It cannot be denied that many controversies relating to wrongful distribution of natural resources have come to the forefront in recent times. The rights to commercially exploit scarce resources such as minerals and mines, airwaves and spectrum, major chunks of land, water supply for industrial use and forests are very important since these involve sovereignty issues and their uses have been restricted through licences and permits. These resources represent huge business opportunities so Indian business houses, multinationals and investors always remain in on the lookout for a pie of the game.

The recent verdict of the Supreme Court of India has rightly emphasised the auctioning of natural resources as an effective mechanism of clean governance. In the case relating to 2G spectrum allocation, the honourable judge said: “In our view, a duly publicised 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.” As against leasing or allotment of natural resources for commercial exploitation by private parties on a first-come-first-served basis or discretionary basis or similar modes used in several instances in the past, auction is a more transparent and impartial means to determine eligible persons and fair value of these resources.

Natural resources carry a very significant economic value for a country. With their scarcity ever increasing and with a widening gap between demand and supply, allocation must be done with utmost care and prudence.

Competition in any circumstance promotes rationalism and transparency, which are of utmost importance. The auction process, where multiple parties are able to strike a claim, is more competitive and formal. As has also been pointed out by the honourable Supreme Court, the first-come-first-served policy can have dangerous implications and its success may sometimes be dependent on pure chance.

Thus, encouraging competition through a fair and open process, auction involves the communication of an offer to a majority of the public. It is a necessity that the auction be made public and this means all eligible persons can participate in the process, openly competing and fairly gaining an opportunity in the competition. Some may argue that auction of natural resources leads to cartelisation, but this can be avoided by mass participation and proper communication to the masses.

Auctioning of natural resources also generates revenue for the government, which is good for countries like India that are still in the developing phase and which ensures optimal resource utilisation for consumers and country.

Hence, there is an urgent need to ensure that those who have the power to allocate resources should be more accountable and the process should be fair, unbiased and transparent. Auction minimises the chances of corruption and provides a level-playing field for interested players and eligible parties, while also contributing to government revenues.

The author is Managing Partner, Corporate Professionals