Advisory opinion seeks to clarify how government may allocate natural resources.
In a recent advisory opinion that could have long-lasting consequences for the Indian government’s allocation of natural resources, the Supreme Court of India determined that neither its decisions nor the Indian constitution mandate that the government hold an auction when distributing access to natural resources, notwithstanding an earlier Supreme Court decision advocating the use of auctions.
Although the Supreme Court has held that the Indian government must act to enhance the “public good” in allocating resources, it has now clarified that maximizing government revenues through auctions is not always necessary to achieve this goal. Indian President, Pranab Mukherjee, requested this advisory opinion in an effort to clarify the Supreme Court’s February 2012 decision that overturned hundreds of 2G bandwidth allocations and ordered the government to hold an auction to reallocate the bandwidth.
The Court’s recent advisory opinion clarified that its 2G decision “was never intended to be taken as an absolute or blanket statement applicable across all natural resources” and that it only recommended that “perhaps” an auction was “the best method” of ensuring fair allocation of natural resources and protection of public interests. In its advisory opinion, the Supreme Court made it clear that the government has more leeway in determining how to allocate resources. The Court “cannot mandate one method to be followed in all facts and circumstances.” Allocating resources is a policy decision, and thus an “executive prerogative.”
The Court also noted that to hold otherwise would contradict any of a number of Indian laws that prescribe methods of allocation other than auctions.
Various Indian government figures have greeted the advisory opinion favorably. The Minister of State in the Prime Minister’s office reportedly said that the opinion vindicated the Prime Minister’s position, and “strengthens the hands of the government.” The Indian Commerce Minister reportedly stated that the decision eliminates confusion while still “keeping public good in mind.” A technology minister reportedly declared that the decision makes clear there “is no constitutional provision that mandated auctions” and provides the government with “clarity on the issue.”
At least one academic observer, though, claims the opinion raises questions about how the “public good” should be defined, particularly since the Court’s newest opinion notes that maximizing revenue is not the only way to benefit the public. Deepa Badrinarayana, a law professor at Chapman University, has questioned how public good should be defined “if the allocation of natural resources are not considered to be a public good” from the perspective of profit-maximization, especially where resources are “allocated to private companies that stand to profit from such allocation.”
In its 2G decision, the Court found that allocating resources on a “first-come-first-serve” basis was contrary to the central government’s obligation to ensure that allocation of natural resources protects public interests. In that decision, the Court relied on the “public trust” doctrine to establish the principle that the government merely holds natural resources in a trust on behalf of the Indian public. The Court also explained that a first-come-first-serve basis did not comport with the government’s obligations to allocate resources in a non-discriminatory fashion, in accordance with Article 14 of the Indian constitution which promises equal protection under the law, because this form of allocation involves an “element of pure chance or accident.”
The Supreme Court’s latest advisory opinion clarifies that the 2G decision applies only to the spectrum allocation at issue in that case. The 2G decision still has continuing consequences for the Indian telecommunications industry, including a recent decision by a ministerial panel recommending a $5.2 billion surcharge for existing holders of 2G bandwidth in order to level the price with what is expected to be the paid at the upcoming auction.
