Auctioning policy

By ruling that auctions are not the only legally sustainable method for allocating scarce natural resources for commercial exploitation by private parties, the Supreme Court has done well to reaffirm the principle that the powers for policymaking or enacting laws are vested in the executive and the legislature. The judiciary’s concern is solely with whether the decisions taken or laws passed by the other two branches are fair, and not violative of any of core principles of the Constitution. When it comes to awarding of contracts or allotment of land, mining concessions and other commercially exploitable resources, the Apex Court – while responding to a presidential reference filed by the Government consequent to the former’s 2G spectrum allocation judgment – has said that the actions of the State have to comply with Articles 14 and 39(b) of the Constitution. The first one concerns the fairness of allocation – whether it has been done in a transparent manner without any arbitrary exercise of discretionary power or discriminating between similarly-placed parties. The other Article mandates that resources controlled by the State be distributed as best to subserve the common good.

The Court, in its latest ruling, has reiterated the desirability of auctions from the standpoint of transparency as well as maximising revenues from allocation of scarce natural resources. At the same time, it has acknowledged that revenue maximisation may not always be the best way to “subserve the common good”. Whether revenue considerations are supreme, or should be secondary to broader development considerations are matters of policy for the executive, and not the Courts, to decide. This is a correct interpretation. A Chhattisgarh or Jharkhand Government may want to offer its mineral deposits mainly to attract industries – in which case, maximising local employment, not revenues, becomes the primary objective. That goal, in turn, may well be met by giving an equal opportunity to all investors, but eventually selecting the one which advances the local employment generation objective the most. The Courts may only step in, if the entire process, including extension of various concessions, smacks of capriciousness or mala fide intent.

By reaffirming the clear demarcation of functions between the three branches of the Government as envisaged in the Constitution, the Apex Court’s latest ruling is most timely. Nor does it contradict the Court’s 2G spectrum verdict of February. The latter judgment ordered the cancellation of licenses and auctioning of the spectrum released only because the so-called first-come-first-served policy of the then Telecom Minister, which, with its grotesque extensions bordering on the bizarre, was clearly framed to favour certain operators and, hence, violative of constitutional principles. The case made for auctions was specific to 2G spectrum – unavoidable in the light of actual experience with regard to implementation of the first-come-first-served policy – and not applicable for allocation of all natural resources. The means adopted for alienation of resources are ultimately executive prerogatives, provided there is no mala fide exercise of power that invites judicial wrath.

COMMENT NOW