Parallel Report in the Form of Dissent Note on the Report of the JPC -Gurudas Dasgupta, MP Just like Railways Telecommunications was set up by the foreign rulers to enable them to run the State apparatus when India was under the British rule. After independence the telecommunications system had improved vastly with the introduction of automation and mechanization. The spread was larger and the beneficiaries were more, but really penetration or the tele density as you may call was highly limited and mostly it remained in the hand of Government officials, business men, rather the elite section of the community. A dramatic change had taken place when Mr.Sam Pitroda was given the job of expanding the telecommunication system. It was mainly the basic (landline) telephone which was in use. But the expansion was vast, reaching out to the common people. Even it penetrated deep into the rural areas. The PCO centres for which licences were given lavishly by the Telecommunications Department was really mobbed by common people at night to enable them to speak to their relations living at distant location. From statistical data it is evident writing letters and sending them through the postal Department had declined and the telecommunications network was found to operate as the main line of communication in the country. With the further evaluation of the technology, cellular phones gradually had become the most popular model of communication. Even the people classified as poor and disempowered started using the mobile phones. Of course, the system could be run only with the use of spectrum, which is even today a scarce material. Earlier it was in the use by the Defence and Para military organizations. With the liberalization of the Government’s economy, the use of spectrum was de-freezed and it was allowed to be used commercially, not only by the domestic corporate, even the foreign companies were allowed to move into this crucial and sensitive sector by the successive dose of economic reforms. Therefore, the spectrum dependent cellular system not only dramatically expanded its area of operation, but also led to unbelievable growth. It had not only the potentiality of stepping up the tele density, but also as a source of revenue to the Government. The changeover from basic to cellular had different phases and is earmarked by a process of evaluation which is characterized by controversies and even complaints of malpractices. Spectrum, therefore, became a scarce , much sought after precious resource, the control of which could generate untold wealth. What is spectrum? Spectrum is the entire range of wavelengths of electromagnetic radiation. Radio spectrum refers to the part of the electromagnetic spectrum which corresponds to radio frequencies – that is, frequencies lower than around 300 GHz (or, equivalently, wavelengths longer than about 1 mm). The use of the radio spectrum is generally regulated through allocation of frequency bands. Spectrum is allocated in bands. A band is a small section of the spectrum of radio communication frequencies, in which channels are usually used or set aside for the same purpose. When a company is allotted a particular band, it provides services using that band. Each of these bands has a basic band plan which dictates how it is to be used and shared, to avoid interference and to set protocol for the compatibility of transmitters and receivers. Different parts of the radio spectrum are used for different radio transmission technologies and applications. Radio spectrum is typically government regulated in developed countries and, in some cases, is sold or licensed to operators of private radio transmission systems (for example, cellular telephone operators or broadcast television stations). Ranges of allocated frequencies are often referred to by their provisioned use (for example, cellular spectrum or television spectrum) The International Telecommunication Unit (ITU), the United Nations specialized agency for information and communication technologies, is responsible for allocating radio spectrum and satellite orbits globally. Chapter-2 The Evolution of India’s Telecommunication Policy: The National Telecom Policy (NTP) resolution of 13th May 1994 gave a clear enunciation of the future road map envisaged for the Indian telecom sector. NTP 1994 had the threefold aim of providing phone on demand, ensuring universal service covering all villages and ensuring world class services. Under the policy Licences for cellular services were initially awarded in a phased manner. In 1994, in the first phase of grant of licences, two licences each were awarded in each of the four Metro cities of Delhi, Mumbai, Kolkata and Chennai based on a Beauty Parade model. A Beauty Parade model is a method of allocation, wherein bids are called for against certain pre fixed criteria. Bidders who score the highest among the pre fixed criteria are allocated the resource. Under the second phase in 1995, two cellular licences each were awarded in the remaining 18 circles through a bidding process. Some licences for Basic services were also awarded though a bidding process. Auction based on a Beauty Parade model, therefore, was the method followed while allocating of the first cellular licences in the country. The Union Cabinet considered and approved a new National Telecom Policy,1999, which became effective from 1st April 1999.The objectives of NTP 99 were to activate investments and competition in the telecom sector so as to create a modern and efficient telecommunications infrastructure. It also aimed at availability of affordable and effective communications for the citizens and to ensure a level playing field for the players. Under the new telecom policy in July 1999, the Cabinet approved and decided that existing licencees would migrate to the new Revenue Share Regime proposed under NTP 99 w.e.f. 01.08.1999. All Basic and Cellular operators migrated to the new Revenue Sharing Regime. In 2001 seventeen new Cellular licences for the fourth mobile operator in different circles were given through bidding under the terms of NTP 99. The term fourth operator refers to the cellular operators who were granted 17 new licences through auction in September/Octobre 2001. (Companies which were granted licences in 1994 and 1995 are referred to as the first and second