November 14, 2010

LATEST CAG REPORT CONFORMS TELECOM SCAM

Time Now for UPA Govt to Act: Yechury

THE latest report from the Comptroller and Auditor General of India (CAG) has not only confirmed all our allegations about the scam perpetrated in the auction of the 2G spectrums; it has even corrected the CPI(M)’s estimate about the losses the government’s exchequer has suffered because of this scam. The losses confirmed by the CAG report exceed the figure of 1,90,000 crore rupees which the CPI(M) had estimated it to be.

This was the point Sitaram Yechury, member of the CPI(M) Polit Bureau and leader of the CPI(M) group in Rajya Sabha, stressed in a press conference held at the part headquarters in New Delhi on November 4. Yechury released some relevant portions of the CAG report on the occasion.

In the background of the CAG report, the CPI(M) leader also reiterated the party’s demand that A Raja, the telecom minister, must be removed from his position till the time the Central Bureau of Intelligence (CBI) completes its probe into the telecom scandal.

Terming it as a Grand Scam, Yechury reminded that the total loss it has caused to the country’s exchequer comes to about one-third of our gross domestic product. It is, to put it another way, equal to eight times the rural health budget in the country, and equal to three and a half times the total allocation for education in this year’s budget. Yechury forcefully said that if only such gigantic loot of the public money could be stopped, we could easily achieve the millennium development goals (MDGs) which we have to achieve by 2015 but from which we are still far, far away. In this context, he also reminded that the CPI(M) has continually been raising its voice against this scam and that he had himself written letters to the prime minister in February 2008, November 2008 and May 2010 in this regard. He drove home the point that while the CAG report has corroborated the allegations made in his letters regarding the telecom scam, the UPA government has so far not moved a finger to bring the culprits to book.

Yechury here reiterated the demand, made in his May 2010 letter, that the government must promptly take steps to recover from the licensee companies the losses the country’s exchequer has suffered because of the sale of spectrums to some favoured companies for a song. Another demand he reiterated was that action must be initiated against the government officials who are prima facie connected with this scam.

Replying to a query coming from the presspersons, Yechury said it was a highly anomalous situation that the UPA government has appointed as Central Vigilance Commissioner (CVC) the very person who was the telecom secretary when this grand scam took place and whose name has been coming up again and again in this regard. This is extremely tragic, as this very fellow would be eventually asked to probe into various aspects of this scam.

The CPI(M) leader also outlined in brief how the sale of 2G spectrums involved corruption at three levels. The first and the biggest scam, involving a sum of about 1,25,000 crore rupees took place in the grant of 122 new licenses. Out of these, 85 licenses were given to such candidates as were, on the criteria set by the Department of Telecommunications (DoT) for the sale of spectrums, not at all eligible for getting a license. Yechury also reminded that in 2008 the licenses were granted at the rates prevailing in 2000, and some favoured private players were thus extended undue benefits at the cost of the public exchequer. Apart from these, losses of thousands of crores of rupees were caused to the public exchequer by the grant of transition licenses for double-use technology to the CDMA operators. The third aspect of the grand scam relates to the fact that the GSM operators are still in control of spectrum in excess of the sanctioned 6.2 megahertz.

In his press conference, the CPI(M) leader also distributed a comparative chart. On the one hand, this chart gives the allegations made regarding the scam as well as the estimation of its size and its various aspects, as mentioned in his letters to the prime minister. On the other hand, the chart also gives in a nutshell of the conclusions and estimations arrived at by the CAG in its latest report. This chart has been reproduced below.

