After 2G verdict, an autopsy of failures

After the Supreme Court’s (SC) decision of February 2012 (cancelling all licences), one would have thought that the judgment in the “2G case” was a foregone conclusion. Not so. The “prosecution failed miserably” in establishing its case.

The political aftermath will reverberate up to 2019. Political victimisation, trumped-up charges, fictional “presumptive losses”, the credibility of the then Comptroller and Auditor General of India (CAG), vindication of the UPA’s public policy stance, and the mischievous role of the “Opposition” (the Bharatiya Janata Party, BJP) will be recurrent themes.

But, politics aside, the case throws up more general issues relating to institutional failures, public policy and judicial proceedings.

Four institutional failures are striking. Ministerial conduct (in states and at the Centre) in brazen disregard of propriety, impartiality and fairness is now commonplace. And without nemesis. When courts don’t let them off, they use the law to drag out the judicial process.

Second, our bureaucracy has been emasculated, some of it suborned — by the politicians. The outcomes: Silence when we need voice; abject surrender to unreasonable political commands; self-preservation by passing the buck or evading a decision; and, active complicity. For those not suborned, indecision is a rational response: There is no premium on decision-making and the risk of a stiff penalty (including incarceration) for taking a decision. And, an officer not toeing the line can be “fixed” by a vengeful government. Worse yet, excessive centralisation (as in the BJP government) has provided a perfect excuse for indecision; the “bosses” will decide.

Regulatory agencies, both within and outside the government, have failed us. Examples abound: Safety in hospitals (fires), the Directorate General of Civil Aviation (DGCA) and unqualified pilots, the Medical Council of India, rail safety and accidents, etc. In the instant case, the Wireless Planning & Coordination (WPC) and licensing arm within the Department of Telecommunications and the Telecom Regulatory Authority of India (Trai) could not have been unaware of industry realities, the scarcity of spectrum and the rent-seeking on licences. The then minister justified issuing licences on the ground that more entrants would promote competition. Wrong. An economics graduate will tell you that in a capital-intensive industry there is a theoretical optimal number of firms. It is common knowledge that, the world over, the telecom industry in a country comprises 2-3 firms. Moreover, we had the lowest tariffs in the world. The genesis of the minister’s decision: Departmental silence and Trai’s recommendations of August 2007 that there should be no restriction on the entry of firms in the industry. Even with caveats, how could an expert body make such a recommendation? 

This is one of a string of cases where the investigating agency has been found wanting. It is time to take a hard look at how it functions. Modern economic crime needs multiple-disciplines (like the Serious Fraud Office). Is it too police-dominated? The Federal Bureau of Investigation (FBI) has multiple disciplines and is headed by a civilian, not a career police officer; it does a pretty good job. Finally, how best do we insulate it from political pressures?

The courts have waded into the public policy arena because of executive inaction, alleged malfeasance and public interest litigation. This is a tricky territory. Public policy is about multiple objectives, competing interests, and trade-offs. There is no absolutely correct stance and elected governments are responsible to their constituents (through Parliament) for public policy. A senior lawyer friend tells me that the binary nature of judicial proceedings (guilty vs not guilty, constitutional vs unconstitutional) is not well suited to public policy analysis. Examples: The SC ruling on sale of liquor along National Highways went through several mutations; the burning of paddy stubble invited the National Green Tribunal’s (NGT) intervention, but no solution was found; the SC’s 2013 judgment on Section 377 evinced public outrage – would an elected government have been able to pronounce that as public policy? Maybe courts could benefit by drawing on expertise within and outside the executive.

Judicial proceedings in matters pertaining to technologically complex industries (and similar sectors) need to be much better informed, especially so for economically regulated industries. In the US (and elsewhere), courts and regulators routinely rely on depositions of professionals — economists, engineers, public interest advocates, and public policy experts — to better appreciate the context of a decision. And, judges can better appreciate the nuances of a decision that is under review if their understanding is enriched. Our courts have quite some way to go before they institutionalise such professional witnesses. But that is the direction for the future, especially when strong public policy interests are at stake.

The tragedy is that a vital industry is paying the price for numerous failures. Shouldn’t we have halted the issue of licences when competition was evident? Was administrative allocation (provided it was fairly done) fundamentally flawed? Would our telecom sector have had a completely different growth path if indebtedness were lower? Would our banks have had non-performing assets (NPAs) in the sector had our policy been different? 

The agenda for action is clear. The SC’s decision to speed up proceedings against politicians is a welcome first step. But, legal proceedings aside, ministers must be bound by a code of conduct; can Parliament devise a way to enforce compliance? Restoring civil service voice and morale is now an imperative. We (India) cannot afford indecision and voice is essential to prevent misadventures; leaving decisions to “bosses” can be very costly. Regulatory institutions must be truly independent to command respect; kowtowing to the government is not fair to the public. Lastly, in public policy matters and all fields of economic regulation, the quality of judicial rulings can be vastly improved if the courts turn to experts for deposition and advice. 

As a country can we get our act together?
 

The writer is former chairman, Telecom Regulatory Authority of India