SC verdict on Prez reference to bring sea change: HP Ranina

The Supreme Court on Thursday clarified that the auction order in the 2G scam was only restricted to telecom spectrum and not for all natural resources.

In an interview to CNBC-TV18, corporate tax lawyer HP Ranina says the judgment is not having any binding force. "It is more directory. It only lays the broad guidelines," he adds. According to him, there will be a sea change. "Every other agency of the government will have to take this factor into account that whenever you have to allocate natural resources, even if it is for a particular sector, it has to be by a fair and open process," he adds. Also read: Judiciary has right to scrutinise policy decisions, say experts Below is the edited transcript of his interview with CNBC-TV18s Latha Venkatesh and Gautam Broker. Q: Everyone took away positively from what the Supreme Court had to say yesterday. But there is one caveat. When such policy decision is not backed by social or welfare purposes, natural resources are allocated for commercial purpose of profit, the adoption of means, other than competitive bids, may be considered arbitrary. Nobody seems to be focused at this point. Do you think that this caveat that will come into focus later on? A: The judgment is not having any binding force. It is more directory. It only lays the broad guidelines. It represents the fact that the constitution clearly has a division between the judiciary and the executive. Therefore, what the judges have said is that we will not encroach upon the executive function, we will leave it to the executive; each issue will have to be decided case by case. So, if the objective is only to mobilise more resources in order to raise revenue then you go in for the auction route so that the market driven price is determined. But if the objective is to do public good and they have referred to Article 39 of the Constitution of India, which says that natural resources have to be so allocated so as to maximise public good, then you can take any other route so long as it is transparent, and is done in an open manner that is devoid of any arbitrariness. So, this is an important point which the Supreme Court has laid down. But they have left the whole field open to the executive. Q: Even when it is social good, you have to have standards of fairness. Where it is quite clearly profit maximisation, you cannot go against the right to equality, Article 14 of the Constitution. So, is it not now possible that prospectively the government will have to invite competitive bidding for more projects than it has hitherto done? For instance, coal allocation for steel. Steel as an end product is not priced regulatorily, unlike power that has a mandatory price when the SEBs sell it. In all such cases, a free allocation will not be tolerated, some level of bidding will become incumbent. Will there not have to be a sea change in the way in which government allocates natural resources and indeed even projects? A: I agree with you. There will be a sea change. That is what the government has now been told. Every other agency of the government will have to take this factor into account that whenever you have to allocate natural resources, even if it is for a particular sector, it has to be by a fair and open process. You mentioned steel, all steel manufacturers who are interested in setting up a steel plant will be asked to bid for it. So, within that contours of the limited field that is available, certainly there will be bidding. You cannot just give it to your friend or to your crony just because you want to make some personal profit out of it. That is absolutely right. The Supreme Court have told the executive while you have a free hand, yet every single thing maybe questioned by us, if it can be proved that you have adopted a procedure which is not fair or which is arbitrary. _PAGEBREAK_ Q: From this opinion, is it fair to conclude that so far whatever has been allocated is safe? A: I would not say it is absolutely safe. I think the government will have to relook at whatever it has done. If it feels that it has not done in a fair and open and transparent manner then it may certainly revisit the issue. I would not say everybody is safe. Infact these guidelines may be applied to some extent retrospectively. For example, you are given a bid and nobody has acted on that or somebody has been allocated something and he has not acted on it then certainly you can revisit it and maybe even cancel that allocation. I would say government should look at some of the recent past events on the touch stone of these guidelines laid down by the Supreme Court. Q: If you take a hypothetical coal allocation being made to a steel plant and compare it with coal allocation made to a power plant, the power, in most of the cases, is sold to an SEB at a pre arranged price, a price purchase agreement, PPA which is normally at subsidised rate not really a profit making rate. But steel, by the nature of the industry, does not have any regulated price and there have been times in the past where there have been windfall gains. Will the old allocations of coal to steel industry, which was done on allocation basis, be opened? A: It depends on what were the riders, what were the conditions which were put. In case some conditions were put that you will set up a steel plant within a certain framework or that you will not sell steel in open market, if all those framework guidelines were there then I think they will stick to it. It also depends on the agreement. The party can challenge the agreement in case there is a breach of violation of the agreement. I think it will have to be looked at from every point of view. In the case of allocation of coal for steel, if it is not done in a transparent manner, I think the government would be fully justified in revisiting this issue.