2G verdict: Did Vinod Rai get it wrong? Curious case of calculating losses

Experts feel it will be too simple to call ex-CAG Vinod Rai's assessment that the allotments caused losses of Rs 1.76 crore to the exchequer, wrong

Did Vinod Rai as the Comptroller and Auditor General (CAG) get it wrong in the 2G spectrum allocation case? Just after CBI trial court judge O P Saini read out his judgment in the case on Thursday morning, this was the question the packed courtroom and just about everyone outside wanted to know. 

It will be too simple to call it wrong, said all experts Business Standard reached out to, cutting across the aisle. “But it is a huge loss of face for the government,” said one of them. “Saini is saying you have no facts,” he said, to connect the presumptive loss of Rs 1.76 lakh crore for the exchequer with an actual conviction. 

The allegations over the allotments of spectrum in the 2G case did not start with the report of the CAG. The CAG report came in November, 2010, more than one-and-a-half years after Telecom Watchdog, an NGO, filed a complaint with the Central Vigilance Commission (CVC). Based on the complaint, the CVC had asked the Central Bureau of Investigation (CBI) to investigate the suspected irregularities in the allocation of spectrum. 

In fact, as the timeline of the telecom saga shows, as early as November 2007, D Subbarao, then economic affairs secretary in the finance ministry, had written to his counterpart in the department of telecom, expressing concern about the procedures adopted for the process of allotment of 2G spectrum. The spectrum was to be allotted along with licences for Unified Access Services (UAS). Then Prime Minister Manmohan Singh, too, asked then Telecom Minister A Raja to keep the process clean but kept himself aloof as Rai notes in his book, Not Just an Accountant: ?? “Unbelievably, the Prime Minister chose to ignore the red flags of deviation from policy, and questionable facts and figures offered by the minister.”

Rai’s former colleague in the IAS, Ashok Chawla, says, “The essential contention of the audit report for a principle-based allocation of airwaves was upheld by the two-judge bench of the Supreme Court.” His reference is to the Supreme Court judgment of February 2012 that cancelled the 122 spectrum licences that were issued when Raja was the telecom minister. The court asked for re-allotment of those airwaves, preferably through an auction.

One basis for the court’s decision in favour of auctions was the report of a secretary-level committee headed by Chawla that was set up by then Finance Minister Pranab Mukherjee to lay down the ground rules for allotment of natural resources, including spectrum. The committee under the former finance secretary recommended auction as one of the preferred ways to sell spectrum among competing bidders. 

However, some of the other commentators said the conclusions of the audit report had not been upheld. It had questioned the way Raja as telecom minister had handed out spectrum and instead suggested this had led to the massive loss for the government. “The report was questioning the policy of the government for using the ‘first come, first served’ route and conjured up public perception of mala fide,” a commentator said. It was this line of argument that made the Supreme Court impose a fine of Rs 5 crore each on three allottee companies (Unitech, Swan and Tata Teleservices) and a Rs 50 lakh fine each on four more (Loop Telecom, S-Tel, Allianz Infratech and Sistema Shyam Teleservices). It also asked the CBI to proceed with its investigations into these companies. “There was no criminal misconduct even if we agree that Sibal (telecom minister Kapil Sibal, who succeeded Raja) went overboard with his zero-loss theory,” said a partner at one of the consultancy firms. 

However, Supreme Court lawyer Prashant Bhushan, whose organization — the Centre for Public Interest Litigation — had got involved in the litigation in May 2010, asking for either a special investigation team or CBI to inquire into the allocations, slammed the government for failing to defend Rai’s findings. “The acquittal of all 2G scam accused by trial court is grossly wrong & sends a signal that influential people are not accountable in this country's judicial system. There was considerable evidence of Benami licences, fixing of the 1st Come 1st served system &also bribes in this. Shame” he tweeted. 

Incidentally speaking at one of the economic editors’ conferences, Mukherjee had defended Rai: “I am making it clear that I do not think the CAG is exceeding its jurisdiction, because the basic responsibility of the CAG is to identify if there is any lapse.”