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CAG scan of the 2G spectrum scam

Ousted telecom minister A Raja subverted the system by manipulating the cut-off date for 2G bids and interpreting first-come-first-served to suit his convenience. Nagendar Sharma reports. Scam FAQ

india Updated: Nov 18, 2010 10:30 IST
Nagendar Sharma
Nagendar Sharma
Hindustan Times

The focus of the media and the opposition parties on the 2G-spectrum scam of 2008 has largely been on the Rs 1.76 lakh crore loss caused to the public exchequer alleged by the Comptroller and Auditor General (CAG).

The CAG has said the loss has been on account of the highly questionable procedures followed by the department of telecom (DoT) under its former minister A Raja.

"We have only tried to quantify the loss on the basis of whatever records we had," deputy CAG Rekha Gupta said.

While the issue is being talked about for more than a month, two most important components behind the real scam appear to be going unnoticed.

First is how the department of telecom made arbitrary changes in the cut-off date for receiving applications for issuing the spectrum allocation licences in 2007.

The second major objection is how 85 of the 122 licences were issued to companies that did not meet the eligibility conditions.

Cut-off date controversy
The CAG report has exposed the undue haste in receiving and processing the applications. It has quoted the August 2007 report of the telecom sector regulator, the Telecom Regulatory Authority of India (TRAI), which had recommended that there should no restriction on the number of operators to be allowed to apply for licence in any service sector.

This recommendation by the telecom sector regulator was not only disregarded by the DoT, but it went on to adopt a highly questionable procedure.

"On September 24, 2007, the DoT issued a press release stating that the applications for issue of licences would be accepted only up to October 1, 2007," states the report.

Before the press release was issued, only 167 applications had been received.

"After introduction of this artificial cap by the DoT, there was a sudden spurt in applications and more than 408 applications were received during the next eight days. This indicated applicants were aware that spectrum was a scarce resource," the CAG has pointed out.

This aberration is, however, only the tip of the iceberg since what the department did around two months later would be extremely difficult for it to explain.

On January 10, 2008, the DoT issued another press release saying, it would accept only the applications received till September 25, 2007.

Of the 575 applicants, only 232 applications were considered and of those 122 were issued licence.

This move was declared illegal by the Delhi high court in November last year, and now the CAG as termed it "arbitrary, deliberate and unreasonable".

The defence offered by Raja for this step is far from convincing.

"The decision was based on the availability of spectrum, the first lot of applications received till that date was considered," Raja said.

He has so far not answered why the dates were altered.

How licences were granted
The CAG pointed out that the DoT had internally adopted the first-come-first-served (FCFS) policy for allocating spectrum, but quietly abandoned it.

"The DoT deviated from its own policy and issued licences to ineligible applicants. The entire process lacked transparency and has eroded its own credibility," the CAG report states.

A dramatic development took place on January 10, 2008, the day the DoT announced its decision to provide licence to 122 applicants. Of these, 78 complied with the terms and conditions, including paying the licence fee of Rs 1,651 crore the same day.

"It was noticed that 13 applicants were even ready with demand draft drawn on dates prior to the notification of the cut-off date. An applicant also submitted the Performance Bank Guarantee (PBG) and Financial Bank Guarantee (FPG) of the Punjab National Bank (Annexure IV) prepared on January 10, 2008, in Mumbai to Ministry on the same day," the CAG has pointed out.

"Evidently, these applicants had advance information about the issue of this notification by the DoT, which enabled them to take appropriate advance action for compliance within half a day, which normally would have taken 15 days," the report has pointed out in a scathing indictment.

Raja appears to be fumbling in his defence on this point too. He has said the scope of the CAG audit was limited and this observation is out of context.

"The law ministry has already given an opinion on August 13 that the CAG cannot question policy decisions of the government," Raja said.

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First Published: Nov 17, 2010 23:08 IST