Raja went against all recommendations by senior officials in his ministry while opting for a contentious first-come-first-served method of allotting spectrum
More and more incriminating evidence is surfacing against Union Minister for Communications and Information Technology Andimuthu Raja in the infamous spectrum allocation scandal that involves a loss of more than Rs 60,000 crore to the national exchequer. There is documentary evidence available with CURRENT to indicate that Raja went against the recommendations of senior officials in the Ministry he heads while opting for a contentious first-come-first-served (FCFS) method of allotting a scarce resource that belongs to the people of the country, namely, electro-magnetic spectrum for use by mobile telecommunications companies.
The Minister waited for the topmost official in the Department of Telecom (DoT) to resign and another senior technocrat to go in for premature retirement – both of whom had argued against his move to allot spectrum on a FCFS basis – before inducting a bureaucrat of his choice and going ahead with his controversial policy of allotting spectrum with licences to a clutch of private companies at prices that were around seven times lower than prevailing market rates.
Till October 1, 2007, the DoT had received 575 applications from 46 companies for allocating of licences with spectrum. On October 18 that year, at a meeting the DoT top brass headed by the then Secretary, Telecom, DS Mathur, with Raja, it was pointed out that since it would not be possible to allot spectrum to all the applicants, criteria for selection of applicants should be worked out based on availability of spectrum. In a note dated October 25, the then Member, Finance, of the Telecom Commission, Manju Madhavan, worked out three alternatives (see document), the first of which was the FCFS method. Madhavan, in her note, suggested two other alternatives that involved public auction of spectrum to be conducted in a transparent manner.
Whereas Madhavan’s note (that was endorsed by the then Secretary Mathur and marked to the Minister) described the first alternative in just one paragraph, the second alternative and the third alternative (which was a minor variant of the second alternative) were described in considerable detail. She stated that the second alternative would ensure transparency and would withstand legal scrutiny. Moreover, she stated that “due to (the) highly competitive scenario, there is a need to review the entry fee and eligibility criteria.” This was precisely what Raja did not – rather, refused to – do.
What the Minister did instead is now clear. Nine companies were arbitrarily selected for allocation of spectrum on a FCFS basis while more than three dozen other firms were kept waiting in the queue. A cut-off date for receipt of applications was announced and then changed without explanation. Faced with a barrage of allegations, Raja has sought to justify his position by citing the National Telecom Policy of 1999, a 2003 Cabinet decision of the NDA government and a single paragraph out of a 178-page document put out by the Telecom Regulatory Authority of India (TRAI). What he has not stated is that each of these documents had recommended public auctions or competitive bidding as the process for discovering the true market value of the licences with spectrum that were awarded by the DoT.
Here’s the background. On May 16, 2007, Minister Raja took over from Dayanidhi Maran. In his earlier avatar as Union Minister for Environment & Forests, Raja had come into contact with various real estate companies that had sought clearances from the Ministry he had headed at that time. Interestingly, many of these companies later applied for telecom licences — such firms include Unitech, Loop (part of the Ruia group), Datacomm (Videocon) and Swan (once partly owned by the Anil Dhirubhai Ambani group) — and some of them were indeed awarded licences.
On August 28 that year, the TRAI came out with a set of detailed recommendations that urged the government to consider determining the market price of licences through a competitive mechanism since the current price of a licence with spectrum was outdated, having been discovered seven years earlier in 2001. The TRAI also recommended that permissions for mergers and acquisitions should not be granted unless the licence-holders met roll-out obligations. These crucial recommendations were not accepted by the DoT.
On September 25, a few hours after Unitech put in 22 applications under eight companies, the DoT issued an apparently innocuous-sounding press release stating that it would not accept applications beyond October 1, 2007. In this period of three working days, as many as 373 additional applications were received. Thereafter, on October 19, the Department implemented its decision on technology neutrality – allowing companies using both the code division multiple access (CDMA) technology and its rival global system for mobile communications (GSM) to apply for spectrum in deviation from TRAI’s recommendations – that benefitted companies like Reliance Communications and Tata Teleservices.
It is learnt from reliable sources that there had been considerable pressure on former DoT Secretary Mathur to sign letters of intent in favour of certain applicants but he refused to oblige. Madhavan, the then Member, Finance, took premature retirement from service. On the last day of 2007, December 31, Mathur retired and he was replaced by Siddharth Behura (who had earlier served as Secretary, Environment & Forests, under Raja). Exactly 10 days later, on January 10, 2008, nine licences were awarded by the DoT ostensibly on a FCFS basis.
The rest, as the old saying goes, is history. In September 2008, Swan sold 45 per cent of its shares to Etisalat (of the United Arab Emirates) for US $ 900 million or around Rs 4,200 crore – the company had obtained its licence for only Rs 1,537 crore and does not possess any major assets. A month later, Unitech Wireless offloaded 60 per cent of its stake to Telenor (of Norway) for Rs 6,200 crore – this company too could only count among its assets a licence with spectrum for which it paid the DoT a sum of Rs 1,651 crore in January 2008. Subsequently, Tata Teleservices sold 26 per cent of its shares to NTT DoCoMo of Japan for Rs 13,230 crore.
These valuations indicate that under Raja’s stewardship, the DoT sold nine licences at least one-seventh their market prices thereby causing a loss of not less than Rs 60,000 crore to the country. Still, Prime Minister Manmohan Singh has not initiated any action to remove a Minister of the Union government against whom serious allegations have been levelled, allegations that are at present being investigated
by the Central Vigilance Commission and the Comptroller & Auditor General of India. Has such inaction been dictated by the compulsions of coalition politics since Raja belongs to the DMK, a constituent of the Congress-led UPA ruling coalition? The government remains steadfastly in a state of complete denial.