Controversy and the telecom ministry have been closely connected ever since the business was opened to private competition in the mid-nineties. With last week’s raids by the Central Bureau of Investigation (CBI), Andimuthu Raja is continuing a tradition.
First, there was Sukh Ram, the first post-reform Congress communications minister to attract CBI attention in 1996. He earned notoriety for being discovered with crores of rupees in his puja room — “amassing disproportionate assets” is the official term — for which he was convicted earlier this year. The money was allegedly received from private players keen to corner licences for what was one of emerging India’s most lucrative businesses.
Then there was the late Pramod Mahajan who, as incumbent in the Bharatiya Janata Party (BJP) government, was suspected of favouring a large private house when the ministry allowed, for a relatively small fee, the entry of service providers offering CDMA technology against the earlier mandated GSM technology. This allegation was never proved, nor did he or his ministry attract CBI raids — but the stigma remains.
That is also true for the 46-year-old Raja, a Dalit who represents the Nilgiri reserved constituency in Tamil Nadu. He now faces a controversy that began in his first stint under the United Progressive Alliance (UPA). The fact that last week’s CBI raids on his ministry excluded him has not deflected criticism from the way he handled the allocation of telecom licences to nine new players in 2008.
Raja acquired his ministerial berth in controversial circumstances in May 2007, though this was not telecom-related but linked to a family feud in the party he represents, the Dravida Munnetra Kazagham (DMK), a key UPA ally.
His predecessor Dayanidhi Maran had fallen out with his uncle, DMK head and Tamil Nadu Chief Minister M Karunanidhi, following differences over investments in Maran’s hugely profitable Sun TV. As a result of this Maran was asked to quit the ministry.
Maran’s revenge was to print allegations about Raja and his personal life in his paper Dinakaran. This is an irony since Raja was originally a protégé of Dayanidhi’s father the late Murasoli Maran, a powerful DMK supremo in his lifetime.
Now, however, Raja is known as a confidante of Karunanidhi’s favourite child, daughter Kanimozhi, who reportedly insisted on his inclusion in the telecom ministry in the UPA’s second stint though she opted out.
Signs that all was not kosher with licence allocations for second generation or 2G services were evident last year with questions being raised in Parliament and within the industry on both the first-come, first-served modus operandus followed by the Department of Telecommmunication (DoT). The question at the time was why DoT did not opt for the transparent auction process that would have resulted in more efficient price discovery for an all-India licence that came bundled with 4.4 MHz of scarce spectrum.
The new firms paid a meagre Rs 1,651 crore for pan-India licences, rates set in a 2001 auction. Also, most new entrants had no experience in telecom.
The fact that the new licensees had gotten off cheap became evident just seven months later. In September, 2008 Swan Telecom, floated by two little-known Maharashtra-based entrepreneurs, sold 45 per cent of its stake to UAE’s Etisalat for $900 million, valuing the licence at $2 billion (approximately Rs 9,200 crore).
A month later, realtor Unitech divested up to 67.25 per cent to Norway’s Telenor for $1.1 billion, while STel, part of the diversified Siva Group, sold 49 per cent to Bahrain’s Batelco for about $225 million. Both deals valued their licences at Rs 11, 620 crore and Rs 2,000 crore.
CBI, which was acting on directions from the Central Vigilance Commission, estimated that the first-come, first-served basis caused the government to lose about Rs 22,000 crore. CBI alleges a criminal conspiracy between unnamed DoT officials and private firms. DoT and the minister had earlier announced that the last date for filing applications for new mobile licences was October 1, 2007, which was later abruptly changed to September 25. Applications from about 46 companies were received till October 1, 2007.
Also, the change of cut-off date excluded applicants such as US major AT&T, Sterlite, DLF, Ispat and Moser Baer. About 24 companies filed 343 applications after the new cut-off date.
Raja, who has steadfastly refused to resign, answers all critics by saying the allocation norms were approved by Trai and the prime minister.
The first part of his explanation appears incorrect since Trai’s 2003 recommendations said the entry fees were clearly in favour of an auction process (the prime minister has not responded). In 2007, Trai had said the entry fees for acquiring mobile licences should be rediscovered through market prices. The finance ministry had also questioned the pricing mechanism in November the same year.
Inevitably, the issue has spilled into the political arena, not least with the BJP and Left demanding Raja’s resignation. Significantly, there has been no reaction from the DMK. This could partly be the result of the DMK’s diminished clout in the current UPA. Though it has 17 seats this time and its tally of ministers — three Cabinet and three ministers of state — is unchanged, the UPA enjoys a comfortable majority.
Some suggest that DMK’s conspicuous silence could indicate tensions between the party and the Congress in the UPA. The two parties are allies in Tamil Nadu too and if the Congress withdraws support to the DMK government, it could fall. The state heads for elections in 2011.
So for Raja, a lawyer by training and a poet, it is the political equations rather than just the propriety of licence allocations that will determine his future.
