Audit warned of low 2G auction rates !!!

The low values in the 2G auction and unclaimed spectrum ought not to be a surprise for the government as an internal assessment had warned that poor market conditions, deficient auction design and policy drift could hurt revenues. The need to freeze policy parameters to assure bidders that goal posts will not be moved while keeping in mind the state of the economy and country ratings was pointed out in the run up to the auction necessitated by Supreme Court scrapping 2G licences. A note submitted to the inter-ministerial committee overseeing the auction process said telecom regulator Trai's recommendation that 1.25Mhz spectrum be allocated to existing licences in the 1800 Mhz (2G) band at auction determined prices will result in these operators k eeping away from the auction. This would depress demand, harm the auction and the government will lose revenue, the note said while succinctly arguing that market conditions have an important bearing on the success or failure of competitive bidding. Under pressure from the SC to move ahead with auctions cancelled in the wake of former telecom minister A Raja and promoters and senior executive of telecom firms being jailed on alleged corruption charges, the government might have ignored the red flags. Hauled over the coals for the 2G scam, the government perhaps developed cold feet in informing the apex court that the timing of the auction was not propitious given a gloomy economic scenario at home and abroad, feel sources familiar with the developments. Sources said the auction has been hit by older telecom players not needing spectrum while cash-strapped newer entrants, scalded by the scam, participating largely in the hope of the Rs 1,658 crore they paid for cancelled 2G licences being adjusted against a winning bid.