Prime Minister Manmohan Singh said today that the comptroller & auditor general (CAG) of India should exercise extreme caution on the accuracy, balance and fairness of its reports. The Prime Minister, who was addressing the 150th anniversary celebrations of CAG, said its reports were taken very seriously by Parliament. He urged CAG to distinguish between “bonafide errors and deliberate mistakes”.
Later in the day, the Supreme Court asked why the Prime Minister had delayed responding to a request for permission to prosecute former telecom minister A Raja. The court made its observations in a hearing relating to a petition filed by Janata Party leader Subramanyam Swamy.
Both developments came on the day CAG presented its report on the issue of licences and allocation of 2G spectrum by the department of telecommunications (DoT). It put leading companies like Uninor, Loop Telecom, S-Tel, Datacom (now Videocon), Allianz Infratech (which has merged with DB-Etisalat) and Swan Telecom in the dock, saying they should not have been given a unified access service licence (UASL).
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The report alleged a lack of transparency by DoT in issuing licences to Reliance Communications, Tata Teleservices and Shyam Telelink under the dual-technology route.
The CAG report indicted DoT for causing a potential loss to the exchequer of up to '1,76,645 crore — based on the price paid by operators for 3G spectrum — by giving new 2G licences to operators at the rock-bottom price of '1,651 crore, fixed in 2001. Leaks on the report were one of the reasons that impelled Raja to quit late on Sunday.
The CAG report also pulled up DoT for issuing licences to new operators, even though they failed to meet various prerequisites. For instance, it said companies like Unitech, Allianz Infratech, Loop Telecom, S-Tel and Datacom made false and fictitious claims of higher paid-up capital. Unitech, Allianz and Loop also, according to CAG, failed to obtain clearance from the registrar of companies to change their articles of association to include telecom.
For Swan Telecom, CAG said DoT had failed to follow the priority list for allocation of spectrum. It also pulled up DoT for giving Reliance Communications, Shyam and HFCL dual-technology licences without referring the matter to the full telecom commission.
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CAG took DoT to task for giving Swan Telecom permission for a UASL when Reliance held 10.71 per cent in the company and operated in the service areas where Swan had applied for a licence. Under the rules, an existing operator cannot hold more than 10 per cent in a competing telco in the same circle.
However, Reliance ADAG responded quickly. "Our group had no shareholding in Swan Telecom Ltd (now known as Etisalat DB Ltd) at the time of grant of licence to them or any time thereafter, and that issue is accordingly not relevant to our company,” the company said in a statement.
“Reliance Communications has always been in full compliance with all applicable laws, rules and regulations, and there has been no violation of our licence conditions at any stage on account of cross-holdings in excess of 10%," the statement added.
CAG revealed that 85 of the 122 new licences issued in 2008 did not satisfy the eligibility conditions prescribed by DOT.
Operators say that many of the points raised by CAG are only procedural and can be challenged in courts. “We have taken legal opinion that once the board clears a resolution adding telecom in the articles of association, we do not have to wait for the registrar of companies to give their clearance, which is a formality. So, there has been no violation” says a CEO of a leading telco, which has been questioned on this ground.
A Loop Telecom spokesperson added: “Loop Telecom was eligible for UAS License and met all the required guidelines. It has disclosed all facts to regulators and is fully compliant with all norms and regulations.”
Industry expert Mahesh Uppal said: "Licences should be taken away as there is clear evidence of misrepresentation by companies and also evidence of collusion. Also, most new licensees do not have enough subscribers, except Uninor."
Almost all telecom stocks, barring Bharti Airtel, lost ground on Tuesday, which also saw the benchmark Sensex shedding 445 points. Reliance Communications lost nearly 4 per cent to close at Rs 161.80. MTNL was down 2.52 per cent at Rs 59.90. Tata Teleservices also lost a little over 2 per cent to end at Rs 21.45. Idea Cellular was also down marginally at Rs 69.20. Bharti Airtel, however, gained 1.16 per cent on Tuesday to end at Rs 313.10.
The BSE Teck index, which comprises telecom and technology stocks, lost 1.44 per cent, or 53 points, to close at 3,706.