Examining the Delhi Excise Policy: Consumer Benefits vs. Corruption Allegations

TK Arun

What any Delhiite can assert, however, is that the impugned excise policy had been the best in terms of the experience it offered the consumer.

Delhi Chief Minister Arvind Kejriwal’s arrest shows, among other things, the imperative for the Opposition to focus on things other than electoral bonds. By arresting Opposition leaders on assorted economic offence charges, the government is making it difficult for them to take part in the election campaign and trying to defame them ahead of the elections.

The move also has the effect of shifting the focus of the election campaign to a debate on the validity or otherwise of the arrest, away from the performance of the Central government over its two terms, on assorted parameters that determine collective well-being, such as hunger (India fell from 107th to 111th spot on the Global Hunger Index), corruption (India showed deterioration, falling from the 87th to the 93rd place in the global Corruption Perception Index) and inequality (at a historical high, according to the World Inequality Lab), all of which drain happiness from the lives of Indians (India ranks 126th among 143 countries, below Pakistan).

Stigma Sticks

Sure, people have heard that everyone is innocent until proven guilty. This has not helped people jailed for a decade and more on assorted charges that were ultimately found to be false or unproven. Nor does the legal process of declaring someone not guilty totally remove the stigma of the charge framed against them.

The CBI court that heard the 2G scam case against former telecom minister A Raja and other accused delivered the verdict that no scam or wrongdoing was established by the prosecution. Yet, in the nation’s collective memory, a massive scam was perpetrated, causing the exchequer to lose Rs 1,76,000 crore, when spectrum for mobile telephony using second-generation technology was bundled, without any separate, upfront payment for it, with the licence to offer the service.

Notional loss

The loss figure of Rs 1,76,000 crore is derived from a wholly obtuse and misguided report by the then Comptroller and Auditor General of India, Vinod Rai, who estimated a range of notional loss figures, of which the highest stuck to public memory and even figures in the White Paper brought out recently by the Modi government on its predecessor, the United Progressive Alliance government.

The figure was based on three mistaken assumptions: one, auction was the only legitimate method of allocating a natural resource such as spectrum; two, the winning auction bid for a 5GHz sliver of the 3G spectrum was an appropriate basis for assessing the value of every Hz of 2G spectrum that had been assigned earlier, bundled with the licence, without any auction; and three, zero revenue accrued to the government from such allocated spectrum. All these three assumptions were not just erroneous but also idiotic.

Telecom issue

A Constitution Bench of the Supreme Court made the definitive pronouncement that it was wrong to hold that auctions are the only fair means of allocating natural resources, in response to a presidential reference in the wake of a division bench of the court calling for the cancellation of 122 telecom licences granted without auctioning spectrum. Neither Japan nor South Korea, the two jurisdictions with the highest penetration of broadband and data consumption per capita, allocates spectrum via auctions.

3G telephony can handle far more voice and video per GHz of spectrum than 2G could. This made 3G spectrum far more valuable than 2G spectrum. Terrible auction design, with no forward visibility as to how much additional spectrum would be available over time, further jacked up the bid price. It made no sense whatsoever to use the winning bid price for a very limited supply of 3G spectrum the basis for estimating the value of large swathes of 2G spectrum allocated in the past.

It was not the case that the absence of upfront payment meant that the spectrum was assigned free of charge. Both the licence fee and the spectrum usage charge were determined as a share of the revenue, or rather, share of the Adjusted Gross Revenue (AGR). As licence fee and spectrum usage charge, the government collected tens of thousands of crore rupees from the telcos, over the years.

Telecom dispute

Because of the faster spread of telecom and ultra-low tariffs enabled by the policy of allocating spectrum without upfront charges, the pace of economic activity went up, yielding additional taxes not attributed to telecom. Because the spread of telecom networks enabled computerization, not just of the private sector, but also of the tax department, tax collection efficiency improved. The CAAG failed to take any of these into account.

Some would recall the AGR dues case, in which the Supreme Court ruled in favour of the government in a dispute with telcos on whether AGR comprised just the telecom revenue or included revenues earned without the help of the telecom spectrum and licence. The telcos had paid what they thought they owed, as per their own interpretation of revenue, endorsed by the telecom regulator, TRAI, but the government demanded shares of a higher revenue, and those arrears alone were estimated to be Rs 140,000 crore, including interest.

New policy

In its new telecom policy, the government has decided to allocate spectrum for satellite communications without auctions, on an administrative basis. This is the right choice. But it kicks the bottom out of the charge that the allocation of spectrum for the still-born satellite broadband venture, Devas, was a scam. The present government continues to label Devas a scam.

The short point of this long digression to a past charge of misconduct is that charges of wrongful conduct brought against political actors can be baseless and misleading.

Excise policy and consumers

This is not to argue that Arvind Kejriwal actually has two wings and a harp tucked away inside his ill-fitting shirts. Nor that the excise policy the Enforcement Directorate has been investigating so diligently was not inspired by monetary rewards. That can only be established by investigation and credible prosecution.

What any Delhiite can assert, however, is that the impugned excise policy had been the best in terms of the experience it offered the consumer. There was abundant choice, as to stores and the types and brands of liquor available. A journalist from the Economist stable said, in a podcast, that for the first time, a woman could buy liquor at an outlet in Delhi without being surrounded by a crowd of men with “touchy-feely hands”.

The use of the government machinery to frame charges against Opposition political leaders and prevent them from campaigning, the freezing of opposition parties’ accounts and the general attack on democracy deserve to be prioritised, ahead of electoral bonds, which have accrued to all parties and whose possible misuse for laundering money, has escaped attention altogether.

TK Arun is a senior journalist.

The article was first published in The Federal as In this election season, focus on issues that scar lives, not digressions on March 22, 2024.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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Acknowledgment: This article was posted by Aasthaba Jadeja, a visiting researcher at IMPRI.