licencees. Government companies MTNL and BSNL were granted licences and were termed as the third licencee/cellular operator.) With the Prime Minister’s approval a Group of Ministers was constituted under the Finance Minister’s chairmanship on 10th September 2003. With respect to the first terms of reference relating to ensuring release of adequate spectrum needed for the growth of the telecom sector, the GoM recommended that the • The Department of Telecom and the Ministry of Finance would discuss and finalise spectrum pricing formula, which will include incentive for efficient use as well as disincentive for sub optimal usages. • The allotment of additional spectrum be transparent, fair and equitable avoiding monopolistic situation regarding spectrum/usage. On receipt of the ToR in the DoT, the MoC&IT wrote to the Prime Minister on 28th February 2006, expressing surprise at the ToR formulated for the GoM. He wrote that that as per the discussions he had had with the Hon’ble Prime Minister earlier, the Hon’ble Prime Minister had kindly assured him that the ToR of the GoM would be drawn up exactly as DoT wanted, which was to keep it restricted to the issue of vacation of spectrum alone. The MoC&IT had also enclosed a draft ToR and requested the Prime Minister to instruct the concerned officials to modify the Terms of Reference as suggested by the DoT. Secretary (Telecom) also wrote to Additional Secretary, Cabinet Secretariat on the issue on 3rd April 2006.The Finance Ministry, however, was of the opinion that technology neutrality in spectrum allocation and spectrum pricing should be part of the ToR. The MoC&IT later met with the Prime Minster to discuss the terms of reference for the GoM on vacation of spectrum. Subsequent to the discussions the DoT prepared a fresh set of ToR for the GoM .The DoT’s view that spectrum pricing was within the normal work carried by it prevailed and the ToR proposed by the DoT was approved. On 7th December 2006 the Cabinet Secretariat issued the revised ToR for the GoM. This revised ToR focussed only on the aspect of vacation of spectrum. Spectrum Pricing Policy was removed from the terms of reference of the GoM. On 28th March 2007 the Finance Secretary wrote to Secretary (Telecom) stating that the ToR of the GoM did not include, “ issues related to technology neutral spectrum allocation and spectrum pricing which are of immense importance for further growth of telecom in the country. The methodology to be followed for allocation of spectrum and its pricing would logically follow the vacation of spectrum which is one of the issues included in the ToR. A sound policy on spectrum allocation and pricing will not only result in optimum utilization of spectrum but would also have revenue implications. As the Go M is being serviced by the Department of Telecom, I request you to ensure that these issues are included in the ToR for the GoM.” Secretary (Telecom) wrote back saying that spectrum pricing was within the normal work done by the DoT and that therefore there was no need to include it in the ToR for the GoM. In April 2007 the DoT made a reference to TRAI seeking to ascertain whether there should be any cap on the number of operators operating in one circle. TRAI responded in August 2007 stating that there would be no cap on the number of operators. The DOT issued a press release in September 2007 calling for applications for UAS license. LoIs were finally issued on 10th January 2008 in violation of all norms of transparency and fairplay. Since the introduction of the UAS licencing regime in 2003, 51 licences were issued by the DoT on a FCFS basis up to March 2007. Next 122 licences were given on 10th January, 2008. Ever since the Indian telecom sector has been opened up for private participation, the mechanism of auction has been systematically adopted for grant of licences. The first licences issued in 1994 were through auction, as were the licences issued in 1995, 2001, 2010 and 2012. The only deviation from this has been during the period between 2001 and 2007, when licences were given away on a FCFS basis. The auction of 2001 in which bids were received for only 17 of the 23 circles was followed by auctions in 2002, wherein bids were solicited for the remaining six circles. No responses were received and these bids failed. When the UAS regime was implemented in 2003, and with TRAI recommending that the amount paid by the fourth operator be used as the benchmark for migration, the amount paid by the fourth operator came to be used as the amount to be paid for migrating into the new regime. Tele density was in a nascent stage between the period 2003-2005. This was when the Cabinet had given directions for a new course, which was in the process of being implemented. Using rates discovered through a market mechanism to give away licences in 2003, when the milieu was similar can be understood. However, by 2005 the telecom sector had undergone a transformation. In 2005 the Government had increased the FDI limit from 49% to 74%. Teledensity had also increased. It was only natural that the demand for spectrum would increase considerable. It was with an awareness of the change in the situation and the need to address it that the Prime Minister decided, in December 2005, to constitute a GoM to examine all issued pertaining to spectrum pricing. What is inexplicable is that even when the scenario changed in 2005 and it was apparent that there was an increasing demand for licences and spectrum, the DoT failed to acknowledge the demand and act on it. In all previous and subsequent instances(what was the approval for the 3G auctions), licences were issued after a process of due diligence, with the consent of the Cabinet r a Group of Minsters. If the GoM constituted in 2006 had been allowed to deliberate on the issue of spectrum pricing as it mandated to do in the original ToR, it is highly likely that the price of 2001 would have been revised to reflect the existing market reality. Instead, the ToR was modified to ensure that the DoT retained the sole prerogative of deciding on the price of spectrum, with the result that certain selected private operators benefitted at the cost of the national exchequer. The DoT’s actions during the period 2006-07 belie the belief that it was the custodian of a valuable national resource