A Raja’s 2G spectrum scam beneficiaries may face termination

The department of telecommunication (DoT) “flouted every canon of financial propriety, rules and procedures” during the last three years under former telecom minister A Raja, says the report of the Comptroller & Auditor General (CAG) on the 2G spectrum allocation scam.

The report, tabled in Parliament on Tuesday amidst the opposition’s demand for a joint parliamentary committee (JPC) probe, shatters Raja defences while pointing out how he manipulated an opaque ministry to favour friends.

“The entire process of allocation of unified access service (UAS) licences lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner,” the report, prepared under the leadership of deputy CAG Rekha Gupta, said.

“The DoT did not follow its own guidelines on eligibility conditions, arbitrarily changed the cut-off date for receipt of applications post facto and altered the conditions of the ‘first-come, first-served (FCFS)’ procedure at crucial junctures without valid and cogent reasons, which gave unfair advantage to certain companies over others,” it concluded.

The cases of companies, which did not meet the eligibility criteria set by the department on the date of their application, should have been rejected and they should have been asked to apply afresh, as stipulated in the UAS guidelines. The DoT, when pointed out the flaw, said that it was contemplating issuing show cause notices for the termination of the UAS licences to all the erring companies. However, there was no follow up.

The new telecom and IT minister, Kapil Sibal, however, refused to comment on the matter, pointing out that he has not had time to study even a single file in his new ministry yet. “It is very unfair of you to ask me this,” he retorted when asked about his next step.

The CAG pointed out that according to the licence conditions, any firm which is shown to have misrepresented itself, is liable to have its licence cancelled outright. In all, 85 of the 122 new licences awarded in early 2008 - which went to new operators - were illegal in one form or the other.

Among the ‘illegal’ licences flagged by CAG are all 22 licences secured by real estate group Unitech, 21 licences issued to Loop Telecom (owned by the Essar group), all 22 licences of Datacom (now Videocon), six licences of S Tel and the 14 licences issued to the Balwas who, in turn, tied up with the UAE-based Etisalat.

The audit agency criticised Raja’s predecessor Dayanidhi Maran for the flawed FCFS system for allocating mobile phone airwaves but held Raja responsible for completely subverting the system to service his alleged friends.

Among Raja’s biggest sins, according to the report, was overturning the criteria on which licences and spectrum used to be handed out to companies who wanted to start their own mobile networks.

Till 2007, companies used to get their licences and spectrum based on how early they had applied for it. But this system was quietly overthrown by Raja, allegedly because his ‘friends’ - who applied for their licences after 60 or so others had already done so - would come hopelessly down in the priority list of applicants.

According to the report, Raja overthrew the system by removing date of application as the primary allocation criteria and replacing it with the date on which applicants could submit their preliminary documents required for the bids. As the documents - which include bank guarantees and demand drafts for thousands of crores of rupees - would require many hours to prepare, applicants who had already prepared the requisite  documents could submit them ahead of others.

This way, Raja’s alleged friends, who had prior information, jumped to the front of the queue. “The last nail in the coffin of transparency and objectivity of the FCFS policy was dealt by selectively leaking the date of issue of letter of intent (LoI) to a few applicants. As a result, they were ready with pre-dated demand drafts of thousands of crores of rupees prior to the date of issue of the press release calling for applicants to collect the LoI,” the report observed.
“It was noticed that 13 applicants were even ready with demand drafts (DDs) drawn on dates prior to the notification of cut off date,” it added. This, however, was only the second part of how the scam was engineered, according to CAG. The first part was the disqualification of more than 400 applicants by an arbitrary advancement of the cut-off date for receiving the application.

The CAG also pulled up Raja for falsely claiming that his policy changes had the blessings of the telecom commission, a multi-departmental body tasked with overseeing the biggest changes in the sector. It also pointed out that Raja had repeatedly disregarded the advice of the telecom regulator, the prime minister and the finance ministry to replace the broken allocation system with a more transparent one.