2G auction: A flop show

Blame game begins. CAG, Trai in the line of fire

The government has garnered a modest Rs 9,407.64 crore from 2G spectrum bids. The figure is less than a quarter of the Rs 40,000-crore (the target was later lowered to Rs 30,000 crore) the Centre had been hoping to raise from the 20-year lease-out of scarce radio waves.

The poor yield from spectrum sale should bring some sobriety to the sky-high estimates that the Comptroller and Auditor General (CAG) had made two years back while computing the presumptive loss the government had suffered by doling out 122 licences in January 2008 through a scandal-tainted process that the apex court eventually overturned.

Information and Broadcasting minister Manish Tewari led the government attack by asking CAG Vinod Rai as to why the spectrum auction had not yielded anything close to the loss it had estimated.

The 2G licence allocation during former telecom minister A Raja’s time fetched the government Rs 9,500 crore.

Telecom minister Kapil Sibal has said the outcome of the spectrum auction was a result of “market dynamics at play”.

The unfortunate part of the lacklustre auction is that India appears no closer to a real solution to the question of spectrum pricing.

The industry has been quick to complain that the reserve price of Rs 14,000 crore (for 5 MHz) for a pan-India licence fixed by the government was too high and that was what kept the bidders away. But it is also true that telecom has seen a rapid decline in its fortunes in recent years. Tariffs have fallen to the lowest anywhere in the world; profits, as a result, are on the decline. A pile-up of debt is strangling the sector.

Companies hope that the tepid response to the auction will make the government cut prices in the next round which, Sibal has said, will take place in this financial year — that is, before April 1, 2013. But that is likely to lead to another set of problems. Those who have bought spectrum in the just-concluded auction could contest any reduction in the reserve price.

However, Bihar sprung a big surprise in the auction having the distinction of being the only circle where the final discovered price in the auction was higher than the base price. And four operators were fighting over eleven blocks of 1.25 Mhz spectrum which included Idea, Videocon, Vodafone and Telenor.

So why was Bihar so attractive? Well one key reason is the low base price fixed for the circle compared to the revenue potential of this state. A large migrant population whom the family at home wants to keep in touch with and the general improvement in the law and order situation have been key factors for making the state an attractive mobile market.

All 22 telecom circles in the country were put on the block in the auction that began on Monday. Delhi, Mumbai, Karnataka and Rajasthan did not find any takers.

In May 2010, the 3G spectrum had raised about Rs70,000 crore after 183 rounds of bidding spread over 34 days.

The poor response to the 2G auction is likely to make it difficult for the government to meet the revised fiscal deficit target of 5.3 per cent of the gross domestic product (GDP) in 2012-13.

Business Standard presents top 10 developments in the 2G scam case

SC quashes 122 licences

1) February 3, 2012: The Supreme Court ordered the cancellation of all the 122 unified access service licences issued in January 2008 by former telecom minister A Raja. It also directed the Telecom Regulatory Authority of India (Trai) to make fresh recommendations for the telecom spectrum auction route in future, within four months.

Kanimozhi sent to jail

2) May 21, 2010: DMK Rajya Sabha member Kanimozhi and her fellow stakeholder in Kalaignar TV Sharad Kumar were arrested and sent to the Tihar Central Jail on judicial custody. The Delhi court hearing the 2G case rejected her bail application.

Kanimozhi, the daughter of DMK chief M Karunanidhi, has been named as co-accused and has been chargesheeted by the Central Bureau of Investigation (CBI) for allegedly accepting a Rs214-crore bribe that was a part of India's largest swindle, the 2G scam.

Judge OP Saini said he wished he could show some consideration” to the DMK Rajya Sabha member, who had appealed for bail in the name of her gender, motherhood and a “Victorian” sense of chivalry.

In April, the CBI chargesheeted Kanimozhi but spared her stepmother Dayalu Ammal, naming her as a witness rather than as an accused.

Top telecom executives sent to Tihar

3) April 20, 2010: A Delhi court denied bail to five top telecom executives and sent them to Tihar jail. The special court judge said there was incriminating evidence against the five accused, whose designations range from group president to managing director to senior vice-president. Among the companies the executives run are Reliance Telecom of the Anil Dhirubhai Ambani Group and Unitech Wireless, which was then a partner of Norwegian firm Telenor.

Reliance Communications boss Anil Ambani and several top executives and directors of other telecom companies named in the charge sheet filed by the CBI appeared before the Public Accounts Committee (PAC).

In February, the CBI summoned for questioning top officials of Unitech Limited, DB Realty Limited that promoted Swan Telecom, Tata Teleservices, S Tel Limited and Loop Telecom. These companies were given licences in 2008.

Sanjay Chandra, managing director of Unitech Limited; Vinod Goenka, partner of Shahid Balwa, who is the promoter of Swan Telecom and managing director of DB Realty Limited; Sandeep Bassi of Loop Telecom; Arun Mandale of S Tel Limited; and Sanjay Ubale and Kishore Salatore of Tata Teleservices were called to the agency's headquarters and questioned.

In February, the CBI arrested Shahid Usman Balwa, director of Mumbai-based DB Realty in the 2G spectrum case. “We have arrested Shahid Balwa for his role in the 2G scam. He is alleged to be involved in receiving and channelling money for Raja,” said CBI spokesperson Binita Thakur.

On November 29, 2011, a Delhi court granted him the bail.

CBI arrests A Raja

4) February 2, 2011: The CBI arrested the former Union Communications and Information Technology Minister, A. Raja, and two officers who had worked under him, for their role in the grant of licences and allocation of 2G spectrum during 2008 in violation of established guidelines and procedures.