which needed to be used for the good of the country. Chapter-3 Conspiracy of DoT during 2007 and 2008 As the telecom sector had begun to look up with increasing tele density, the corporates realising the potentiality of the sector moved into to invest in telecom anticipating high profit. Between 2004 and March 2007, 53 applications were put up. But the Department deliberately kept the applications pending in violation of the earlier practice, of expeditious disposal. This was done to generate artificial demand to seek and make illegal gains. Seen in the background of change of terms of reference to the Group of Ministers, GoM due to the persistent pressure of the Ministry of Telecommunications to grab absolute authority for fixing spectrum price, the move to keep applications piled up sets the clear what DoT was really working for. The change of ToR giving exclusive right to DoT to decide the price of spectrum violated the Cabinet decision of 2003 that clearly provided equal status to Ministry of Finance in this regard. It also violated the age old government rule that in all cases of financial implications, Ministry of Finance has to be involved. The Government, particularly the Prime Minister, buckled under the pressure of Mr. Maran, the then Minister of Telecommunications to keep his Government safe. The delay in processing applications with TRAI refusing to put a cap on the number cellular operators exposed beyond a grain of doubt what the Department of Telecommunications under the leadership of Raja was heading for. The illicit intention of the DoT is further exposed when it asked for the applications for licences on 24th September, 2007, the time limit being up to 1st October, 2007. The short window set for the submission of applications pinpoint to the long intention of Mr. Raja for committing subversion of all governmental rules and norms. Even after deliberate introduction of short window time, nearly 400 new applications were received. It piled up to 575 indicating clearly how lucrative the telecom sector looked to the corporates looking for profits. The criminality of Mr. Raja is further exposed, suddenly and most arbitrarily, Mr. Raja advanced the cut off date to 25th September, 2007, only one day after the press release inviting applications. More illegality, Mr. Raja advanced the date with an ulterior motive to favour his favourite corporates. Further the decision to advance the cut-off date was intimated publicly only on the day the letter of intent was issued, 10th January, 2008. Out of 575 applicants, 78 applicants complied with the terms and conditions of the LOI on the same day itself. The change in the manner FCFS was implemented resulted in a scenario where the applicant companies rushed to make payments to comply with the LOI conditions. The table below reveals the haste with which applicant companies complied with the terms of the LOIs. Certain companies even had pre dated demand drafts, as also bank guarantees from Mumbai, which was physically impossible given that they had been given only 45 minutes to collect the LoIs and respond to it. It only confirms that the allocation of licences, licences of intent was all prepared much earlier, the list was finalised, the corporates were chosen as per his discretion with the intention of providing undue benefit, the process of processing was merely a show sham mockery. In order to put the seal of semblance of legality, Mr. Raja subsequent to receiving 575 applications cleverly sought the view of the Ministry of Law and Justice. But it cynically rejected their suggestion for having an empowered committee of Ministers to consider the issue, also their view that Attorney General may be asked to give his opinion. That Mr. Raja was not alone in the gamble, he, of course, was the principal player playing cards well, most fraudulently obtained the seal of legality with the connivance of the then Solicitor General, the point in question infamous release of January 2010. Mr. Raja moved ahead despite the repeated protests of the Ministry Finance. Lastly, in October 2007, when it was known to the Ministry of Finance that licences under dual technology was proposed to be provided at the price of 2007, merely at a price of Rs.1658 crores for a pan India licence, the then Secretary, Mr. Subbarao clearly asked his counterpart in Telecommunications to stay the allocation of licences pending further discussion. Neither DoT agreed with the suggestion of MoF nor MoF moved further to stop the giving away of licences. In the entire process of allocation of licences, the DoT followed one consistent rule-and that was to ignore every advice to undertake the issue of allocation of 2G licences after discussions or consultations with other Government Departments or agencies, Having pressurized the PMO into allowing it to have the sole right on pricing, the DoT was in no mood to allow anybody else to prevent it from extracting maximum mileage from the allocation of the 2G license.Even though the MoF , a concerned agency sought to retain its role in spectrum pricing, the DoT did not give it an opportunity to do so. Its plea that all further action to implement the dual technology licences was also not heeded by the DoT. This is again a sordid story of conspiracy, collusion, deceit, fraud after all a violation of all canons of established Government functioning. It is a criminal breach of law. Mr.Maran rolled in motion the game of perpetrating irregularity by claiming all the time that pricing was the exclusive prerogative of the DoT. Shri. Raja and all his accomplices further forwarded the illegality by not attending to the applications, artificially popping up the demand, creating a situation where he could play his cards well. The manipulation of dates, without verifying the facts in the application and allowing ineligible people to have access and giving the licence to many of those who were actually real estate businessmen at a price which was abnormally low, he had given benefit to few service providers, allowing them to disinvest without rolling out the service, was all done with a pre determined intention of making illegal gain and doling our illegitimate benefits to private players. In fact, Mr. Raja had acted as the stooge of the corporates, it is the corporates who had campaigned for his appointment