(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By Jeff Glekin
MUMBAI Feb 8 (Reuters Breakingviews) - India's judiciary is
making its presence felt in the fight against corruption and
crony capitalism. The Supreme Court's ruling in the 2G telecoms
scam will change the way all state assets are sold in future. It
could also stir a hornets' nest by reopening other old licence
awards, in telecoms and other sectors.
The court ruled that there was a fundamental flaw in the
first-come-first-served policy under which 2G spectrum was
allocated. Anyone who obtained privileged information about the
timing of the sale stood an unfair chance of success.
The court also appears to have ordered that all future sales
of land, mines, spectrum and other state assets, should be
conducted as auctions. Lawyers will debate how soundly this
reflects the constitution. But economists ought to welcome the
ruling. Auctions are the best method of price discovery. They
leave little room for corruption.
What about past sales though? The court said that firms such
as Vodafone, Airtel and Reliance
which are using spectrum awarded in 2001 are not subject to the
current judgement because they were not part of the petition
under consideration. But that leaves the door open for fresh
petitions. Some lawyers have said that the 2008 process was
distinct from that in 2001 and the licences would therefore not
meet the same fate. The 2008 sale was found to be corrupt and,
while the 2001 process may not have maximised revenue, there's
no evidence of graft. A public interest litigation could be
filed to test that award, though.
For the central government, spectrum is the main source of
revenue from asset sales. But at the state level, mine and
minerals sales are important, raising $4.3 billion since 2004.
The wider applicability of the court's judgement could also be
tested in relation to revenue sharing agreements of oil and gas
reserves, for example Reliance Industries' large gas contracts.
So while the future looks brighter in India's battle against
corruption, there is a risk that the country gets bogged down in
a wave of litigation on the back of the precedents set in the 2G
-- India's Supreme Court on Feb. 2 ordered the revocation of
all 122 telecoms licences issued by the government in 2008. The
court said the current licences will remain in place for four
months, during which time the government should decide a new
system for issuing licenses.
-- The court said that "while transferring or alienating the
natural resources, the State is duty bound to adopt the method
of auction by giving wide publicity so that all eligible persons
can participate in the process."
-- The licences affected include all those held by Unitech
Wireless, the Indian joint venture of Norway's Telenor and
Unitech. Also affected are: Loop Telecom; Videcon
Telecommunications, part of India's Videocon group; Etisalat DB,
the joint venture between Abu Dhabi's Etisalat and India's DB
group; S-Tel; 13 licenses held by Idea Cellular; and three held
by Tata Teleservices.
-- Reuters: India court orders licences cancelled in telecom
-- Reuters: ANALYSIS-Scandal blow puts Indian government in
-- Supreme court judgment: here
Spectrum of higher prices
-- For previous columns by the author, Reuters customers can
(Editing by Hugo Dixon and David Evans)