The Joint Parliamentary Committee (JPC) report on allocation and pricing of telecom licences and 2G spectrum has criticised the Comptroller and Auditor General (CAG)’s “presumptive loss” theory and said all indicators and calculations used by it to reach the loss figures ranging between Rs.57,666 crore and Rs.1.76-lakh crore were “untenable” and “unrealistic.” The CAG had indicted the government for causing a massive loss to the exchequer by granting 122 licences in 2008 at a price discovered in 2001.

Referring to the CAG’s calculation of loss based on FDI attracted by the new entrants in the telecom market, the JPC report says the Department of Telecom (DoT) was of the view that the investment brought in by strategic foreign partners were to be utilised for rolling out the services in the licensed service areas and that issuing additional equity for bringing in foreign investment was a normal practice in the corporate world.

The CBI has confirmed that investigations did not reveal evidence of criminality in the infusion of additional equity by foreign companies into the two new licensees or contravention of the FDI investment policy applicable in the telecom sector. Therefore, “loss calculation and determination of value of licences and spectrum on the basis of legitimate infusion of FDI by means of fresh equity by the telecom companies are untenable,” the report said.

Similarly, the JPC report dismissed the CAG’s loss calculations by comparing value based on prices discovered for 3G spectrum. The report says “the Telecom Regulatory Authority of India (TRAI) recommendations were cherry-picked by the CAG and were not considered in entirety while referring to them by the audit for trying to establish that 2G and 3G prices are comparable and calculating presumptive loss for spectrum on the basis of revenue realised through 3G auction.

“The 3G spectrum was auctioned for the first time in the country in early 2010. How could the revenue realised in 2010 for 3G be used for calculating the loss on account of 2G spectrum allocated as far back as in 2008 where the demand-supply position was also very different is something that needs proper justification.”

Stressing the point that it was difficult to assess loss with retrospective effect, the JPC report noted that “on their part, the experts were of the view that it is not possible to predict with certainty the precise value of spectrum that would have emerged in an auction. They also felt that the risk of error in the estimates would increase since the exercise would be carried out retrospectively and with meagre data.”

“Hence it emerges to be amply clear that an exercise for calculation of value of spectrum in retrospect by any agency could be error prone with a misleading outcome,” it adds.

The report says: “It is a matter of grave concern that while calculating the presumptive loss on account of matters which fell within the domain of the policy prescription of the government, the Audit never took cognisance of the benefits which accrued to the people of the nation at the grass-roots level as a result of implementation of the policy. By any standards, the benefits far outweigh any possible revenue forgone by the government in the process of sustained policy intervention with the broad objective of increasing tele-density and maximising welfare of the people.”

Terming spectrum “a precious national asset,” the report says it was necessary that all spectrum users, whether government or private, work in the spirit of mutual understanding and cooperation and utilise the resource optimally with self-discipline. “The Committee suggest that with a view to ensuring optimal utilisation of assigned bandwidth, the TRAI, as regulator, should undertake spectrum audit for which details should be finalised at the earliest. The guidelines for spectrum audit should contain a provision for penalty for hoarding of excess spectrum and also for taking back excess spectrum, if found,” the report added.

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