In praise of corruption

Robert Clark
21 Dec 2010

It took a telecom scandal to put India's endemic corruption onto the front page.

By one measure, $39 billion -the government revenue estimated to have been foregone -India's 2G licensing scandal is a gargantuan case of official corruption.

However, bribery of public officials is usually measured by the amount of money they have pocketed. At this stage, it is not clear how much the former telecom minister, A. Raja, collected, if anything at all.

Raja was dumped in mid-November when the long-simmering scandal finally blew up.

He had awarded 2G licenses in 2008 by directly allocating the spectrum, rather than selling the frequencies as he was supposed to have (and which the government used this year for 3G). An auditor's report found he had not followed his own department guidelines.

It didn't help that the country had been humiliated in the lead-up to the Commonwealth Games in October by the greed and ineptitude of senior officials.

The head of the games organizing committee was sacked, and government probes are underway into both of these embarrassments. With the acrid odor of righteous anger still in the air, we can guess the outcomes.

Good for consumers

But I think Indian consumers, investors and operators owe a debt to ex-minister Raja (perhaps "debt" is not the best word.) Not to his dubious motives, but to the results of his actions.

Raja's apparent personal shakedown of the mobile operators was a lot less expensive than the officially-sanctioned shakedown. They ponied up $15 billion for more than 100 3G franchises early this year. India today has 15 mobile licensees, including half a dozen with national or near-national footprints.

This is not because the government favors competition in telecom. Rather it tells us that the "license raj" mentality dies hard; mobile operators desperate for spectrum are an irresistible target.

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