The finance ministry note of March 25, 2011 on the 2G spectrum issue that has created a political storm was the result of an inter-departmental effort to mount a common defence in the face of the Supreme Court case and the public accounts committee (PAC) proceedings.
It was the outcome of several meetings and emails exchanged between PMO officials, the cabinet secretariat and the ministries of finance, law and telecommunications.
The cabinet secretariat added substantially to the original finance ministry draft, hinting that the scam could have been avoided if the ministry headed by P Chidambaram in 2007 and 2008 had insisted on an auction or any other market-based system for allocation, revealing cracks within departments and exposing the government to attacks from the opposition.
On March 17, the department of economic affairs (DEA) sent out an email to the cabinet secretariat titled: “Chronology of basic facts relating to pricing and allocation of 2G spectrum,” which contained 12 paragraphs.
The cabinet secretariat wrote back the next day attaching a modified version of the note suggesting substantial changes and expanding it to 32 paragraphs.
Chidambaram, according to the cabinet secretariat, had seen a note prepared by the ministry and used it as a basis of his ‘secret note’ to the PM on January 15, 2008 recommending auction-based mechanism for future allocation of spectrum (beyond the start-up spectrum), with the past allocations to be treated as a closed chapter.
“A constructive interpretation of the note would imply that for licences already allocated in the start-up spectrum, which is embedded in them and was to be allocated subsequently based on availability, would be left outside the purview of pricing through auction,” the cabinet secretariat had suggested in its version of the note.
In other words, according to the cabinet secretariat’s interpretation, the finance ministry note was in favour of offering “start-up” spectrum of 4.4 mhz bundled with the licence fee and not force companies to purchase it separately through an auction.
The DEA, however did not incorporate these lines, in the final note sent to the PMO a week later.
The cabinet secretariat added a new paragraph to the draft note stating that on January 9, 2008 — a day before the DoT handed out the letters of intent to prospective operators — it was suggested to the finance minister to argue for revision of entry fee and adoption of auction with spectrum usage charges as the bid parameter.
The minister’s note, didn’t deal with the need, if any, to revise entry fee or rate of revenue share, the cabinet secretariat added in its version of the note.
The cabinet secretariat also added that in a subsequent meeting with the communications minister on January 30, 2008, the finance minister noted that he was not seeking to revisit the current regimes for entry or venue share.
These were later incorporated in the final note the DEA sent to the PMO, as suggested by the cabinet secretariat, and were not part of the original 12-paragraph draft the finance ministry had circulated on March 17.
The cabinet secretariat had also added 14 paragraphs under the broad title “General Comments on the Policy for allocation of 2G licences at the pan-India entry fee of Rs 1,658 crore”, in its version of the draft.
The DEA, however, did not add these in the final version sent to the PMO.