Cartel games again at telecom ministry

Since there were 6 firms offering essentially four technologies — those of Siemens, Alcatel, Ericcson and Lucent — it was very possible that one or two of the technologies would get left out in the final award. In other words, since it was not certain who would get left out, the chances of all parties cartelising while bidding was close to nil.

That, however, was in early May. After the Telecom Commission took this decision, the file then did the rounds in the ministry, and on May 31, the Telecom Commission decided to reverse its earlier decision. It was decided that the number of firms who would get the final bid would be kept at the original five. Now, it is very clear that with 6 firms offering four technologies, if five are to be chosen, no single technology could get left out. In fact, if five firms were to be given the award, one technology — that of Siemens, Alcatel, Ericcson or Lucent — would get two orders. Essentially then, instead of breaking the possibility of a cartel getting formed, the ministry is encouraging this.

Interestingly, the anti-cartel logic is the one that MTNL used when it was inviting bids for switches. Originally, MTNL also had 7 bidders for these switches, and then Fujitsu dropped out. On June 17, according to a note written by G D Gaiha, director technical in MTNL, they decided to restrict the number of firms who would get the order to 4 precisely so that there would be no cartelisation. `In the changed scenario since there are only six bidders left out we are asking for the first four bidders to be considered for placement of purchase orders at L1 price. This will attract competitive prices in this tender.’ This was then okayed by senior officials — S. Sundresan, MTNL’s finance director noted that `in case this is not being done, there is the possibility of the bidders forming a cartel’. On June 20, the then CMD, S Rajagopalan agreed to the proposal.

This action of MTNL apparently had some impact, as two days ago, there was another meeting in the ministry on the DTS order. The Secretary of the Department of Telecom Services, R N Goyal, and the Member Finance decided that it would be more appropriate to keep the number of firms who would get the order to 4 as per the original decision. This file is currently with telecom secretary Shyamal Ghosh who is still to ratify it.

This paper had reported last week, that in the case of jelly-filled cables, Sterlite Industries had quoted a price that was significantly lower than that of the other firms, and then wanted to opt out on the excuse that it had got its bid price wrong. At that time, minister of state, Tapan Sikdar had argued that Sterlite should be penalised for its mistake, but the next-lowest bid should be considered to be the lowest — at that time DoT officials had argued against this, stating that Sterlite’s low bid and desire to opt out could be a sign of cartelisation. They had argued that the propounding, was possibly a sign that the market was cartelised.

Clearly the lack of a firm signal from the telecom ministry is encouraging this.