Reserve Bank of India Governor D. Subbarao, who served as Finance Secretary to the Centre when the controversial 2G spectrum allocation process of 2007-08 was undertaken, deposed before the special court hearing the 2G spectrum scam case on Monday stating that if there was “a sacrifice of some revenue, it cannot be said that government suffered a loss.”
In response to cross-examination by counsel for accused Unitech Wireless promoter Sanjay Chandra, Mr. Subbarao, a Central Bureau of Investigation (CBI) prosecution witness in the case, said: “It is correct that while determining policy, the government has to make a balance between welfare maximisation and revenue maximisation. In this case, if there was a sacrifice of some revenue, it cannot be said that the government suffered a loss.”
Earlier during his testimony too, Mr. Subbarao was quizzed on whether it was correct to say that the Telecom Department (DoT) or the government of India suffered loss due to the issuance of 122 new UAS licences, after the DoT and the Ministry of Finance “arrived at an agreed position regarding the entry fee.” To this question by counsel for former aide to the then Telecom Minister A. Raja, Mr. Subbarao replied: “There was certainly sacrifice of revenue.”
Mr. Subbarao was asked by the CBI prosecutor about his crucial letter written to the former Telecom Secretary, D.S. Mathur on November 22, 2007, before the Finance and the Telecom Ministries reached an agreement on pricing issues in spectrum allocation. He said: “I wrote this letter to confirm if proper procedure was followed with regard to due financial diligence. I also questioned as to how the rate of Rs.1,600 crore determined as far back as 2001 could be applied for licence given in 2007 without any indexation, let alone current valuation.”
Mr. Subbarao said that after the DoT issued Letters of Intent on January 10, 2008, the Finance Ministry’s effort turned towards seeing if the spectrum price could be enhanced to reflect the market prices.
Mr. Raja’s counsel then asked Mr. Subbarao whether by June 2008 the DoT and Finance Ministry had agreed that “start-up spectrum would not be charged and only spectrum beyond start-up would be charged.”
Mr. Subbarao answered: “It is true that by June 2008, the position as indicated in the question was agreed upon between the Ministry of Finance and DoT. This agreement was reached after a series of discussions between DoT and the Ministry. Initially, Ministry of Finance had argued that the entire spectrum including start-up should be charged. During the discussions, DoT had told us that charging for the entire spectrum would be problematic and legally questionable on a number of grounds. Eventually after the discussions, the above position was agreed upon.”
To a further poser by Mr. Raja’s counsel if he sat at a meeting on July 4, 2008, attended by the Prime Minister, then Finance Minister P. Chidambaram and Mr. Raja in which the agreement between the Finance and Telecom Ministries was conveyed to the Prime Minister, Mr. Subbarao replied in the affirmative.