as the Minister of Telecommunications. Chapter-4 Has the country suffered a loss on account of the allocation of 2G licences in 2008 at the rates discovered in 2001? It is clear that there was no social benefit to be derived by giving spectrum at the price of 2001. It is a matter of no surprise that the Minister of Communication has gone public with a zero loss theory, because the DoT would like to prove that its actions were dictated by a social cause. It is the Devil’s argument. One aspect of the entire 2G allocation process which has generated a huge debate and has caught the imagination of the entire nation has been the question of whether the exchequer has suffered a loss on account of the manner in which the 2G licences were allocated. If so, what has been the quantum of loss? Different figures of losses have been propounded by different agencies. In 2007, while the allocation process was underway, media, civil society groups and even Members of Parliament had been pegging figures of losses. These ranged from somewhere around Rs. 67000 crore to Rs.1.90 lakh crore given by certain Members of Parliament. Subsequently the CAG report, the CBI, the Supreme Court, and even the DOT with its “zero loss theory” all came out with different sets of figures, giving rise to a situation where a “zero loss theory” existed side by side a loss of a couple of lakh crores. The evidence which emerged during the course of the JPC revealed that there had been a definite loss to the exchequer. Spectrum is a scarce resource, essential for providing cellular services. Companies which wanted to enter the telecom sector needed, necessarily, to acquire spectrum. From 2001 when the last licences had been given out through auction, there had been a huge increase in tele density. Demand had increased, as had the scarcity of spectrum. It was only natural therefore, that the price of spectrum should have reflected the value it had in 2008, instead of being given at an artificially fixed price of 2001. The CBI told the JPC during its presentation that one of the reasons that it ….was that , “The telecom sector had undergone tremendous growth and the parameters like tele density, Adjusted Gross Revenues (AGR) etc had undergone a phenomenal rise since the year 2001.”Shri.Subba Rao, Governor RBI and Secretary Finance in 2007 also told the JPC during his interaction with the Committee that as Finance Secretary, he was of the view that the price of spectrum needed to be revised in 2008 and that it would have been inappropriate to give away the licences at rates determined 2001.He told the Committee, “ Left to myself, if I was the final authority to decide on this, I would have tried to rediscover the prices in 2007-08 and would have tried to give at that prices. The Cellular Association of India (COAI) members who had appeared before the Committee also spoke of the fact that the price of spectrum needed to reflect its value, stating, “… we have time and again advocated for an open transparent method allocating a limited scarce resource like spectrum. Auction is one of them.” The Ministry of finance, the custodian of the country’s finances was of the strong view that the price needed to be revised to reflect the actual value of the spectrum. There can be no doubt, therefore, that the price of spectrum needed to be revised in 2008 and that allocating spectrum, the demand for which had increased substantially, at the old rate of 2001 was highly inappropriate. When one looks at the DOT’s actions, it only reinforces the belief that the price of spectrum would have increased substantially, had the price been allowed to be revised in 2007-08. The DOT’s insistence on demanding to be the single agency to decide on the price of spectrum makes it clear that the DOT was aware that head the Ministry of Finance been allowed to participate in the decision making process, the DOT would have been prevented from giving out spectrum at the old rates of 2001. The real estate operators who sought to enter the fray in spite of being ineligible to enter the business of telecom, were willing to risk violating laws because they were assured of windfall profits once they acquired scarce spectrum at such low rates. Different figures of losses have been thrown up during the course of the entire process of 2G allocation. The CAG report has given a detailed set of figures, giving different possible sets of losses to indicate the under pricing of spectrum. One of these indicators was the price offered by a telecom company, STel, who offered to pay RS.13752 crore for an all India licence. On this basis the value of spectrum in 2007-08 has been worked out by the CAG at Rs.65, 909 crore. The CAG report attempted a valuation of the 2G spectrum given in 2008 by comparing it with the price 3G spectrum fetched when it was auctioned in 2010. The CAG report presented a figure of Rs.1.76 lakh crore, with Rs.1 lakh crore being the amount which could have possibly been generated from the 122 licences and Rs. 35,000 each being the amount which could have been generated from the 35 Dual Technology licences and the extra spectrum given out. The third indicator that the CAG report used was the profits made by the real estate operators. These real estate companies had diluted their equity within a couple of months of acquiring the spectrum and what is particularly to be noted is that fact that the companies which acquired the stakes in these real estate firms were all big international telecom players. Using the value that the international telecom giants pegged for the spectrum, the CAG report gave a third set of figures which gave the possible value of spectrum at between Rs.57, 000 to Rs. 69,000 crore. The CAG’s report itself clearly states that these figures are merely indicative and that the actual value of spectrum could only have been discovered had it been allowed to be discovered through a market mechanism. But by not allowing a market discovered process to take place, the DOT ensured that the entire due process was vitiated and that spectrum was under priced and given away. The CBI, in its charge sheet gave another set of figures, calculating loss to the tune of Rs.22,000 crores for 122 licences. The CBI also used the dilution of equity as an indicator. The Supreme Court, in its judgment cancelling the licences