2G scam: Finance Ministry document on Chidambaram role placed in SC

The Telecom Ministry could have gone in for auction of 2G spectrum licences had the then Finance Minister P Chidambaram insisted on this, according to a Finance Ministry document submitted to the Supreme Court today.

The March 25, 2011 office memorandum by the Finance Ministry headed by Pranab Mukherjee sent to the Prime Minister's Office (PMO) also suggested that Chidambaram and the jailed former Telecom Minister A Raja had jointly determined the price for the 2G spectrum in 2008.

The document was filed by Janata party leader Subramanian Swamy before a bench of Justice GS Singhvi and Justice AK Ganguly.

The coverning note of the memorandum sent by a Finance Ministry official DR PGS Rao to the PMO said it was seen by Mukherjee.

Swamy, who has sought probe against Chidambaram for his alleged culpability in the price fixation of the spectrum, has contended that CBI was only holding Raja for the loss of revenue to the exchequer in the spectrum allocation.

Swamy contended that there were four meetings on the issue of price fixation for the spectrum in which Chidambaram and Raja sat with the Prime Minister in the final meeting.

The document placed by Swamy stated that a note was sent by the then Finance Minister (Chidambaram) to the Prime Minister on January 15, 2008 in which auction of spectrum was argued but only with the reference to spectrum beyond the 'start up' spectrum.

Further, it said that in a subsequent meeting on January 30, 2008 between Chidambaram and Raja, it was noted by the then Finance Minister that "he was for now not seeking to revisit the current regimes for entry fee or revenue shares".

The note also ruled out the option of auctioning spectrum for various reasons.

The allegations in the 2G spectrum scam was that the licenses  were sold at throwaway prices on a first-come-first-serve basis based on 2001 price causing a loss to the exchequer instead of them being auctioned.

The document said though Finance Secretary had suggested to go for auction for initial spectrum of 4.4 MHz in early February 2008, "the DoT was not keen to do the same since it had said that it will disturb the level playing field and the present Letter of Intent (LoI) holders who had already paid entry fee were likely to go for litigation."

It said DoT opined that 4.4 MHz (radio wave for 2G) was a part of licence agreement and initial entry fee for licence may be construed as the defacto price of initial spectrum.

"DoT could have invoked clause 5.1 of the UAS license for cancelling licenses in case MoF(Finance Ministry) had stuck to the stand of auctioning the 4.4 MHz spectrum. Perhaps some litigations would have arisen as a consequence," it said.

The document of the Finance Ministry also noted further meetings were held between Chidambaram and Raja on May 29, 2008 and June, 12, 2008.

"Subsequently in the meeting held under the Chair of the Prime Minister on July 4, 2008 (as recorded in the note of the then Finance Secretary dated July 6, 2008,), the then Finance Minister (Chidambaram) and Minister of Telecommunications (Raja) agreed to the proposals on enhancement of spectrum usage charges and pricing of spectrum based on indexing the base prise (Rs 266 crore per MHz) and compounding using SBI PLR  from existing allottees of spectrum beyond 6.2 MHz.

However, the issue of revision of entry fee was not discussed in the meeting," the document said.

The document noted that the former Finance Minister recommended an auction mechanism for future allocation of spectrum(beyond the "start up" spectrum) with the spectrum allocations having been made in the past to be treated as a closed chapter. The recommendation was in the context of spectrum usage charges and not with regard to the entry fee.

The Finance Ministry document said "it is, therefore, clear that there were consultations between Ministry of Finance (MoF) and DoT in the first half of 2008 on the formula for charging 2G spectrum based on indexation to PLR of the SBI, which related only to allocation beyond 6.2 MHz in the matter presently under consideration (allotment of 2G licensees in 2007-08) spectrum allocation were not made beyond 6.2 MHz on the pricing of which, DoT and MoF were in agreement."

It further said comments of the Department of Economic Affairs on the draft performance audit report on the issue of licences and allocation of 2G spectrum were sent to the Director General of Audit on August 11, 2010.

"These were put up for the first time to the FM for information when copies of these were forwarded to the cabinet Secretary under intimation to the Prime Minister;s Office on January 5, 2011," it said.