Said auctioning spectrum would be unfair to the new players.
The Comptroller and Auditor General of India (CAG) has indicted A Raja, the Union communications minister till Sunday, for ignoring advice from the prime minister and finance and law ministries while awarding new telecom licences with 4.4 MHz of bundled spectrum in 2007-08.
In its report, tabled in Parliament today, CAG said the prime minister had written to Raja in November 2007, saying, against the backdrop of inadequate spectrum and an unprecedented number of applications for new licences, spectrum pricing through a fair and transparent method of auction for revision of entry fee needed to be considered.
However, Raja had replied that auction had not been recommended by the Telecom Regulatory Authority of India (Trai) or the Telecom Commission, the highest policy-making bodies of the department of telecommunications (DoT). And, it would be unfair and arbitrary to auction spectrum to new applicants, as it would not give them a level playing field.
The law ministry had suggested an Empowered Group of Ministers (EGoM) to discuss the large number of applications and spectrum pricing, but Raja rejected this, saying the need for forming an EGoM arose when a new policy was being framed. In this issue, no new policy for grant of a unified access service licence was being framed.
The finance ministry had also sought an EGoM for spectrum pricing. It insisted on inclusion of spectrum pricing in the terms of reference of a group of ministers constituted on the issue of vacation of spectrum. They also questioned the sanctity of continuing with a price determined in 2001 and without any current valuation.
Also Read
However, DoT quoted a four-year-old cabinet decision of October 2003 that it was authorised to calculate the entry fee for licences, depending on the date of payment and on the Trai recommendations of that date. Also, in 2007, Trai had not recommended any revision in the price of spectrum.
DoT’s member (finance) had agreed with the finance ministry and sought detailed analysis of the issue prior to taking any further action. The DoT secretary concurred, but Raja observed on the file: “Officers neither have up to date knowledge of UASL guidelines nor have bothered to carefully go through the files...these types of continuous confusion observed on the file, whoever be the officer concerned, does not show any legitimacy and integrity but only their vested interest."
He added that the matter of entry fee had been deliberated in the department several times in the light of various guidelines issued by the department and recommendations of Trai and a decision taken that entry fee need not be revised.
"Brushing aside their concerns and advice, the Department of Telecommunications, in 2008, proceeded to issue 122 new licences for 2G spectrum at 2001 prices, by flouting every canon of financial propriety, rules and procedures," the CAG report concluded.
The audit found that applicants had not rolled out services in line with the provisions of licence.
These six companies are Unitech (brand name Uninor), Swan (name changed to Etisalat), Allianz (since merged with Etisalat), Datacom (name changed to Videocon), S Tel and Shipping Stop DoT Com (name changed to Loop Telecom).
According to the conditions of UAS licences, these licensees were required to roll out services in 90 per cent service areas in metros and 10 per cent district headquarters in other service areas within 12 months of the date of award of licences.
The audit found that though these six new operators obtained the initial 4.4 Mhz spectrum in 81 service areas during the period April 2008 to January 2009, none had rolled out services, as required, in any service area, till December, 2009.
“DoT also failed to recover Liquidated Damages and penalty of Rs 679 crore from these six operators for inordinate delay in the rolling out services till December 31, 2009,” the CAG report said.