How did A Raja push through a policy that was questioned by the Prime Minister, as well as the ministries of finance and law?
It took individual aggression, several strokes of luck, unwillingness among his colleagues to act, and a pliable bureaucracy to pull off the 2G scam. Although parliamentary democracy is about collective responsibility of the Cabinet, A Raja, the former telecom minister, still did whatever he wished to.
In fact, he easily circumvented objections from various quarters like the Prime Minister and the ministries of finance and law, and bypassed other policymaking and regulatory mechanisms like the empowered group of ministers, Telecom Commission and Telecom Regulatory Authority of India (Trai).
Step 1. Avoid Cabinet interference: In October 2003, the NDA Cabinet approved a policy, which constituted of two phases. In the first, existing operators could migrate to a new unified licensing regime by paying the 2001 fee of Rs 1,651 crore. The second phase envisaged “fully unified licensing” for all operators, including new ones. The Cabinet said the details of this regime would be finalised by the department of telecommunications (DoT), based on Trai’s recommendations.
One of Trai’s proposals in its August 2003 report — the basis of the Cabinet decision — was that new licence and spectrum allocation should be separated; while the licence should have a nominal fee, spectrum should be priced separately. The regulator added that if additional spectrum is available, the government “may introduce additional (read: new) players through a multi-stage bidding process as was followed for fourth cellular operator (in 2001).”
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Thus, for spectrum allocation, Trai was convinced that auction was the best route to find its right market price. It never envisaged that spectrum would be sold at 2001 rates.
What is important is that the second phase of the 2003 Cabinet decision was not implemented by either the NDA or the UPA-I regimes. All new licences, and fresh spectrum, were subsequently given on the basis of 2001 rates, which should have been applicable only for the then existing players as a part of the first phase.
So, in 2008, Raja could easily say that he was merely following the old policy. Using this logic, he ensured that the issue did not go to the Cabinet again for fresh appraisal.
Step 2. Use Trai’s recommendations selectively: However, the regulator’s insistence that spectrum be priced separately was embedded in its 2003 report. This had to be changed for Raja to feel a bit secure. In April 2007, when Dayanidhi Maran was telecom minister, DoT asked for Trai’s views on whether there should be a cap on the number of new players that could be given mobile licences. On August 28, 2007 — Raja became telecom minister in May of that year — Trai said there should be no cap on new licences, but spectrum should indeed be delinked, since the value of spectrum was “not correctly reflected.”
However, Raja sold licence and spectrum together. He justified his policy by using another line from the 2007 Trai report that the regulator did not favour any change in 2G spectrum pricing, even for new entrants, as “it would affect the principles of level playing field.”
In the same vein, a telephone conversation between the DoT secretary and Trai chairman on November 14, 2003, when the NDA was in power, in which the latter clarified that the entry fee for new players should be pegged at 2001 rates, was used by all the telecom ministers, including Raja, to sell spectrum cheaply.
Step 3. Keep other policymaking bodies out of the loop: On October 10, 2007, DoT internally discussed Trai’s report of August 2007 and accepted some of its recommendations. But the department did not involve the Telecom Commission, which is chaired by the telecom secretary and includes four outside secretaries from the ministries of finance, industry, and information technology, apart from the Planning Commission. Neither the agenda papers nor the minutes of the DoT meeting were circulated or shared with the outside members.
Similarly, while the 2003 Cabinet decision stated that the finance ministry and DoT would together finalise the pricing formula for additional spectrum, the former was not involved in the process. DoT kept insisting that spectrum pricing was an internal matter.
The finance ministry wrote two letters, dated June and November 2007, telling the telecom ministry that “a sound policy on spectrum pricing was required”, even as it questioned “the sanctity of continuing with a price determined way back in 2001”. DoT replied that according to the Cabinet decision of 2003, “it was authorised to calculate the entry fee”, and that Trai’s August 2007 report “had not recommended any revision” in pricing.
Step 4. Fool the PM, GoM: At one stage, in February 2006, when Maran was telecom minister, the government did constitute a group of ministers (GoM) to look into the issue of spectrum. However, its terms of reference were deftly restricted to exclude spectrum pricing. The same month, Maran appraised the Prime Minister and convinced him that the key issue at that time was spectrum vacation (and, hence, its availability) and not pricing.
Once the Prime Minister gave his nod, the terms of reference of the GoM was drafted accordingly. Thus, the manner in which spectrum should be priced was never discussed by the GoM, and it continued to be sold at 2001 rates. Raja took advantage of this to maintain that spectrum pricing was solely DoT’s domain.
Step 5. Pray that your colleagues abdicate their responsibilities: The Prime Minister, finance minister or the law minister could have forced Raja to bring the matter to the Cabinet. This was especially true of the finance ministry, which should have been involved in the pricing issue based on the 2003 Cabinet decision.
Moreover, the finance ministry, according to the Government of India (Transaction of Business) Rules, 1961, could have insisted on a Cabinet-level decision for reasons such as wrong interpretation of the 2003 decision, serious financial implications in the sale of spectrum, and a difference of opinion between the finance and telecom ministries. In fact, this is exactly what the finance ministry did when the spectrum for 3G and broadband was auctioned in 2010, while Raja was still telecom minister.
Unfortunately, the two ministries and the Prime Minister’s Office sat quietly after writing letters to the telecom ministry. In his letter of November 2, 2007, the PM asked Raja to introduce a “transparent methodology” of pricing, thereby hinting that the existing policy was not transparent.
Raja replied the same day, saying “it would be unfair, discriminatory, arbitrary and capricious to auction spectrum to new applicants, as it will not give them (a) level playing field.” The PMO took his word for it.
Although the law ministry refused to give its legal opinion on the issue, and said that the matter should be considered by an eGoM, where the attorney general would give his views, it did not take the matter to its logical end. The finance ministry too gave up after dashing off a few letters of protest.
Finally, Raja was free to do what he wanted. Once he had total control, he tweaked even the legitimate first-come, first-served policy to help some applicants jump the queue. The hijacking was complete.