed that at least part of the revolt against corruption is politically motivated

The 2G auction was a flop. Who says, and more importantly, for whom? Certainly not a flop for economic rationality, or for the identification of the true culprits behind the 2G scam. In 2001, licences for 2G auction (4.4 MHz) yielded R1,660 crore; the equivalent auction revenue for 5 MHz would have been R1,900 crore. (Nripendra Misra, former chairman of Trai, “An auction that did not flop”, Business Standard, November 25, 2012). The CAG alleged, the Supreme Court agreed, and Mr Kejriwal followed—the lack of an auction for 2G in 2008 enabled a large dose of corruption whose magnitude was R1.76 lakh crore—that is, the revenue loss was almost 100 times that of the “successful” auction held in 2001.

In years gone by, the government, or auditors, could allege whatever and would be believed. Complete information was lacking, there was no internet and therefore no ability to conduct research in a timely fashion, and institutions (like the CAG) were respected because the presumption was that not only the institutions knew better, but must know better. Something like Caesar’s wife who should not only not be suspect, but seen to be above suspicion.

What has not been generally been recognised, especially by the “ruling” generation, is that in this brave new world there is no place to hide one’s fallibilities. One simple, and crude, calculation of the worth of the 2001 2G licence in 2008 would have been the 2001 revenue adjusted upward by the growth in nominal per capita income. The latter includes both the effects of inflation and real income growth, i.e. a first stop calculation of increase in nominal purchasing power. This calculation would imply a 121% increase; R1,900 crore in 2001 would be R4,200 crore in 2008. The equivalent number for 2012 (per capita income levels of R21,850, R47,508 and R79,990 in the three years 2001, 2008 and 2012) would be R7,000 crore. The final realised auction revenue in 2012, according to Mr Misra, was R6,994 crore!

The point is not that the two numbers are near identical; Mr Misra’s calculation left out the areas where there were no bids (Karnataka, Rajasthan, Delhi and Mumbai), and these would most likely have yielded an additional R2,000-3,000 crore. The point simply is that whenever any analyst computes any number, and especially the lead accountants at the CAG,

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