shaw capital management: PM says Govt. Ready for JPC to Prove 2G Spectrum Allocation Scam

NetIndian News Network
New Delhi, February 22, 2011

Prime MInister Manmohan Singh today announced the Government’s willingness to form a Joint Parliamentary Committee (JPC) to inquire into the alleged irregularities in the allocation of universal access services (UAS) licences and 2G spectrum to telecom players in January 2008.
Speaking in the Lok Sabha as soon as the House assembled for the day, before Question Hour on the second day of the Budget Session of Parliament, Dr Singh requested Speaker Meira Kumar to proceed with the formation of a JPC. He said a formal motion in this regard would be moved in the House soon.
Recalling that almost the entire Winter Session of Parliament had been lost on acount of the controversy relating to the allocation of 2G spectrum, he said the country could ill afford a situation where Parliament was paralysed and important legislative business was not allowed to be considered.

“In paralyzing Parliament, I believe, we all do disservice to those who have elected us,” Dr Singh said.
He said his Government was committed to root out corruption and had acted expeditiously and transparently in this direction.
He said a Central Bureau of Investigation (CBI) probe into the allocation of 2G spectrum was being supervised by the Supreme Court. He said the Public Accounts Committee (PAC) of Parliament was also seized of the matter and the Government was fully cooperating with it.

He said the report of the independent inquiry committee headed by former Supreme Court judge Justice Shivraj Patil had also been received by the Government and placed in the pubic domain. He said the Ministry of Communications and Information Technology had also acted with expedition in the matter.
“Our Government believed that, as all effective steps were being taken, we might have been able to persuade the Opposition not to insist on a JPC. We could not succeed inspite of our sincere efforts. We can ill-afford a situation where Parliament is not allowed to function during the crucial Budget Session. It is in these special circumstances that our Government agrees to the setting up of a Joint Parliamentary Committee,” Dr Singh said.

“We are a functioning democracy and must strive to resolve our differences in a spirit of accommodation and collaboration not confrontation. This, I hope, will renew our confidence in India’s forward march. I am, therefore, requesting the Honourable Speaker to proceed with the formation of a Joint Parliamentary Committee. A formal motion in this regard will be moved soon,” he added.
The unrelenting pressure from the Opposition and the report of the Comptroller and Auditor General (CAG) on the issue forced then Union Communications Minister A Raja to quit the Union Cabinet on November 14 last year.
On February 2 this year, the CBI arrested Mr Raja, his former private secretary R K Chandolia and former Telecom Secretary Siddharth Behura in connection with its ongoing probe into the alleged irregularities.

They were charged with allocation of letter of intent and resultant UAS licenses & spectrum to certain companies ahead of others, in violation of established guidelines and procedures.
The CAG, in his report in November last year, had said that the alleged 2G scam had caused a presumptive loss of Rs 1.76 lakh crore to the national exchequer.
Mr Raja, 47, a Dalit leader of the Dravida Munnetra Kazhagam (DMK), has repeatedly said that he was innocent of any wrongdoing in the matter and had only followed the policy and procedures set by his predecessors.
On December 8, the CBI had raided the premises of Mr Raja, his close aides and four former telecom officials in Delhi and Chennai. Those whose premises were searched on that day included Mr Chandolia, Mr Behura, Mr K Sridhar, Member, Telecom Commission, and Mr A K Srivastava, Deputy Director General, Department of Telecommunications (DoT).

The agency has been questioning Mr Raja, among other things, about his reasons for allocating 2G spectrum to new players at low prices, for ignoring the advice of the Prime Minister, Finance Ministry and the Law Ministry in the matter, the haste shown by the DoT in handling applications and the alleged advantages received by some of the telecom firms.

The CBI had registered a case on October 21, 2009 against unknown officials of the DoT and unknown private persons/companies and others in connection with the allegations.

The agency had also conducted searches at 34 places in Delhi, Noida and Tamil Nadu, including the premises of corporate lobbyist Niira Radia, former Telecom Regulatory Authority of India (TRAI) chairman Pradeep Baijal and some of Mr Raja’s close aides in Chennai and other parts of Tamil Nadu and seized several documents on December 15 this year.