also observed that there had been substantial loss to the exchequer on account of the manner in which the 122 licences were distributed. The most emphatic avowal of the value of spectrum emerged not from any Constitutional or external agencies, but from the highest centre of the Government itself. In November 2007 the Prime Minster sought an assessment of the entire 2G issue, which was drawing immense media attention, from the Cabinet Secretary, the senior most bureaucrat in the country. The Cabinet Secretary responded to the Prime Minster on 4th December 2007, well before the licences were given away on 10th January 2008. The note given by the Cabinet Secretary had never been available in the public domain and came to public notice only when, in response to my questions during the course of his interaction with the JPC, Shri.Chandrashekhar stated that he had sent a note to the Prime Minster on the issue and that he had calculated the value of the spectrum. In this note Shri Chandrashekhar wrote, “ When I last met the Hon’ble Prime Minister on 26th November 2007, he had directed me to send him a note on the revenue issues relating to spectrum allocation. A note is enclosed herewith for kind perusal of PM.” In his note Shri Chandrashekar wrote: There is a strong case for enhancing the licence fee, on the following grounds: all asset prices have increased substantially over the last six years, with inflation being about 34%. In the case of spectrum, the quantum allocated has increased by around 40% over this period, while teledensity has become 51/2 times. On this basis, the value of Rs.1650 crore paid in 2001 becomes ( 1,650 x 1.34x51/2 /1.4=) Rs.8,700 crore, i.w about Rs.7,000 crore higher. The fact the market considers this asset under-priced is confirmed by the long queue for fresh liences, the alacrity with which Reliance and two other forms paid up the fee on being allowed to do so (within a few hours). The rapid expansion of consumer base during this period has effectively taken the risk out of this business…..There is, therefore, there is no justification for retaining licence fee at the earlier rates on the ground of ‘level playing field’ between new licensees and incumbents The crux of the matter however, remains that different agencies which looked at the issue of allocation of 2G licences from different angles all arrived at the conclusion that the country had suffered a loss. It is immaterial whether the quantum of loss was Rs. 30,000 or Rs.1.76 lakh crore. What matters is that the country lost an opportunity to earn and fill the coffers, particularly at a time when it was facing severe financial constraints. The nation lost, the corporate reaped the profits. There is no doubt about the fact that that DOT perpetrated illegalities in 2007-08 to benefit certain corporates. There have been deliberate attempts however, to justify the DOT’s actions as an forethought strategy, in line with Government’s past policy and aimed towards a social objective. One argument that has been advanced to justify the under pricing of spectrum is that it was Government policy to give away spectrum at the price of 2001 and that auction of spectrum could not have been done as it was contrary to Government’s policy. The Government’s actions right from the issue of the first cellular licences in 1994 had been based on the premise of a market mechanism. In 1994 it was through a beauty parade model where there was bidding against pre determined parameters, that two operators were introduced in the four Metros. In 1995 two operators were introduced in the remaining 18 circles through bidding. In 2001 the fourth operators were introduced through a multi stage bidding process. Basing on the TRAI report, the Government in 2003, after having constituted a task force and GOM, had decided to introduce UAS. TRAI had recommended in para 7.39 of its report, which was approved by the Cabinet, that new entrants in the sector were to be introduced through a multi stage bidding process as was followed in 2001. It is very evident, therefore, that from the very beginning the entry of new operators was through a market mechanism, which was either bidding or auction. The policy of DoT is clearly demonstrated through its actions over the years. Only in 2008 was there a violation of this policy. Another argument that is being advanced in support of under pricing of spectrum by retaining it at the price of 2001 is that spectrum was being given at low prices with a social purpose. Making cellular phones available at a low price had led to very high tele density and have made cellular phones affordable to even poor people, this is the argument being propounded. This is an absolutely fictitious argument, without an iota of truth. Even if the spectrum was sold at the price depending on the market in 2007-08, the cost of the mobile telephones if at all increased, the impact would have been marginal. Statistics disprove the argument that the increase in tele density was on account of the licences given in 2008. The figures provided by the DOT to the JPC, gives the tele density figures over a decade. Tele density figures given by the DOT to JPC show that teledensity increased from 7.02% on 31st March 2004 to 26.22 % on 31st March 2008. The licences were given in January 2008, while the spectrum was allocated from April 2008 onwards, The licences given in 2008 would not have any major impact on increasing the teledensity and lowering of tarrifs. Tele density targets had already reached and exceeded the targets envisaged in the tenth plan. The DOT’s claim of seeking to increase teledensity and lower tarrifs by giving licences at old rates therefore stands demolished in the face of facts. The country had already high tele density. There was no need for low price spectrum to promote tele density. The possibility is that there would have been no increase, and even if the rates had been increased, it would have been marginal. Shri subba rao, former Secretary (Finance) in his deposition told the JPC that it was not necessary that the rates would increase because the corporate would be able to cushion the price rise in their profits. What could be the reason for DOT allowing the corporate to acquire spectrum at a low cost and reap the benefits if it was not in exchange of hefty kick back? Underpricing