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LATEST NEWS UPDATES | Lessons from a flop show

Lessons from a flop show

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published Published on Nov 16, 2012   modified Modified on Nov 16, 2012
-The Hindu

The wretched outcome of the 2G spectrum auctions, netting just Rs.9,407.64 crore against a Rs.40,000 crore revenue target, has evoked predictable reactions from the Congress party. Its leaders have indirectly mocked the Comptroller and Auditor General, the Supreme Court and the media for tying the government’s hands — instead of expressing concern about the impact of the failed auctions on investor confidence and India’s worrying fiscal deficit. Their gloating fails to conceal the fact that the government has messed up and badly needs scapegoats to camouflage its sins. The loss calculated by the CAG was in reference to the year 2008 when the addressable market in telecom and consequently, the revenue potential, was substantially higher than it is in 2012. India then had only 234 million mobile subscribers, translating to a 24 per cent tele density level and an addressable market of nearly 800 million. Roughly eight-nine million mobile subscribers were being added every month, hitting a scorching 20 million per month in 2008-09. In 2012, the tables turned towards negative subscriber growth as the total mobile subscriber base hit 900 million, with a tele density of 70 per cent, significantly diminishing the addressable market and making any substantial investment unwise.

Similarly, the average revenue per user (ARPU) has also dipped to Rs.97/month from Rs.316/month in 2008. With these numbers, no company can hope to build a viable greenfield business by bidding for raw spectrum. Even where money supply and capital markets are concerned, on January 8, 2008, two days before the scam, the Sensex hit a peak of 21,078 and international funding was flowing like water. Little surprise then that 575 applicants had queued up, all of whom have since fled as the UPA struggles to defend itself against charges of rampant corruption, policy paralysis and crony capitalism. Market buoyancy equally played a role in 2010 during the 3G auctions, garnering the exchequer revenues of over Rs.1 lakh crore. In short, the UPA government deliberately forsook a great opportunity in 2008 to legitimately collect large revenues, bring in serious investors and hike tele density, while keeping the sector free of litigation. India is today at a crossroads where it can either admit to past transgressions and pursue a course correction or sink further in the quicksand of denial. Any attempt to get into a blame game will only create fresh havoc — impacting all sectors of the economy, which the nation can ill afford. The government would be better served by proactively correcting a situation gone horribly wrong rather than gloating over its opaque decision making, illegal acts and complete lack of foresight in matters of public policy. 

The Hindu, 16 November, 2012, http://www.thehindu.com/opinion/editorial/lessons-from-a-flop-show/article4098781.ece


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