The CAG on Friday rapped the Telecom Ministry for giving Mukesh Ambani-led Reliance Jio Infocomm undue benefit of over Rs 3,367 crore by allowing it to provide voice calling on broadband spectrum, a charge the company vehemently denied.
The CAG on Friday rapped the Telecom Ministry for giving Mukesh Ambani-led Reliance Jio Infocomm undue benefit of over Rs 3,367 crore by allowing it to provide voice calling on broadband spectrum, a charge the company vehemently denied.
Infotel, an internet service provider (ISP), had in 2010 outbid most of the telecom operators to bag BWA spectrum under a licence that did not permit voice services. The firm later was acquired by Reliance Industries and renamed it Reliance Jio. The Comptroller and Auditor General (CAG) in its report tabled in Parliament on Friday said Reliance Jio was the first firm to seek a universal licence (UL) for voice services after the government permitted ISP licencees to migrate to UL.
Reliance Jio Infocomm paid UL entry fee of Rs 15 crore and additional migration fee of Rs 1,658 crore in August 2013. "The entry fee of Rs 1,658.57 crore was discovered in 2011 through the bidding for the 4th Cellular Licenses and tis price did not reflect the present value as on August 2013. Taking into account the cost inflation in the economy for the period from 2011 to 2013 the value of licence would have been at least Rs 5,025.29 crore," CAG said.
This migration resulted in undue advantage of Rs 3,367.29 crore to Reliance Jio, it said. "Reliance Jio Infocomm Limited (formerly, Infotel)... paid UL entry fee of Rs 15 crore and additional migration fee of Rs 1,658 crore in August 2013. This migration, allowed at prices discovered in 2001, resulted in undue advantage of Rs 3,367.29 crore to Reliance Jio Infocomm," it said.
Stating that "no favour" was given to it, Reliance Jio said, "We have always conducted our business as per the prevailing laws and have abided by the rules and regulations prescribed by the Department of Telecom (DoT) and other regulatory authorities." "We have acquired all our spectrum at market prices through open and transparent bidding processes, the conditions for which were same for all bidders. Further, the DoT rules for procuring the relevant licence for services using BWA spectrum too were the same for all successful bidders," it said.
The CAG report also said Bharti Airtel made an undue gain of Rs 499 crore because of Department of Telecom's decision to merge Chennai telecom circle with Tamil Nadu in a hasty manner in 2005. "Merger of Chennai Metro and Tamil Nadu telecom circles without any cost benefit analysis of the proposal in 2005 for the CMTS/UAS (full fledge telecom operators) licence resulted in undue benefits to the select telecom operators," the CAG said.
The order issued in September 2005 allowed merger of licences and the period of permits was allowed to be fixed as per the date of licence among the two having longer validity. On the broadband spectrum auction, CAG said the auction rules "suffered from deficiencies like absence of financial parameters in the eligibility criteria for bidders, absence of lock-in-provision, disparity in scope of usage of BWA spectrum, lack of intermediate milestones in roll out targets etc".
Infotel requested for network codes after the auction which would have enabled them to provide voice services beyond the scope of their ISP licence, it said. The Department of Telecom (DoT) in 2013 allowed migration of ISP licensees with BWA spectrum to UL (Unified Licence) which would enable them to provide mobile voice service using BWA spectrum, on payment of additional fee equal to the difference between the entry fee for a telecom licence and entry fee of national ISP permit.
This was apart from the entry fee as applicable for migration of ISP licencee to UL, CAG said. "The decision to grant permission to an ISP licencee with BWA spectrum to operate in the voice telephony space also helped the ISP to circumvent the restrictions imposed by their licence at the time of auction, which were known to the ISP at the time of bidding for BWA spectrum. RJIL was the first to take benefit of this scheme," CAG said.
The auditor added that while allowing voice telephony service on BWA spectrum, DoT had not prescribed the matching Spectrum Usage Charges (SUC) with what was being paid by the main telecom operators who were providing voice telephony.
While full fledged telecom operators were paying 3 to 5 per cent depending on the quantum of spectrum held by them, BWA spectrum winners were asked to pay just 1 per cent of its AGR (adjusted gross revenue) as per the auction rule.
"This relaxation would result in significant loss of revenue to the government over 20 year licence period, since the BWA spectrum had potential to provide voice services also in addition to data services," CAG said.
These deficiencies led to lack of efficient use of spectrum, hoarding of spectrum in view of absence of roll out of BWA services and non-realisation of the expected revenue share in the form of SUC even after more than four years of allocation, the auditor said.
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