has no relation with high teledensity, it is devoid of any social bias at all. Teledensity had already peaked before licences had been distributed. Without inflicting much heavy loss to the national exchequer the social objective of the Government of making cellular services available to even the poor of the country could have been done. Firstly the tele density was high well before January 2008. Secondly, that fact that the Indian telecom market had tremendous potential was palpable to corporate within and outside the country and they were vying with each other to acquire the licences. Finally, even if the price of spectrum had been increased, the cost to the subscriber would have increased marginally only. Therefore, the argument that is being made that Shri.Raja did no wrong by allowing the underpricing of spectrum and that his actions had benefitted the country is a totally fallacious one. It is entirely dubious to co relate under pricing with social obligations. It is being done to underplay the criminal conspiracy which had benefitted the corporate, as revealed by the huge profit margins made by the corporate by disinvesting the shares and the price which some of the companies were ready to pay for a licence. It is also a well known truth that the corporate can never offer a huge price if they are not sure of the market returns. Chapter-5 The Role of Prime Minister and PMO: In the entire chain of events that preceded the allocation of the 2G licences, the role of the Prime Minister’s Office has been exceedingly important. The one question that has been repeatedly asked is, ‘was the PMO aware of what was happening?’. How could the DoT go ahead with its actions? The CAG in its report on the issue had commented, “Hon’ble Prime Minister’s suggestion to reconsider the pricing was ignored”. From the records that have emerged during the course of the JPC, it appears that the even the CAG was misled, probably on account of the fact that it was unable to look at the records of the Prime Minister’s Office. Records with the JPC provide a complete picture of the actual events that occurred in the course of the issue of the 2G licences. It has been well documented that the MoF was protesting about the inappropriateness of using prices discovered in 2001 to give away licences in 2008 and wanted the price to be revised to reflect the actual market value of spectrum. The MoF had also sought to involve the Cabinet Secretariat to resolve the issue, but the Cabinet Secretariat had asked the DoT and MoF to mutually arrive at an agreement. The Prime Minister’s Office (PMO) had also been receiving a large number of complaints and letters of concern from Members of Parliament, civil society and others regarding the actions of the DoT. Even Cabinet Ministers had written to the Prime Minister expressing concern on the developments in the telecom sector and the need for setting up of a GoM to examine the issues. All the PMO did was to forward all the complaints it received to the DoT, seeking DoT’s comments on the same. The person or persons who were meticulously planning to commit the crime were asked to sit in judgement over the complaints that the Prime Minister was receiving. It may also be noted that concern in the public domain was also perceptible. The shameful facts are enumerated. PM’s letter to Mr. Raja -2nd November, 2007 That the PM was aware of the course of events that was unfolding in the DoT is clear from the letter he wrote to Mr. Raja. On 2nd November 2007, the PM wrote to the Minister of Communication &IT, Shri.A. Raja stating , “ A number of issues relating to allocation of spectrum have been raised by telecom sector companies as well as in sections of the media. Broadly these issues relate to enhancement of subscriber linked criteria, permission to CDMA service providers to also provider services on the GSM standard and be eligible for spectrum in the GSM band, and the processing of large number of applications received for fresh licences against the backdrop of inadequate spectrum to cater to overall demand…I would request you to give urgent consideration to the issues being ….with a view to ensuring fairness and transparency and let me know of the position before you take any action in this regard.” Raja writes back to Prime Minister – 2 letters on 2nd November, 2007 Responding to the concern of the Prime Minister, Shri. Raja wrote two letters back to the PM on the same day, i.e. 2nd November 07 itself, justifying the actions of the DoT and seeking to convince the PM that nothing incorrect or illegal was being undertaken by the DoT. He informed the PM that, “ …there was, and is, no single deviation or departure in the rules and procedures contemplated, in all the decisions taken by my Ministry and as such full transparency is being maintained by my Ministry and I further assure you the same in the future.” Letter of Mr. Kamal Nath, the then Commerce Minister to Prime Minister -3rd November, 2007 On 3rd November 2007, the then Minister of Commerce & Industry, Shri.Kamal Nath, wrote to the Prime Minister. He wrote, “I am writing this letter with concern on the sudden and alarming developments in the telecom sector….It may be advisable to have a comprehensive look at the issues facing the telecom sector and I would strongly advise for setting up of a GoM.” Not only general complaints, letters from Members of Parliament, even a member of his own Cabinet, Mr. Kamal Nath, the then Commerce Minister had sent a letter expressing deep apprehension on the way in which the DoT was moving. PM wants independent evaluation by PMO Records from the PMO reveal that the Principal Secretary to PM discussed these issues with Secretary Telecom and Chairman TRAI on 6th November 2007. It emerged from the discussions that the issues raised were with respect to the recommendations made by TRAI and the difference of opinion between the Minister of Law & Justice and the Minister of Communications &IT. The Prime Minster, during the course of these events, wanted an independent evaluation of the actions of the DoT. Joint Secretary, PMO, after an evaluation of the facts stated in Shri.Raja’s letters of 2nd November 2007, put up a note to the PM on 6th November 2007, proposing that in the context of the facts that emerged in the note, it would be appropriate to