These first arrests in the case relating to 2G spectrum allocation came nearly 15 months after the CBI registered a case under Section 120-B (criminal conspiracy) read with Section 13 (2) and 13 (1) (d) of the Prevention of Corruption Act, 1988 against ‘unknown' officials of the Department of Telecommunications and ‘unknown' private persons/companies, and others.

From humble origins in a non-descript district of Tamil Nadu to a position of high ministerial power and political influence, the career graph of A. Raja tells a story of meteoric rise in the last five years.

Projected by DMK president and former Tamil Nadu chief minister M. Karunanidhi as the Dalit face of the DMK, Raja acquired political prominence in New Delhi and vast influence in the implementation of the country's telecom policy.

‘CAG estimate of 2G loss utterly erroneous’

5) Januray 7, 2011: Telecom Minister Kapil Sibal termed “utterly erroneous, baseless and sensational” the government auditor’s estimate that the alleged 2G scam resulted in a presumptive loss of Rs1.76 lakh crore. Sibal gave a detailed explanation of the priorities that drove the telecom policy and the benefits over the years to “the aam aadmi” — something his predecessor A. Raja did not or could not articulate till now.

Scams wash out winter session

6) In 2010, the winter session of Parliament ended without transacting any substantial business, going down in Parliamentary history as the only session virtually washed out due to standoff between the government and Opposition over 2G spectrum scam.

A Raja quizzed

7) December 26, 2010: The CBI questioned former telecom minister A Raja for the second consecutive day at its headquarters for almost eight hours even as the agency roped in Enforcement Directorate officials in the case. Sources in the agency, however, said Raja had “not been able to give any clarifications yet” on allegedly benefiting some telecom companies and his relatives in the multi-crore 2G spectrum scam.

In July this year, the Enforcement Directorate has questioned Raja in connection with its money laundering probe in the 2G spectrum case. This is the first time that the ED has questioned Raja in the case.

Niira Radia tapes

8) December 8, 2010: The Supreme Court asked the CBI to probe all telecom licences awarded from 2001 to 2007 and information thrown up by the Niira Radia tapes, delineating the contours of the investigation that will now cover decisions taken by the BJP-led NDA government also.

The court directed the director-general in charge of income-tax investigations to arrange for transcripts of the Radia tapes, which feature purported conversations the lobbyist had with industrialists, journalists and politicians, to be handed over to the CBI.

In December 2010, the CBI searched 34 offices and residences of corporate lobbyist Niira Radia, former Telecom Regulatory Authority of India chairman Pradip Baijal, siblings of ex-Telecom Minister A Raja and an NGO linked to Dravida Munnettra Kazhagam member of Parliament Kanimozhi.

A CBI official claimed that some "incriminating documents" were recovered during the raids at 27 places in Tamil Nadu and seven places in Delhi and Noida.

On 29 November 2010, Tata group chairman Ratan Tata moved the Supreme Court seeking to restrain the broadcast and publication of purported conversations between him and lobbyist Niira Radia who is under investigation in the 2G spectrum allocation case.

On 20 November 2010, Prime Minister Manmohan Singh maintained that there was no delay or inaction on his part in considering all the letters received from Janata Party president Subramanian Swamy seeking sanction for prosecution of A. Raja, who resigned as Communications Minister a few days ago.

Raja quits as telecom minister

10) November 14, 2010: Yielding to relentless pressure, controversial A Raja resigned as Telecom Minister after being ordered to do so by his party, DMK, in the wake of allegations that he caused a loss of Rs.1.76 lakh crore to the exchequer while allocating 2G Spectrum two years ago.

In October 2009, the Bharatiya Janata Party (BJP) attacked the government and Prime Minister Manmohan Singh over an alleged cover-up of India’s “largest” scam.

Leader of opposition in the Rajya Sabha Arun Jaitley said the alleged irregularities in the allocation of spectrum to new operators had cost the exchequer over Rs 60,000 crore, and described this as the “largest scam in independent India in terms of monetary value”.

Singh, asked about the accusations against telecom minister A. Raja’s ministry, whose offices have been raided by the CBI, had said: “In a democracy, charges are traded but that does not mean what the Opposition is saying is right.”

In December 1995, the entire Opposition had put the Narasimha Rao government on the mat and stalled Parliament over another telecom scam involving the then minister, Sukh Ram.

On October 22, 2009, sleuths from the CBI trooped into Sanchar Bhavan — the headquarters of the department of telecommunications — and pored over documents relating to the allocation of 2G licences and spectrum to new mobile telephony companies last year.

Raja, however, refuted allegations of “wrongdoing” and added that the licences and spectrum had been allocated in conformity with a long-standing telecom policy.

Soon after the United Progressive Alliance (UPA) won the general elections in May, the political grapevine was abuzz with talk that Prime Minister Manmohan Singh wanted to drop Raja from his cabinet as he had become embroiled in the controversy over spectrum allocations.

Raja had been the telecom minister in the previous government, taking over from DMK party colleague Dayanidhi Maran who had then fallen out with Karunanidhi. Despite his disapproval, Singh had to accommodate Raja and keep the DMK within the UPA fold.

The controversy had erupted in early 2008 after the DoT allotted eight telecom licences and 4.4 MHz of start-up spectrum at a price fixed in 2001 to a batch of new Indian players, including real estate firms who had no experience of running telecom operations, as also existing operators.
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ALSO READ: BS Books has published Spectrum Grab, a book on the 2G scam.