GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF ECONOMIC AFFAIRS 

RAJYA SABHA
UNSTARRED QUESTION NO. 2799
TO BE ANSWERED ON SEPTEMBER 06, 2012 / 15 BHADRAPADA, 1934 (SAKA)
Discontinuance of FCFS Policy

2799: SHRI RAJEEV CHANDRASEKHAR 

Will the Minister of FINANCE be pleased to state:

(a)   Whether Government proposes to discontinue the First Come First Served (FCFS) policy for allocation of all natural/scarce resources, in line with the recent Supreme Court Judgment on the 2G spectrum allocation scam dated 02 February, 2012;

(b)   If so, by when is the new policy framework and guidelines in this regard expected; and

(c)    If not, the reasons therefor?

ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI NAMO NARAIN MEENA)

(a), (b) & (c): A statement is placed on the table of the House.

Statement placed on the table of Rajya Sabha in reply to parts (a) to (c) of the Rajya Sabha Unstarred Question No. 2799 regarding Discontinuance of FCFS Policy.

1. The H'ble Supreme Court of India while quashing the Licences vide its judgment dated 02.02.2012 in WP (C) No. 423 of 2010 and WP (C) No. 10 of 2011 had observed in Para (76) as follows: 

Para (76): There is a fundamental flaw in the first-come-first-served policy in as much as it involves an element of pure chance or accident. In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-first-served policy has inherently dangerous implications. Any person who has access to the power corridor at the highest or the lowest level may be able to obtain information from the Government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be awarded or a licence or permission is likely to be given, he would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim. This Court has repeatedly held that wherever a contract is to be awarded or a licence is to be given, the public authority must adopt a transparent and fair method for making selections so that all eligible persons get a fair opportunity of competition. To put it differently, the State and its agencies/instrumentalities must always adopt a rational method for disposal of public property and no attempt should be made to scuttle the claim of worthy applicants. When it comes to alienation of scarce natural resources like spectrum etc., it is the burden of the State to ensure that a non-discriminatory method is adopted for distribution and alienation, which would necessarily result in protection of national/public interest. In our view, a duly publicized auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first-come-first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. In other words, while transferring or alienating the natural resources, the State is duty bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process.

1. In context of the above order the Government has filed a Special Reference No. 1 of 2012 under Article 143 (1) of the Constitution of India in the Supreme Court of India seeking clarification inter alia on the following: 

Q.1 Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?

Q.2 Whether a broad proposition of law that only the route of auctions can be resorted to for disposal of natural resources does not run contrary to several judgments of the Supreme Court including those of Larger Benches?

Q.3 Whether the enunciation of a broad principle, even though expressed as a matter of constitutional law, does not really amount to formulation of a policy and has the effect of unsettling policy decisions formulated and approaches taken by various successive governments over the years for valid considerations, including lack of public resources and the need to resort to innovative and different approaches for the development of various sectors of the economy?

Q.4 What is the permissible scope for interference by courts with policy making by the Government including methods for disposal of natural resources?

The hearing in Special Reference has commenced on 10.07.2012 and has been concluded on 16.08.2012 and the judgment has been reserved.