request the Cabinet Secretary to call for the files and examine the matter in the context of their Transaction of Business Rules, as well as the TRAI Act. On this note the Principal Secretary to PM noted on 7th November 2007, “ PM has seen. Before proceeding with the letter, PM wants a note put up to him in whether the action proposed to be taken by the Ministry is correct or not; whether it is justified in doing what it plans to do.” Another note of Joint Secretary on 7th November, 2007 With reference to the PM’s queries, the Joint Secretary, PMO prepared a fresh note on 7th November 2007 itself, addressing the PM’s question of whether the DoT’s proposed actions were correct or not and whether it was justified in doing what it sought to do. In this note the Joint Secretary noted: In his letter dated 02.11.2007 addressed to PM, Minister of Communication &IT has stated that the Department intends to ignore the advice to refer the issue of allotment if fresh licences to an Empowered GOM and intends to proceed on first-come-first-served basis, which according to the minster will be a continuation of the existing policy. This decision does not appear to be in conformity with the Transaction of Business Rules, which provides that “ cases in which a difference of opinion arises between two or more Ministers and a Cabinet decision is desired, shall be brought before the Cabinet. Further, while this office is in no position to examine whether there is indeed a policy statement laying down first-come-first-served basis for fresh licensing, the fact is that the fourth round licences were awarded in 2001 on the basis of auction rather than first-come-first-served basis…It does appear, therefore that the course of action proposed to be adopted by the Minister is , prime facie, not correct. In so far as the issue of enhancement of subscriber linked spectrum allocation criteria is concerned, Minister in his reply to PM had stated that the recommendations of the Telecom Engineering Centre, have in principle, been accepted by him…. Minister’s averment in his reply is bit, therefore, legally sound….Clearly there appears to have been selective acceptance of TRAI recommendations without a holistic view having been taken. As TRAI is insistent that its recommendations are to be seen in totality as one set of recommendations, this amounts to modification of recommendations, which under the law required further consultation with TRAI.” The note of the Joint Secretary to the PMO that categorically states that the course of action of Mr. Raja was prima facie not correct. Further the Joint Secretary said that Mr. Raja was making selective e acceptance of the TRAI recommendations. Even after such a stringent comment made by his own office the PM preferred to remain silent over the issue, he was still not satisfied about the abuse being done by his own colleague Mr. Raja. From the evidence it is clear that these issues were discussed with the PM. The PM desired that the Principal Secretary to PM along with Cabinet Secretary and Secretary, Department of Telecom examine all aspects of the issue. Whether any such discussions took place or not is not known, at least, not documented. Mr. Pulak Chatterjee reverses the note of the Joint Secretary The issue was examined in depth by Shri.Pulak Chatterjee , who noted that , “ A good policy should focus on the optimal use of spectrum which is the scarce commodity. Instead we are already in a position that is leading to wastage and sub-optimal use of spectrum…. In the short run, however, a balance has to be immediately found between the objective of optimum use of spectrum and a competition policy based on fair and transparent allocation processes. Ideally, in a situation where spectrum is scarce, it should be auctioned.” The approach however, he advocated was: • New operators may be allotted spectrum only up to the threshold level on payment of the normal fees. • The balance spectrum may then be auctioned among all those who hold spectrum up to the threshold level. The Prime Minister had obviously seen the two notes of the Joint Secretary and also the subsequent note of Mr. Pulak Chatterjee. After Mr. Pulak Chatterjee stood in support of Mr. Raja, PMO got into hibernation. The Prime Minister also fell into silence. The day after the distribution of licences however PMO woke up only after the perpetration of the crime was complete. After the distribution of the letter of intent, the Prime Minister wakes up On 11th January, 2008, Principal Secretary to PM noted on the file, “ PM says that the DoT has issued license today. That may be taken into account and the issues accordingly modified and submitted to him pl.”. When the proposal was modified taking into view the DoT’s allocation of the new licences and resubmitted to the PM on 15th January 2008, Principal Secretary to PM, on 23rd January 2008, noted , “ PM wants this informally shared with the Deptt. Does not want a formal communication & wants PMO to be at arm’s length pl”. These remarks on file only make clear that Raja had finally been allowed to violate all the norms and procedures taking advantage of the continuous silence and inaction of the Prime Minister. Now most hypocritically ‘PMO wants to be at arm’s length, it only means after allowing the crime to be committed, PMO wants to dissociate itself and put up a veil of innocence. From all the information and documents available all around, it becomes even more apparent that all the transgressions that the DoT undertook were known to the PMO. With reference to the issue of new licences, the PMO prepared the following table, methodically listing the position of the various agencies involved in the issue: Issue Opinion of TRAI Opinion of Telecom Commission Opinion of Telecom Engineering Centre Opinion of EAM Opinion/Decision of Minister/DoT Suggestions Issue of New Licences There shall be no cap on the number of operators in a circle. Agrees with TRAI.( This is also the present practice). Criteria for grant of licences may be strengthened and placed on public domain. Accepts TRAI recommendation regarding “no cap”. Propose to continue existing policy of first come first-served basis for grant of licences. This is a 3 stage process as follows: 1) issue LOIs on first-come-first-served basis to applicants. 