Karela Fry

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Spectrum of lies

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The Hindu Business Line reminds us of the background to the still simmering 2G spectrum scandal:

Back in 1994, when telecom licences were being given out for the first time, a flawed auction design allowed non-serious players to bid astronomical sums of money and then default on payments. The Government was forced to convert the auction fee to an annual revenue share under a New Telecom Policy in 1999.

Three years later, in 2002, the same operators were given additional spectrum on a subscriber-linked criteria without any upfront fee. This was the first time anywhere in the world when spectrum was given based on the number of subscribers. Now the current Government, as if to rectify a mistake, wants to impose a one-time fee on all operators who got additional spectrum over the last ten years.

In 2008, the then telecom minister A. Raja decided to give away 122 licences on first-come-first-served basis at throwaway prices to a few players, despite having as many as 40 players waiting in line. These allocations were later cancelled by the Supreme Court on grounds of impropriety.

The latest efforts to allocate spectrum, this time through an auction mechanism, have once again failed. Of the 176 blocks of GSM spectrum (each block equal to 1.25 Mhz), the Government received bids for 101 blocks.

There were no bidders for key markets such as Delhi and Mumbai, which were once considered among the most lucrative telecom markets in the world.

The auction ended in two days, at the end of which the winning bid amount was the same as the reserve price set by the Government before the auction started.

The CAG’s estimate of a public loss of Rs. 176,000 crores (1.76 trillion) has been questioned by the government. IE reported the most recent denial:

Reserve Bank of India Governor D Subbarao on Monday told the special court trying the 2G spectrum allocation cases that there was “sacrifice of revenue” when the telecom and the finance ministries, in June 2008, agreed that start-up spectrum would not be charged and only spectrum beyond start-up would be charged for the issuance of the 122 new universal access & service (UAS) licences.

“It is correct that while determining policy, the government has to make a balance between welfare maximisation and revenue maximisation. In this case if there was a sacrifice of some revenue, it cannot be said that the government suffered a loss,” Subbarao, who was the finance secretary from April 2007 to September 2008, said during his cross examination by Advocate Sushil Bajaj on behalf of accused Sanjay Chandra. He also told the court of Special Judge OP Saini that the entry fee and spectrum pricing were matter of constant discussions between the Department of Telecommunications (DoT) and the Department of Economic Affairs (DEA) between 2003 to 2008.

While the UPA has been tarred with this allegation, there have been consistent reports that there were irregularities committed also by the NDA government. The Hindu reported recently:

Additional spectrum beyond 6.2 Mhz was allotted during the late Telecom Minister Pramod Mahajan’s tenure to cellular operators Airtel, Vodafone and Idea without due coordination with Defence agencies, the CBI has claimed in a probe report.

In its report to the Law Ministry, the CBI also claimed that Mahajan, who was the telecom minister during the BJP-led NDA rule, had apparently told “half truth” to then defence minister George Fernandes that additional spectrum upto 8 Mhz to cellular operators was assigned only after due coordination with Joint Communication and Electronic Staff (JCES).

In the public eye these shenanigans have appeared pale in comparison with the estimated loss of Rs. 1.76 trillion. However, now comes a bombshell of a retraction by the CAG.

The officer behind the CAG’s 2G spectrum audit has said he was told to sign off on the controversial report by CAG headquarters even though he did not agree with the report’s findings.

R P Singh, former D-G, Post and Telecommunications at CAG, also said that CAG officials visited the residence of BJP leader Murli Manohar Joshi, chairman of Parliament’s Public Accounts Committee (PAC), on a holiday to help him prepare the panel’s report on the 2G spectrum allocation.

R P Singh told The Indian Express in a telephone interview that CAG officials had visited Joshi’s residence on the Good Friday holiday on April 22, 2011.

“I got to know from my team members that CAG officials including senior CAG officials from headquarters went to the PAC chairman’s residence and assisted him in preparing the PAC report. I cannot say with certainty what exactly transpired at the meeting,” Singh said.

Asked if there was an attempt by the PAC chairman to influence the outcome of the CAG’s 2G report before it was tabled in Parliament, Singh said “it appears” from a note prepared by R B Sinha, D-G at CAG headquarters, that there were “some telephone calls by the PAC chairman to access the 2G report which was under preparation”.

The PAC had been examining the 2G matter since 2008. Joshi became PAC chairman in 2010. The CAG report was tabled in Parliament on November 16, 2010, and put the presumptive loss from spectrum allocation between Rs 57,666 crore and Rs 1.76 lakh crore.

On the CAG’s report, Singh said: “This was not my report. It was CAG’s (the institution’s) report. What can I do as a subordinate when the CAG (Vinod Rai) has issued written instructions on how he wants the report? I sent a report which calculated a loss of Rs 2,645 crore. This was on May 31, 2010. After this my audit team was attached with CAG headquarters under Deputy CAG Rekha Gupta. I was not involved in the inclusion of auditing the Ministry of Finance. In July 2010, I was sent a heavily revised report, and asked to issue (it) to the Ministry of Finance and Department of Telecommunication. There was little I could do when I got a written instruction.”

If this is true, then it would appear that the whole controversy about massive corruption in the UPA government could be a lie engineered by the BJP. The government is not clean by any means, but the level of corruption in the UPA and the NDA could then seem to be more evenly matched, or perhaps even tilt the other way. But the Hindu presents a detailed argument why Mr. Singh cannot be taken at face value:

According to documents with The Hindu, Mr. Singh is contradicting not just most public statements that he has ever made but also documents that he himself has signed which support rather than oppose the CAG’s loss figures.

Mr Singh cherry picks from the TRAI’s recommendations, depending on what he needs to prove, an impropriety that the TRAI had scolded the DoT for doing in 2008. While indexing to Rs. 2,645 crore he ignores the TRAI but to reject the Rs.1.02 lakh crore loss estimate, he quotes the TRAI. Mr Singh’s lack of rigor is also exhibited by the fact that the government did, in fact, contemplate charges beyond entry fee. These are called spectrum usage charges. And this has been the government’s main argument for keeping entry fee low and detailed in Finance Minister P Chidambaram’s letter to the PM dated January 15, 2008.

A review of the documents leading up to the audit, including several signed by Mr Singh himself, fail to reveal even the slightest hint of objection to the Rs. 1.76 lakh crore loss estimate. His report, filed to Ms. Rekha Gupta, DEI-RC on September 9, 2010, duly signed in not one but two places, shows that he details all four sets of losses presented in the final CAG report without objection. These include the loss estimate based on the S Tel offer, on Swan’s transaction with Etisalat, Unitech’s M&A with Telenor, as well as the 3G auctions.

However it turns out, this case has brought public attention to endemic corruption and crony capitalism.

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