The report of the Comptroller and Auditor-General of India (CAG) on 2G spectrum allocation refutes the claims made by the former Communications and Information Technology Minister, A. Raja, that whatever he did on the pricing issue was as per the recommendations of the Telecom Regulatory Authority of India (TRAI) and with the complete backing of Prime Minister Manmohan Singh.
The audit report states that not only did Mr. Raja ignore the advice of the Prime Minister, who had called for “introduction of a transparent methodology of auction” and “revision of entry fee,” that was benchmarked on an old figure (based on 2001 prices), but that TRAI also favoured the reassessing of spectrum price through a market mechanism.
Mr. Raja wrote to Dr. Singh that “the issue of auction of spectrum was considered by the Telecom Commission and was not recommended.” But the CAG found out that TRAI's recommendations (given on August 2007) were never discussed in a meeting of the full Telecom Commission between the date of submission of the TRAI's recommendations and the date of Mr. Raja's letter (November 2, 2007) to Dr. Singh.
Belying the former Minister's claims that he followed TRAI's recommendations on pricing, the CAG report says: “The TRAI, in its report, observed that the entry fee, as it existed in 2001, was not a realistic price for obtaining a licence in the changed situation considering the dynamism and growth of telecom sector… It also observed that the value of spectrum was not correctly reflected in the extant pricing model, and recommended again for de-linking of spectrum from licence.”
The report says the Department of Telecom's contention that it was merely following a prior policy on spectrum pricing was not correct. It disagrees with DoT's argument that non-revision of entry fee was based on TRAI's recommendations, for both new licensees as well as for migration of existing operators to the Universal Access Services (UAS) licensing regime. It also observes that this matter was never raised before the Cabinet, as claimed by DoT.
“Even the TRAI, in their report [October 2003], had recommended for a two-stage implementation of the UAS licensing regime, in which the first phase was regarding migration of existing basic and cellular operators, and the second phase for the new UAS licences …The first phase was to be implemented immediately, while the second was to commence only after the receipt of fresh recommendations of the TRAI within six months.” Instead, DoT showed undue haste and did not follow the normal official procedures before implementing the old policy.
“The decision to continue to charge entry fee at 2001-level even from the new licensees under the UAS regime in 2003, was thus not deliberated either in the TRAI or Telecom Commission [decision-making body in DoT] or the Group of Ministers or the Cabinet,” the report observes.
Spectrum pricing issue was to be decided in consultation with the Ministry of Finance. However, when a GoM was constituted in February 2006, its Terms of Reference (ToR) were modified at the instance of the DoT to keep the issue of spectrum pricing outside its purview.
Without the Ministry of Finance getting a chance to contribute to the issue of pricing of spectrum, new licences continued to be issued along with the spectrum.
Referring to the communications between DoT and the Ministry of Finance on the pricing issue, the reports points out that Mr. Raja “was not open to the idea of discussing and deliberating the issues involved at the appropriate levels, even when there was high risk of huge revenue loss to the government exchequer,” put at Rs.1.76-lakh crore (based on the rates achieved by the auction of 3G spectrum).
Rules violated
The CAG report also finds that Mr. Raja violated the Government of India (Transaction of Business) Rules, 1961, as he failed to consider the concerns and objections of the Ministries of Finance and Law.
As there was difference of opinion between the Ministries on the pricing issue, it should have been brought before the Cabinet for decision.