The agency had also searched some “hawala” dealers in Delhi and Chennai.
The Minister and his supporters repeatedly argued that the allocation of 2G spectrum could not be compared with the recent auction of 3G spectrum, which had yielded huge revenues for the Government.

They also claimed that the “first-come, first-served” policy they followed had helped to grow the telecom sector in the country and to increase the tele-density by making the services affordable and accessible for more people. But, despite all their protestations, the suspicion of wrongdoing remained and Mr Raja could not shake it off.

Mr Raja is one of the 18 Lok Sabha members belonging to the DMK, which is the second largest ally of the Congress in the ruling United Progressive Alliance (UPA).

The CAG report, tabled in Parliament on November 16, had come down heavily on the DoT for the manner in which it issued 120 licenses for unified access services on a single day in January 2008, saying the entire process did not withstand the test of scrutiny.

The CAG said the widely held belief that the process had benefitted a few operators and had not been able to maximise generation of revenue from allocation of such a scarce resource had been confirmed in its audit.
In a scathing criticism of how the spectrum allocation issue was handled by Mr Raja and the DoT, the CAG report said the role of the Telecom Regulatory Authority of India (TRAI) had been reduced to that of a hapless spectator as its recommendations were either ignored or applied selectively.

“The entire process of allocation of 2G spectrum raises serious concern about the systems of governance in the Department of Telecommunications which need to be thoroughly reviewed and revamped. The fact that there has been loss to the national exchequer in the allocation of 2G spectrum cannot be denied. However, the amount of loss could be debated,” it said.
“To ensure that such lapses do not occur in any Ministry or Department of the Government, there is an imperative need to fix responsibility and enforce accountability for the lapses highlighted in the Audit Report,” the report said.
The CAG said TRAI had recommended auction of 3G spectrum in September 2006. In its report of 2010, TRAI had observed that it was fair to compare 2G with 3G and recommended 3G prices to be adopted as current price of 2G spectrum in 1800 Mhz band.

“If these recommendations, which have not so far been accepted by the Government, are taken into account, then the value of 2G spectrum allotted to the 122 new licensees and 35 Dual Technology licences would be much higher at about Rs 1,52,038 crores as against the amount actually received,” the CAG report said.

The report also pointed out that many of the new UAS licensees of 2008 had been able to attract substantial amount of Foreign Direct Investment (FDI).
“Thus, on the values determined through various indicators, the presumptive value of 2G spectrum on account of grant of 157 licenses in different circles during 2007-08 would be in the range of approximately Rs 58,000 crores to Rs 1,52,038 crores,” it said.

Further, the report said spectrum was allotted by DoT to the existing operators beyond the contracted limits without imposing any upfront charge for such allotment. The value of spectrum held by 13 operators for 51 circles based on the 2001 rates worked out to Rs 2561 crores. Based on the above indicators, value would be in the range of Rs 12,000 crores and Rs 37,000 crores.
“TRAI’s recommendation (2010) for charging this additional quantity of spectrum has not been accepted by the Government so far,” it said.

Thus, it worked out that, using rates on the basis of 3G spectrum, that the potential loss could be Rs 176,645 crore.
The CAG said the entire process of allocation of UAS licences lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner.
It noted that the Prime Minister had stressed on the need for a fair and transparent allocation of spectrum, and the Ministry of Finance had sought for the decision regarding spectrum pricing to be considered by an Empowered Group of Ministers.

“Brushing aside their concerns and advices, the Department of Telecommunications, in 2008, proceeded to issue 122 new licences for 2G spectrum at 2001 prices, by flouting every cannon of financial propriety, rules and procedures. The 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 at crucial junctures without valid and cogent reasons, which gave unfair advantage to certain companies over others,” the report said.

According to it, the DoT also did not do the requisite due diligence in the examination of the applications submitted for the UAS licenses, leading to the grant of 85 out of 122 UAS licences to ineligible applicants.
On January 7, new Communications Minister Kapil Sibal, who succeeded Mr Raja in the key ministry, said the CAG’s estimates of the presumptive loss to the Government in the allocation of 2G spectrum in 2007-08 was “totally erroneous”.
In fact, Mr Sibal claimed that, if the math were redone properly, it would be seen that the Government did not suffer any losses at all because of the policy, which, in any case, had been formulated by the previous Bharatiya Janata Party (BJP-led National Democratic Alliance (NDA) government.

