04-Feb-2012

Spectrum Auctions Not The Way To Go


By far the most interesting take on the 2G decision by the Supreme Court comes from a pink paper:

The Court posits auctions as the only acceptable method for fair and transparent allocation of national assets. Why ignore a draw of lots among financially and technically qualified aspirants? It equates national enrichment with the proceeds of auction.  
This is a simplistic assumption devoid of economic analysis. Low-cost telecom spreads fast, increasing, with each additional connection, the utility of being connected for everyone on the network. The result is efficiency and productivity gains across the board, leading to faster economic growth. Crores of lives improve and the government nets superior tax receipts, far in excess, over the years, of auction proceeds. Auctioned spectrum jacks up the telecom industry's capital costs, which will either raise tariffs or delay further expansion and upgradation. 
In any case, what sense does it make to transfer huge investible resources from industry to the government? 
So auctions are not the bestest methods of all?  And they tell us only now?  So sad.  But the pink one need not worry.  Our telecom guys have a neat trick through which huge auction prices can be whittled down to manageable amounts:  just take the money from our public sector banks, discussed in The 3G Scam?

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