:: Paranjoy Guha Thakurta

Spectrum allocation row has cost India Rs 80,000 crore

Paranjoy Guha Thakurta

It is the biggest scam in the history of Independent India. The perpetrator of the scam, Union minister for telecommunications and information technology Andimuthu Raja is trying to brazen it out protesting his innocence. He says he has played by the rule book and that the Cabinet and the ministry of finance have approved his decisions. His mentor, DMK supremo Muthuvel Karunanidhi, claims he is being victimised because he is a Dalit. But facts tell a diametrically different story.

The exchequer has lost roughly Rs 80,000 crore because of the flawed manner in which electro-magnetic spectrum, used for mobile telecommunications, has been allotted. Spectrum is a scarce national resource. The government is supposed to act as a custodian of the people. But the manner in which a clutch of private companies have gained, at the expense of the country, is nothing short of scandalous. These acts of crony capitalism comprise the underbelly of the telecom revolution that has swept India in recent years.

Two recent transactions, the first involving Swan Telecom (earlier associated with the Reliance Anil Dhirubhai Ambani Group) and Etilasat (or Emirates Telecommunications Corporation, the main telecom operator in the United Arab Emirates), and the other between a division of Unitech Ltd, United Wireless, and Telenor (of Norway), confirm the view that the nation lost no less than Rs 60,000 crore because of the methodology that was adopted by the Department of Telecommunications (DoT) while allotting spectrum.

If one adds to this figure the amount lost due to excess spectrum being allotted to existing telecom operators like Bharti, Vodafone and Idea — the same so-called cartel that Mr Raja alleges has been working against him without naming them — besides Reliance Communications (RComm) and Tata Teleservices, the total loss figure would rise by roughly Rs 20,000 crore. In other words, the scam is in the region of Rs 80,000 crore or more than what the Central government spends in a year on healthcare.

Mr Raja has steadfastly refused to allot spectrum through an open public auction and instead chose the first-come-first-served (FCFS) route that was not merely opaque but also discriminatory. Thus, second generation (2G) spectrum for all-India mobile telephony was allotted to individual private companies, for Rs 1,651 crore each (this price was determined seven years earlier) against a current market price that was at least six times higher.

Mr Raja replaced Dayanidhi Maran as communications minister in May 2007. On October 19, 2007, the DoT had changed its policy by issuing a press note. The same evening, RComm was ready with a demand draft of Rs 1,651 crore and was conferred the status of a GSM (general system of mobile communications) licensee by virtue of the original licence it had been holding. The company had earlier been primarily using the competing CDMA (code division multiple access) technology.

RComm was able to jump the queue ahead of 46 corporate entities/groups that had placed 575 applications with the DoT, none of which had at that time received letters of intent despite the fact that some (such as ByCell, Idea and Spice) had been waiting for over a year-and-a-half. In the queue were all kinds of firms, including realtors and retailers, none of which had any experience in telecom, who later received licences and with it, spectrum. After RComm, Tata Tele became the next beneficiary and were thereafter followed by others.

The ministry of finance has, in an internal note, claimed that the government should have obtained Rs 31,453 crore for the 120 licences given to nine corporate entities with start-up spectrum in the first quarter of 2008 instead of Rs 8,987 crore actually obtained (as these are based on 2001-02 prices arrived at through a public auction). The two industry lobbies (divided into GSM and CDMA technology users) have been at loggerheads for a while now. RComm and its supporter Amar Singh of the Samajwadi Party have accused old GSM operators (led by Bharti and Vodafone) of hoarding spectrum worth Rs 20,000 crore.

Angry letters have been exchanged between Telecom Regulatory Authority of India (TRAI) chairman and former DoT secretary Nripendra Mishra and current Secretary, DoT, Siddhartha Behura. On August 28, 2008 TRAI confirmed that the DoT has made no reference on spectrum allocation to it, stating: "Having come to the conclusion that there should not be any limit to the number of access providers, the Authority is of the opinion that in order to have an actual free market, there is an urgent need to have a predictable and transparent road map for any new entrant wishing to enter the sector. There is a need to have a simple licensing regime and a transparent and efficient spectrum management system; otherwise the free market will only be a myth".

On January 14, 2008, TRAI chairman Mishra wrote to DoT secretary Behura accusing his department of misinforming the courts on subscriber-linked spectrum allocation norms by selectively quoting TRAI’s recommendations out of context. Mr Behura, in turn, told Mr Mishra that "it does not seem desirable for the regulator and the government to engage in any correspondence at this stage on matters which are sub-judice". The TRAI chairman then hit back stating: "There is no provision in the TRAI Act that allows DoT to write such letters to us. The DoT secretary… is clearly ill-advised. His enthusiasm to settle scores has clearly overtaken his legal wisdom…"

A few days earlier, on January 10, 2008, Sanchar Bhavan was witness to an unedifying spectacle. At 2.45 pm that day, DoT posted an announcement on its website saying letters of intent would be issued between 3.30 pm and 4.30 pm and that application fees (over Rs 1,000 crore) would have to be paid immediately, by demand draft, with supporting documentation. It was announced that spectrum would be allotted to those who deposited their fees first, by even a fraction of a second. In the mad melee, well-heeled CEOs were manhandled by hired bouncers and DoT staffers were bashed up before the cops turned up, late as usual.

Was this is the best way to allot spectrum? The compulsions of coalition politics should not make Prime Minister Manmohan Singh blind to the blatant misuse of ministerial powers that have resulted in a huge loss to the country.

Paranjoy Guha Thakurta is an educator and a commentator based in New Delhi