2)issue UAS license to those who fully comply with LOI conditions(payment of fee etc) on first-complied-first saved basis. 3) Issue wireless Licence for allotment of radio frequency (spectrum) in first come first-licences-first-served basis. Since spectrum is limited and there are more than 570 applications for new licences pending, it is feared that, once a large number of LOIs are issued simultaneously on first-come first served basis, these licencees would never get spectrum even in the next several years. Further, 3 CDMA operators who have applied for permission to operate in GSM, have been granted licence and allowed to pay licence fee, even before the policy could be announced. This means they will be eligible for additional spectrum for GSM for which existing operators have been waiting for several years. It would therefore be best to stick to the 1999 Cabinet decision that licence may be given subject to availability of spectrum. To speak more precisely, the table above makes it clear that the PMO was aware of DoT’s proposed plan of action of on all the following counts: (1)Change of manner of implementation of FCFS: the PMO was aware that the DOT was proposing to modify the existing manner of implementation of FCFS by taking compliance with the terms of the LOI as the precondition for grant of licences, i.e. DoT was planning to replace ‘ First-come-first-served’ with ‘First-complied-first-served’. Not only was the PMO aware of the proposed change, it was also aware of the repercussions of this action, given the fact that quantity of spectrum available was limited. What this meant was that once the licences were given out on the basis of compliance with conditions of the LOI, many companies would not get spectrum in the next several years. (2)Approval for use of Dual Technology and licences being given to three CDMA operators even before the policy was announced: the PMO was aware that the DOT had given permission to three CDMA operators to use GSM technology even before it had announced the policy permitting this. This benefit given to the three CDM operators meant that they would be eligible for spectrum for which other existing operators had been waiting for years. In effect these CDMA operators had jumped the queue and got spectrum ahead of those who had applied years in advance and who had been waiting for it. (3)The violation of the Cabinet decision of 1999: the PMO was aware that the DOT’s action of seeking to give away licences to new operators was in contravention of the Cabinet’s decision of 1999 that licences should be given away only subject to spectrum being available. The note in PMO files states, “ the MCIT was advised that the applications for new license should be taken up seriatim according to the chronology in which that were received and the number if fresh licenses in any Circle should be determined according to the availability of spectrum. The Telecom Commission had detailed discussions with the MCIT on this issue. The MCIT was of the opinion that all applications for new licences should be issued Letters of Intent and, thereafter, all those who deposit the licence fee, should be issued licences. They shall also be eligible for spectrum. Since spectrum is very limited, even in the next several years all these licensees would never be able to get the spectrum. This would also be contrary to the provisions of the Telecom Policy that had been approved by the Union Cabinet in 1999 wherein it has been specifically stated that new licenses would be given subject to availability of spectrum”. What could have been the compulsions of the PMO that they were unable to prevent the Minister of Communication & IT and the DOT from giving away spectrum in a random manner, despite being fully aware of the implications of DOT’s actions? The answer probably can be found in the PM’s comment on the compulsions of ‘coalition dharma’. (4) What is most intriguing, Prime Minister over and above the other failures an enumerated above to enforce norms and legality in the distribution of 2G spectrum liences by Mr. Raja had even committed grave blunder by refusing to consider the note of Mr. Chandrasekhar, the then Cabinet Secretary. Actually, the Prime Minister asked the Cabinet Secretary to put up a note on the issue of pricing of licences. 1. Mr. Chandrasekhar had categorically stated that the value of licence which was Rs.1650 crores in 2001 should be jacked up to Rs.8700 crores taking into consideration the high cost of spectrum due to 34 per cent of inflation causing 40 per cent rise in the cost of spectrum also taking into account 5/1-2 rise in the tele-density. 2. Mr. Chandrasekhar had argued strongly for enhancing the licence fee citing many other undisputable facts. The note was submitted to the Prime Minister 4th December, 2009 much before the distribution of licence on 10th January, 2008. Conclusion: It is established beyond doubt, the Prime Minister of the country who is under oath obliged to protect the interest of the nation had deliberately not acted having full knowledge of the criminality that was sought to be perpetrated by his own Cabinet colleague, turning a blind eye to the innumerable complaints, even ignoring the firm opinion of the Ministry of Finance, even violating the earlier decision of the Cabinet. He had shamefully rejected the views of the Joint Secretary of his office, even more shamefully refused to consider the views of the topmost officer of the government, the then Cabinet Secretary, Mr. Chandrasekhar. Therefore, the argument that is being advanced that the Prime Minister had acted in good faith does not at all to be considered sustainable. The inescapable conclusion is that the Prime Minister cannot be absolved of the serious charge of dereliction of duty. He had only pretended to remain at an arm’s length because he preferred remaining in office as a matter of greater than acting decisively to prevent irregularity that had caused dastardly damage to the country financially and politically to the government. He must have believed that if he had taken pre-emptive action the boat should have been rocked, the government would have collapsed. Therefore the story that Mr. Raja misled the Prime Minister does not hold good. ----to be continued
Posted on: Wed, 16 Oct 2013 15:14:26 +0000
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