Thursday, October 29, 2009

Telecom Scandal

[Following is the one of two editorials of the Statesman, 29 October 2009 which describes a scandal involving central minister that resulted revenue loss of something between Rs 60,000 and 100,000 crore.  And that minister is still in his chair.
To add stress few sentences were made bold by this blog.]

After the CBI raids on the headquarters of the department of telecommunications in New Delhi, headed by A Raja of the DMK, his continuance in the Cabinet of Dr. Manmohan Singh has become untenable. Probity in public life demands that he resign pending completion of the inquiry. As long as he is at the helm of affairs in the telecommunications department, the CBI will be inhibited from a free and open inquiry. If he is found innocent, he can always be re-inducted into the Cabinet with the same portfolio and free of any taint. 
Raja was the kingpin in the award of 2G spectrum licences in January last year at a price of Rs. 1,651 crores, fixed in July 2001, for a pan-India licence. The price then was arrived at through an open, multi-stage, transparent auction/bidding process. The telecom regulator, TRAI, recommended a similar exercise before the allocation of 2G spectrum. Raja ignored it. The scandalous events that took place when licences were being issued and spectrum allocated for 2G services, the way cut-off dates were changed and that too with retrospective effect, the scuffles that took place at Sanchar Bhavan, made headlines in the media at the time.
The real value of the spectrum can be gauged from the profit made by two of the lucky ones, Swan Telecom and Unitech Wireless, favoured by Raja on first-come-first-served basis. Swan let UAE-based Etisalat acquire 45 per cent share in the company for $900 million, valuing the company at $2 billion, not because of its intrinsic worth but because of the spectrum it acquired, a scarce national resource. Similarly, Unitech let Telenor of Norway acquire 67.25 per cent share in the company, valuing it at Rs.9,100 crores.
There are three elements that are important in the spectrum issue. The first: what basis should award of licences and spectrum be decided on, auction or some other criteria? Second, if a non-auction route is chosen, what should the value of licence and spectrum be? Third, if the licence and the spectrum are given below market rates, how can the country guard against their re-sale by profiteers? Prima facie, Raja wantonly misused his position. He disregarded TRAI guidelines and a letter from the then finance secretary, D Subbarao, now Governor of the Reserve Bank of India, asking him not to implement his plan. As long as DS Mathur was DoT secretary, he refused to sign licences in a way that would cause the exchequer revenue loss. Mathur retired on 31 December 2007, other inconvenient officials were transferred out of the ministry, and the scheme was implemented without let or hindrance after Siddharth Behura took over as secretary in January 2008. Raja’s action has led to the loss of between Rs. 60,000 crore and Rs.100,000 crore to the government. Raja’s defence that he was only following Trai’s recommendation of not auctioning 2G spectrum does not hold water. The government’s telecom policy and TRAI wanted market forces to determine the fee for spectrum. If only he had followed that, the government would have realised its true value. The DMK, no doubt, will resist any move to drop Raja from the Cabinet, even temporarily, to allow the CBI to proceed with the investigation unhampered. It would be wrong for the government to shield Raja especially when auction of 3G spectrum is in the offing. The Central Vigilance Commission has decided to initiate action against top DoT officials, including Behura. Sparing Raja and punishing his underlings would be a travesty of justice.

Source: The Statesman, 29 October 2009

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