2G and the real scam

Allegedly, the public exchequer has incurred a loss of several tens of thousands of crores of potential income from auctions on the 2G spectrum. And the controversy over this refuses to die down. No one seems to realize that the government does not own spectrum and has no rights to auction it in the first place. Most people seem to believe that the government owns everything by default. So let me play along and see where this logic leads.

To setup a shop (or pretty much anything) in India, one needs to acquire a license (or registration or whatever). As far as I know, these licenses have never been auctioned. Assuming a very modest figure of Rs 1 lac per shop license auctioned, and just half a million shops who could have paid this modest sum, that works out to a loss of 5000 crores.

Over 750,000 two wheelers were sold in India last year. Each of those had to be registered. These registrations could have been limited (with the added benefit of reducing road congestion and pollution) – say to 500,000 – and auctioned to raise revenue. Assuming a modest amount of an extra Rs 10000 per registration, that works out to a loss of 500 crores. Similar losses could be worked out for sales of other vehicles. Let us say the total loss on all vehicles is 2000 crores. Further the government could have made it mandatory to renew vehicle registrations every year (as a security measure). These renewals could also be auctioned (to reduce the incentive to keep using old vehicles, thus reducing pollution). Assuming a very small amount of Rs 1000 on average per vehicle registration and estimating the number of vehicle owners who would pay this amount at 20 million, the total loss works out to another 2000 crores.

The cricket world cup is coming up. The right to use cricket as a theme for advertisements could be restricted and auctioned. Just imagine the loss! Easily another few thousand crores.

Tens of thousands of people migrate into cities from rural areas or smaller cities and towns. Since these people obviously cannot afford to buy houses, they stay on rent (if not in illegal slums). The right to rent space could be auctioned (with the added benefit of reducing overcrowding of the cities). Another few thousand crores lost.

Enough of examples. Let me generalize. Any activity that results in any value to anyone could be restricted by the government and the rights to it could be auctioned, thus generating additional revenues. Assuming just 1% of GDP as the revenue that the government could have generated by auctioning rights to economic activity, that amounts to a loss of 70,000 crores per year. Aren’t auctions wonderful? They have such immense potential to generate revenue. Sadly, this incredible idea is woefully under-used by policy makers. And no one is complaining about this scam!

Enough of sarcasm! Suppose the license rights had been auctioned. Who would have paid the money? The telecom companies who would have had to remain in business by lowering their costs – paying lower salaries to their staff or by hiring less, increasing the prices for their services and by reducing their profits. Ultimately, it is the “common man” – that mythical creature worshipped by all policy makers – who would have paid for the license rights. And where would the money have gone? Ah it would have gone to the same place where government money usually goes – but really, that is rude of me. I should not dare to ask such questions. Of course it would have gone into welfare schemes for the common man – the NREGA (remember the pictures of smiling villagers carrying a couple kgs of mud on their heads?), the minimum support price for various foodgrains (wasn’t there a recent report about grains rotting in government godowns? never mind), the public distribution system (absolutely necessary since minimum support prices cause inflation), the right to be educated (in a school where teachers never turn up, but that’s OK, the children can atleast have fun) etc. These are all noble ideas with proven track records. They must be implemented at all costs. You see, the “common man” is too stupid to know what he should do with his own money. That money should be taken away from him – by means of taxes on all consumption, license fees on every service that he uses etc, etc. A portion of it should be used to subsidize higher education (after all, the bureaucrats and policy makers need to be educated, don’t they?). Another portion should be used to establish various government agencies (like the agency which calculated the loss to the exchequer in the 2G scam). Another portion should be used to fund events such as the Commonwealth Games (it is a matter of national prestige after all). Another portion should be allocated to muncipal agencies and the like (like the one that digs up the road in front of my house every 3 weeks). Another portion should be used to line the pockets of the entire government machinery (people are corrupt and selfish, what to do?). Another portion should be used to create TV and other media advertisements for welfare schemes. And then, whatever is left (if any) may be returned back to the common man who should be grateful and beholden to the government for thinking of his welfare. Where would he be if he were left to the mercies of the free market? Oh no. That is just unimaginable. He would simply be exploited by the capitalists and left without a home, education and health care if he had full control over all his money. Just imagine!

Oh, did I get back to sarcasm after starting the last para with “Enough of sarcasm!”. Sorry about that. The real scam here is much, much larger than a few thousand crores. It has been in operation for decades (centuries?). And it is primarily a moral scam, not a monetary one. It is perpetuated by people who seek to derive their self esteem second hand – not from their personal achievements but from a claim to altruism (however tenuous), not from producing value but from distributing the value they have not produced. People like Raja are not responsible for the scam. People who support the system that makes Raja inevitable are.

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