Why telecom is still a milch cow for the corrupt
Scarcity — whether of spectrum or anything else — is what breeds corruption. Telecom needs honest ministers to steer it clear of controversy.
The brouhaha over the sale of 2G spectrum is surprising. The allegation is that thousands of crores were made by politicians and bureaucrats in the sale, which was conducted through the first-come, first-served method —- opening the door to unlimited skulduggery. When scarce resources are given away in less than transparent ways, corruption will always be the end result. That’s why one should not be surprised.
The turning point came in September, 2007, when the communications ministry under A Raja decided to close the door to new spectrum seekers. This led to a gold rush, as everybody wanted to get in before the deadline. Given the zooming growth of mobile telephony and the scarcity of available radio spectrum, everyone knew that a spectrum licence was a licence to print money.
For decades now, the telecommunications ministry has been a mother lode for corruption because it has always dealt in scarcity. Before 1991-92, most of the corruption was petty: since new phone connections were scarce, you had to bribe someone in the department of telecommunications (DoT), or even a minister, to get yourself a phone. Bribes were also required to get a phone repaired.
Everyone believed that corruption would disappear when telephony was thrown open to the private sector. They were dead wrong, for two reasons. One, big money is always made whenever there is policy confusion and scope for the use of discretionary power. Two, since the growth was largely happening in mobile telephony, there was another scarcity to tap for underhand money: spectrum.
The first reason is why Sukh Ram found it easy to make tons of money when he was telecom minister in the Narasimha Rao cabinet. But the confusion did not end even with his removal, for the policy of high licence fees was essentially unworkable. The confusion continued well into the United Front and NDA governments, enabling corruption to thrive. All interested parties were keen to tweak policy to their advantage.
The first major attempt to milk that confusion happened under Ram Vilas Paswan, telecom minister in the Vajpayee government. A new telecom policy was announced to shift the basis of licence fees from fixed rates to a revenue-sharing mode. But it was the next minister, Pramod Mahajan, who enabled corruption to hit the big time. He presided over policy shifts that could not but have engendered corruption.
Mahajan, who was shot dead by his own brother in 2006, made two changes that seemed to favour particular businessmen. When VSNL was being privatised in 2002, he failed to compensate the company adequately for the loss of its international monopoly two years ahead of the scheduled date in 2004. Mahajan ensured that the Tatas, who beat the Ambanis in their bid for VSNL, did not derive any benefit from the acquisition.
A close friend of the Ambanis, Mahajan allowed Mukesh Ambani’s Reliance Infocomm (now Anil Ambani’s Reliance Communications) to enter mobile telephony through the back door. At that point, basic fixed-line services were charged lower licence fees than mobile services, but Mahajan made a policy change that classified wireless in local loop (WLL) as a fixed-line technology when it was no different from mobile technology. This essentially put Ambani on a better wicket than the rest: he paid lower licence fees for so-called basic fixed-line telephony that was really mobile telephony in another garb.
The mobile companies were enraged. The issue would have created a right royal legal mess, but that was when Vajpayee brought in the first honest telecom minister — Arun Shourie — to put things on an even keel. Shourie fined Reliance for its transgressions and created a unified system under which licence fees were similar for all kinds of telephone services.
With the arrival of the UPA and a weaker coalition in 2004, the new prime minister’s ability to rein in wayward ministers dwindled. Under Dayanadhi Maran, telecom became an independent DMK fief that wasn’t accountable to the PM. And this, despite the fact that there was a clear conflict between Maran’s business interests in TV and cable and his ministry’s role as regulator. When the Marans temporarily fell out with DMK boss Karunanidhi, Raja entered the picture. Manmohan Singh did not want Raja to return after the 2009 elections, but Sonia had to bow to the DMK’s pressure and accept him back.
The latest spectrum scam shows that telecom will continue to remain a milchcow. Giving the ministry to coalition partners who have no sense of accountability to the PM makes no sense anymore. It’s time to dump Raja — and the DMK, if need be — to bring probity back to this crucial ministry.
The turning point came in September, 2007, when the communications ministry under A Raja decided to close the door to new spectrum seekers. This led to a gold rush, as everybody wanted to get in before the deadline. Given the zooming growth of mobile telephony and the scarcity of available radio spectrum, everyone knew that a spectrum licence was a licence to print money.
For decades now, the telecommunications ministry has been a mother lode for corruption because it has always dealt in scarcity. Before 1991-92, most of the corruption was petty: since new phone connections were scarce, you had to bribe someone in the department of telecommunications (DoT), or even a minister, to get yourself a phone. Bribes were also required to get a phone repaired.
Everyone believed that corruption would disappear when telephony was thrown open to the private sector. They were dead wrong, for two reasons. One, big money is always made whenever there is policy confusion and scope for the use of discretionary power. Two, since the growth was largely happening in mobile telephony, there was another scarcity to tap for underhand money: spectrum.
The first reason is why Sukh Ram found it easy to make tons of money when he was telecom minister in the Narasimha Rao cabinet. But the confusion did not end even with his removal, for the policy of high licence fees was essentially unworkable. The confusion continued well into the United Front and NDA governments, enabling corruption to thrive. All interested parties were keen to tweak policy to their advantage.
The first major attempt to milk that confusion happened under Ram Vilas Paswan, telecom minister in the Vajpayee government. A new telecom policy was announced to shift the basis of licence fees from fixed rates to a revenue-sharing mode. But it was the next minister, Pramod Mahajan, who enabled corruption to hit the big time. He presided over policy shifts that could not but have engendered corruption.
Mahajan, who was shot dead by his own brother in 2006, made two changes that seemed to favour particular businessmen. When VSNL was being privatised in 2002, he failed to compensate the company adequately for the loss of its international monopoly two years ahead of the scheduled date in 2004. Mahajan ensured that the Tatas, who beat the Ambanis in their bid for VSNL, did not derive any benefit from the acquisition.
A close friend of the Ambanis, Mahajan allowed Mukesh Ambani’s Reliance Infocomm (now Anil Ambani’s Reliance Communications) to enter mobile telephony through the back door. At that point, basic fixed-line services were charged lower licence fees than mobile services, but Mahajan made a policy change that classified wireless in local loop (WLL) as a fixed-line technology when it was no different from mobile technology. This essentially put Ambani on a better wicket than the rest: he paid lower licence fees for so-called basic fixed-line telephony that was really mobile telephony in another garb.
The mobile companies were enraged. The issue would have created a right royal legal mess, but that was when Vajpayee brought in the first honest telecom minister — Arun Shourie — to put things on an even keel. Shourie fined Reliance for its transgressions and created a unified system under which licence fees were similar for all kinds of telephone services.
With the arrival of the UPA and a weaker coalition in 2004, the new prime minister’s ability to rein in wayward ministers dwindled. Under Dayanadhi Maran, telecom became an independent DMK fief that wasn’t accountable to the PM. And this, despite the fact that there was a clear conflict between Maran’s business interests in TV and cable and his ministry’s role as regulator. When the Marans temporarily fell out with DMK boss Karunanidhi, Raja entered the picture. Manmohan Singh did not want Raja to return after the 2009 elections, but Sonia had to bow to the DMK’s pressure and accept him back.
The latest spectrum scam shows that telecom will continue to remain a milchcow. Giving the ministry to coalition partners who have no sense of accountability to the PM makes no sense anymore. It’s time to dump Raja — and the DMK, if need be — to bring probity back to this crucial ministry.