Mr Sibal said the CAG had calculated the presumptive loss on the basis of 6.2 MHz whereas the spectrum allocated was only 4.4Mhz. He said the Government was yet to fix the price of 6.2MHz and beyond.

He said the CAG had also worked out the figures on the basis of the 3G spectrum auctions in 2010, not appreciating the fact that 3G spectrum was three to four times more efficient than 2G spectrum. In any case, he felt the 2010 figures could not be used to work out so-called losses in 2008 without taking into account the value of the money.
He said the Xth Plan document for 2002-07, finalised by the NDA Government, had said that revenue should not be the main consideration while deciding on telecom policy.
At his interaction with editors of television news channels on February 16, Dr Singh had said that, in his letter of November 2, 2007, he had mentioned to Mr Raja a number of concerns being expressed by the media and by telecom companies.
“I listed a number of issues and I said to him that you must look into these issues and ensure that they are dealt with in a fair, equitable and transparent manner. One of the issues that I asked him to look into was the possibility from legal and technical angle of having an auction of spectrum. Mr. Raja wrote back to me almost on the same day, or our letters crossed. He said, ‘I have been absolutely transparent in my dealings, I will be so in the future, and you have my assurance that I have done nothing and will do nothing which will not be consistent with the promise that I am making’,” he had said.
Dr Singh had said that Mr Raja had told him that the auction route had not been suggested by the Telecom Regulatory Authority of India (TRAI) or the Telecom Commission.

“He also said that if we have an auction, it would not give a level playing field for the newcomers, because the existing players have got their spectrum free of charge of about 10 megahertz. Therefore he said the TRAI’s advice, Telecom Commission’s advice and his own view was that auctions are not the way forward, at least for 2G spectrum, and he also mentioned in a subsequent letter that he is agreeable to auction of 3G spectrum. But with regard to 2G spectrum, he was very clear that he should stay with the then existing approach,” he had said.
Dr Singh had said the issue was also discussed with the Finance Ministry because, in terms of the Cabinet decision of 2003, the pricing and allocation of spectrum was to be settled between the Ministry of Finance and the Department of Telecommunications (DoT).
“Initially, of course, the Finance Ministry did ask for a high price of spectrum but after many discussions, the two ministries agreed that as far as 2G is concerned, we have to live with the present system, particularly with regard to the amount of spectrum that is built and embedded into a license agreement. So this is the background why I did not proceed further with this matter of pricing of spectrum, because if the Ministry of Finance and Ministry of Telecom both agree and they have the obligation of the Cabinet Decision of 2003 to decide on the matter and also since TRAI is an expert body and Telecom Commission has experts, if all of them are of the same view, I did not feel I was in a position to insist that auctions must be insisted,” he had explained.

Dr Singh had said that the issue of licenses were not referred to him or to the Cabinet and were exclusively decided by the Minister.
As far as the sale of equity by some of the companies after they got licenses, Dr Singh said they had basically diluted their equity. “Now if they have to roll out they require money, and that money can be raised either by way of borrowings, or by way of diluting equity by getting in more people. Therefore at that stage I did not think that I should intervene in that affair,” he had said.

About Shaw Capital Management Financial News

At Shaw Capital Management we give you the information and insight you need to make the right investment choices.
We look forward to working with you and being the open architects of your financial well being.

Strategies

Our goal is to provide consistent quality investment advice to our clients.

Although the stock market provides many facets of opportunity for today's investor, there are always just a few stellar markets or niche companies at any given time. It is true that in a healthy market, investments yield favourable returns in a given growth area. The key is to pick those investments that are driving the trends and will become tomorrow's brightest stars.

info@shawcapitalmanagementfinancialnews.com
http://info@shawcapitalmanagementfinancialnews.com

Tel + 82 2 398 5852
fax + 82 2 398 5853

This release was published on openPR.