CAG indicts A Raja in 2G scam; says every rule flouted

Indicting A Raja, the CAG today said 2G spectrum allocation had caused revenue loss of Rs1.76 lakh crore as the then Telecom Minister had ignored the advice of the prime minister besides those of ministries of law and finance, giving "undue" benefits to Anil Ambani-led RCom.

The CAG highlighted that the entire process of allocation of Unified Access Service licences "lacked transparency" and was undertaken in an "arbitrary, unfair and inequitable manner", in the process "flouting every canon of financial propriety, rules and procedures."

The 77-page report of the CAG tabled in Parliament said due diligence was not followed and even the recommendations of the telecom regulator TRAI were "not followed in spirit".

The report said the "presumptive" loss caused to the exchequer through spectrum allocation to 122 licencees and 35 dual technology licences in 2007-08 was Rs1,76,645 crore. It pegged the figures on the basis of 3G auction held earlier this year in which the government mopped up over Rs67,000 crore.

It said there was an "imperative need to fix responsibility and enforce accountability for the lapses highlighted in the audit report."

Elaborating on the lapses and irregularities, the government auditor said Prime Minister Manmohan Singh had "stressed on the need for a fair and transparent allocation of spectrum" while the ministry of finance had sought for the decision regarding spectrum pricing to be considered by an EGoM (Empowered Group of Ministers).

"Brushing aside their concerns and advices, the Department of Telecommunications, in 2008, proceeded to issue 122 new licences for 2G spectrum at 2001 prices, by flouting every canon of financial propriety, rules and procedures," the CAG said.

The DoT also did not do the requisite due diligence in the examination of the applications submitted for the licences, leading to the grant of 85 out of 122 licences to the "ineligible applicants" as all these firms did not have stipulated paid-up capital at the time of application.

Further 45 out of 85 licencees were issued to companies which failed to satisfy conditions of main object clause in the memorandum of Association (MoA), it said.

The CAG said the process of giving dual technology licences to leading telecom firms including Reliance Communications and Tata Teleservices "lacked transparency and fairness", and equal opportunity was denied to other similarly placed operators who could apply for use of dual technology only after formal announcement of the policy.

Noting that this approval (dual technology use) had violated cabinet decision of 2003 to allow additional spectrum at 2001 prices, the auditor said, "Deviation from a cabinet decision should normally be with the approval of cabinet.

"However, in the present case, such a crucial decision to permit service providers to offer access using combination of technologies (CDMA, GSM and/or any other) under the same licence with dual spectrum allocation was taken without the matter being referred to the cabinet."

It said the dual technology was introduced in October 2007 in a "hasty and arbitrary manner" and in-principle approval was given to three operators on a day prior to announcement of the policy, which gave "the perception of discrimination against other players in the field."

The companies which got the licences, were created barely months earlier and "deliberately suppressed facts, disclosed incomplete information, submitted fictitious documents and used fraudulent means for getting licences and thereby access to spectrum.

"Onus of these licences, obtained at unbelievably low price, have in turn sold significant stakes in their companies to Indian/foreign companies at high premium within a short period of time," the auditor said.

The premium earned by these "new entrants" to the telecom sector was nothing but the true value of the spectrum, which should have normally accrued to the public exchequer, "had the transparent and fair market mechanism been followed" for the allocation of these licences, the CAG said.

In the report, the CAG noted that the ministry of communication and IT "decided to go ahead with arbitrarily deciding that the cut-off date for issuance of Letters of Intent would be advanced to September 25, 2007 and applications received would be decided on FCFS (first-come first-served) basis."

In November, 2007, Prime Minister Manmohan Singh had written to the telecom ministry suggesting introduction of "transparent methodology" of auction, "revision of entry fee" in the "backdrop of inadequate spectrum and large number of applications received for fresh licences."

The CAG highlighted that the law ministry had suggested setting up of an Empowered Group of Ministers to discuss the large number of applications and spectrum pricing, but the telecom ministry rejected it saying "the need for forming and EGoM arises when a new policy is being framed and in this particular issue no new policy for grant of UASL (unified access service licences) was being framed."

The auditor, however, said the "contention of the DoT is untenable as the rejection of the advice" of the Law Minister to have detailed deliberations on the issues in the EGoM on the ground that changes in policy might lead to litigation "goes against the well established and time-tested procedures of functioning of the government and the collective responsibility of the Union cabinet."