Poor response to auctions of natural resources

Poor response to auctions of natural resources

The recent Supreme Court ruling that the first come first served policy is seriously flawed and that all future natural resources should be sold through auction process may have very little appeal to the sectors like minerals, land, energy and water where supply outpaces demand.

Experts are also of the view that if the first come first served (FCFS) policy has to be abandoned, it needs to be scrapped across several sectors, where the government is vigorously following it. For example, in the mining sector, this rule applies for prospecting licences.

A bill to introduce auction and transparency in the mining sector is still lying with the Standing Committee and yet to be passed by Parliament. Even in that Bill certain areas like the ones considered for allocation to a government company, have been exempted from auction. “Going by the ruling, the entire process has to be changed and new laws incorporated,” said an expert.

“The verdict questions the bidding process for other critical natural resources and it is valid for only those resources where the demand is greater than supply,” telecom consultant, Mahesh Uppal said.

According to him, the verdict is not going to yield much benefit where the resources are in abundance.

The propagators of FCFS also believe that the policy protects the weaker sections by giving them an equal chance in economic opportunities. According to them, FCFS need not always arbitrariness and corruption, it can be absolutely transparent if well designed.

“If everything is done by bidding, then it is a policy that favours only the rich,” said an energy expert.

However, those in favour of auction, say that reasonable restrictions can apply even in the auction route.

“The government can specify certain reservations at the entry level itself to fulfil its social obligations,” Pavan Duggal, a telecom and cyber law specialist said.