The CAG has indicted the former Communications and Information Technology Minister A. Raja for failing to adhere to guidelines and ignoring the concerns and advice of the Prime Minister, and the Finance and Law Ministries.

Highlighting gross irregularities in the allocation of 2G spectrum in 2008, the Comptroller and Auditor-General of India has said that “the entire process lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner” causing a “presumptive loss” of over Rs.1.76-lakh crore to the exchequer.

It indicts the former Communications and Information Technology Minister A. Raja for failing to adhere to laid guidelines and ignoring the concerns and advice of Prime Minister Manmohan Singh and the Union Finance and Law Ministries.

The CAG's Performance Audit Report titled “Issue of Licences and Allocation of 2G Spectrum by the Department of Telecommunications (DoT)” was tabled in Parliament on Tuesday.

It said the DoT issued 122 new licences for 2G spectrum in 2008 at 2001 prices by flouting every canon of financial propriety, rules and procedures.

The DoT did not follow its own guidelines on eligibility conditions, arbitrarily changed the cut-off date for receipt of applications post-facto and altered the conditions of the FCFS (first come, first served) procedure at crucial junctures without valid and cogent reasons, “thereby giving unfair advantage to certain companies over others,” the report said.

The CAG report blames Mr. Raja for violating the FCFS policy, but says the Prime Minister, the Minister for Law and Justice, the Finance Secretary, the DoT Secretary and the Member (Finance) in the Ministry were “not in favour of hasty allotment of licences without revision of spectrum prices.”

In a severe indictment of the DoT, the CAG report said it failed to do the requisite due diligence in the examination of the applications submitted for the licences, leading to the grant of 85 out of 122 licences to “ineligible applicants.”

These companies, created barely months ago, deliberately suppressed facts, disclosed incomplete information, submitted fictitious documents and used fraudulent means for getting licences and, thereby, access to spectrum, it pointed out. The companies that won licences despite being ineligible include Unitech, Datacom (now Videocon), S-Tel, Swan Telecom (now Etisalat DB) and Loop Telecom.

The CAG report said the owners of some of these licences, “obtained at unbelievably low price, have in turn sold significant stakes in their companies to the Indian/foreign companies at high premium within a short period of time.

The premium earned by these new entrants to the telecom sector was nothing but the true value of the spectrum, which should have normally accrued to the public exchequer, had the transparent and fair market mechanism been followed for the allocation of UAS licences,” the report added.

Underlining the need for fixing responsibility and enforcing accountability for the lapses, the CAG report said the entire process of allocation of 2G spectrum raises a serious concern about the systems of governance in the DoT, which needed to be thoroughly reviewed and revamped.

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