Issue	CPI (M) Charge	CAG Findings
Dimension of the Scam	Ø “Loss due to 122 licenses for new entrants in 2008: Rs. 124,000 crore Ø Loss due to cross-over licenses permitted to CDMA operators (Dual Technology License): Rs. 36,000 crore Ø Loss due to excess spectrum occupied by the GSM operators beyond 6.2 MHz: Rs. 30,000 crore Ø Total Loss: Rs.190,000 crore”	“6.3 Given its scarcity value and increasing demand, a comprehensive evaluation of available spectrum was required which was not done. With the UAS policy and its subsequent amendments being implemented in a weak and indeterminate manner and with the reluctance on the part of DoT to address the issue of pricing of 2G spectrum, it was only natural that 2G spectrum was allocated at much below its value. Though the correct value of 2G spectrum allotted to 122 licences in January 2008 and the 35 licences under dual technology, also in 2008 could have been determined only by a market driven process, if adopted. However, its presumptive value, based on various available indicators, as indicated in Chapter 5 ranged between Rs. 90000 crore and Rs. 140,000 crore. In addition, the value of additional spectrum allotted beyond the contractual amount to existing nine operators, based on 3G rates works out to Rs. 36729 crore.” (Comment: Adding the components, the total loss to the exchequer is calculated as Rs 176,379 crore.)
Violations of TRAI Recommendations and Overruling the Advise of the Ministry of Finance and the Ministry of Law	“The Telecom Minister was given explicit recommendation by TRAI in August 2007 (Section 2.73) that the entry fee existing then based on 2001 prices was not realistic and there was a need to “reassess entry fee through market mechanism.” Further, the PMO (your letter), Finance Ministry, Law Ministry, and internal memos of senior officials of DoT had made it clear that instead of the dubious route of “first come first served” distribution of 2G spectrum/ licenses at 2001 prices, other routes for price discovery including auction or appropriate benchmarking should be adopted.” “I cannot accept that the PMO, the Law Ministry, the Finance Ministry and senior officials in the DoT were all ignorant of the existing policy and TRAI provisions while advising the Ministry on entry fee/spectrum charges. Notwithstanding these recommendations, the Minister went ahead with this spurious first come first served principle claiming previous policy of 2003 and TRAI recommendations as the basis of his decision.”	“4.2 Advice of the Hon’ble Minister of Law and Justice was ignored by DoT” “4.2.4 Concerns of the Ministry of Finance and Finance Wing of DoT on continuance of entry fee fixed in 2001 were overlooked” “6.4 The Hon’ble MoC &IT for no apparent logical or valid reasons ignored the advice of Ministry of Law, and Ministry of Finance, avoided the deliberations of the Telecom Commission to allocate 2G spectrum, a scarce finite national asset at less than its true value on flexible criteria and procedures adopted to benefit a few operators. TRAI, the regulator also stood by as a helpless spectator when its recommendations were being either ignored or misused.”
Arbitrary Operation of First-Come-First-Served (FCFS) Policy	“There is now clear evidence that the first-come-first-served policy for award of licenses was further vitiated by entirely arbitrary operation of even this principle. The Delhi High Court Judgements of July 1 and November 24, 2009 struck down the September 25 cut-off date imposed by the Ministry on license applications as illegal, calling this change of cut-off date as “... a change in the rule after the game has begun”. Even more glaring was modifying first-come basis from the date of application for license to whoever deposits the money first with just a few hours’ notice. This was done well after the ranking of parties as per original criterion of first-come was known, and was nothing but a blatant attempt to change this ranking in favour of specific parties. This is now no longer a matter of inferences or media reports but stated in an Audit Report – P&T’s Audit Office report dated March 31, 2010. The entire exercise was nothing but playing favourites and awarding licenses to a hand-picked set of parties.”	“4.3 Multiple Activities on 10 January 2008 On 10 January 2008 afternoon, DoT informed all eligible applicants who applied for UAS licences up to 25^th September 2007 through the Press Information Bureau that they would be issued LoI. It was also mentioned in the press release that as per the policy of FCFS being followed for the grant of UAS licences, an application which is received first will be processed first and thereafter if found eligible will be granted LoI and then whosoever, complies with the condition of LoIs first will be granted UAS license. This stipulation took away the relevance of the date of application and the sanctity of the declared FCFS policy. Though the draft press release proposed to maintain the inter-se seniority of applicants based on their date of applications, if more than one applicant complied with LOI conditions on the same day, the same was withdrawn from the final press release. Thus DoT deviated from its declared FCFS policy though MOCIT maintained that it was continuing ‘with the policy (first-cum-first-served) for processing of applications’” “6.2 The process followed for spectrum allocation was also unfair, considering the fact that DoT did not follow its own guidelines on eligibility conditions, arbitrarily changed the cut off date for receipt of applications post facto and altered the conditions of the FCFS procedure it had been following, gave unfair advantage of certain companies over others thus creating an environment which can not be perceived as transparent and fair.”

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