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After flop 2G auction, government challenges its auditor (CAG)

After flop 2G auction, government challenges its auditor (CAG)
New Delhi The government may have raised just over 9,000 cores from its auction of second-generation (2G) mobile phone airwaves, but the poor sales help to make a politically expedient point - the revenue raised now is at par with what the government earned in 2008, when licenses were sold to cellphone operators in a process allegedly manipulated by corruption.

After the Supreme Court cancelled 122 telecom licenses assigned in 2008 and ordered an auction, the government set a target of 40,000 crores. The fact that it earned just a fourth of that allows it to attack the national auditor (CAG), who said in 2010 that in 2008, the country lost 1.76 lakh crores because of the manner in which licenses were allocated.

"Mr CAG, where is the 1.76 lakh crore crore?" asked Information and Broadcast Minister Manish Tewari. "The opposition made this its holy grail for the last two years...it should apologize now," he said.

Calling the government "zero-loss ke hero" (the heroes of zero loss), the BJP's Mukhtar Abbas Naqvi said that government was looking for opportunity to target the CAG. "We will not allow this at all," he said.

When the CAG, Vinod Rai, shared his report on the telecom scam, Telecom Minister Kapil Sibal had controversially argued that there was "zero-loss" to the country. The results of the auction can be employed now by the government to bolster its defense - it has, for example, emphasized that its goal was not so much on revenue as on tele-density - providing the maximum number of consumers with the cheapest-possible rates for cellphones.

The target set by the government for the auction was 40,000 crores; the tepid response damages efforts to cut the fiscal deficit and avoid losing the country's investment grade credit rating.

The amounts pinned by the CAG to first the telecom scam and then to the government's coal policy- 1.86 lakh crores according to its audit shared this year with parliament - became indispensable arguments in the opposition's campaign against the government for steadfast corruption.

But the lack of an auction in 2008, and the first-come-first-serve policy used by then telecom minister A Raja was also denounced by the Supreme Court, which cancelled 122 of the licenses issued by Mr Raja, and asked for a fresh auction. The government agreed to complete the process by the end of January 2013.

A little over 50 percent of the airwaves on sale have found takers; most carriers found them too pricey. Four telecom zones, including the expensive Delhi and Mumbai circles, saw no demand.

The government had set a bid starting price of Rs.14000 crore for 5 megahertz of 2G airwave space on offer in all 22 zones. The base price was more than seven times what carriers paid in 2008.

The low prices paid will provide respite to a debt-ridden industry suffering from heavy loans taken to pay for a previous sale of 3G mobile airwaves, even as intense competition keeps tariffs low and margins suppressed.

The auction - used by most subscribers - has been mired in controversy, with carriers saying the starting price was too high and that the limited amount of spectrum on sale created artificial scarcity.
While India's more than 900 million mobile phone customers make it the world's second-biggest market after China, intense competition among 15 carriers means wafer-thin margins.

The competition will shrink from January, leaving seven players with nationwide presence.
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