Is the Cabinet aware of the repercussions for the telecom sector and the country?
The Presidential Reference against the Supreme Court 2G judgment, which carries the approval of the Cabinet, is ridden with serious misrepresentations and factual errors which could become a potential source of embarrassment for both the office of the President and the country's apex policy-making body.
The misrepresentations are despite the fact that at least three of the members of the group pushing the Presidential Reference under the chairmanship of Finance Minister Pranab Mukherjee have had a fairly deep engagement with the 2G mess. This includes Telecom Minister Kapil Sibal, now famous for his “zero loss” theory, Salman Khurshid, who put up a strong, but futile, government defence in the 2G matter, and Attorney General Goolam Vahanvati, who approved the press release of January 10, 2008 and defended the government twice over in the Supreme Court in the 2G matter — both times unsuccessfully.
Given this level of experience, it is discomfiting to find that the reference strings together rank falsehoods and half truths to prove that spectrum has rarely been bid for in India except when it was auctioned for 3G in 2010, in order to establish that a vast majority of the sector is impacted by the Supreme Court order cancelling 122 licences for being allocated in 2008 through a serious of illegal steps.
The legal questions raised generate dangerous and unnecessary uncertainty, placing licences from 1994 vintage under judicial scrutiny by asking questions, several of which have no relevance to the Supreme Court's previous judgment.
Strangely, though the Reference has been prepared based on a presentation made to the Prime Minister on February 11, followed by one to the Finance Minister on February 24, it has managed to bypass scrutiny save for a strong rejection by Deputy Chairman of the Planning Commission Montek Singh Ahluwalia.
While describing the various cellular and basic service licences allocated between 1994 and 1997, referring to them as pre-2001 licences, the Reference concludes that spectrum for these licences was allocated on a “first come, first served (FCFS) basis without any upfront charges for spectrum.” This is wrong on both counts. The question of allocating spectrum on a FCFS basis didn't arise as there were only two licences in case of mobile and a single licence where basic services were concerned. The second highest bidder had to match the highest bidder and spectrum was allocated on that basis. The 34 cellular mobile licences in 1995 and the six basic licences of 1997 received upfront bids of Rs.20,393.84 crore and Rs.27,863.30 crore for 10 and 15 years respectively — a fact that the Reference hides.
Apart from the amounts being bid upfront and at least in the case of the cellular licences of 1995, they were nothing but a payment for the 4.4 MHz of spectrum that came guaranteed with the mobile licence. Without spectrum, the licences were worthless. The only difference in 1995 was that the upfront bid was to be paid across the life of the licence through annual payments — 10 years in case of mobile licences and 15 years in case of basic telecom licences.
Contradicting itself later, the Reference, while describing the 17 mobile licences granted in mid-2001, claims: “Similar to the pre-2001 licences, the 2001 licences required that licensees pay a one-time non-refundable entry fee”. Wrong again. In the pre-2001 period, there was no one-time entry fee. The upfront bid amount was payable across the life of the licence — as described above, while in 2001, the government received a one-time upfront entry fee of Rs.1,633 crore for 17 mobile licences with linked 2G spectrum.
Further, the Reference maintains that the 22 licences granted for limited mobility in 2001 were on a FCFS basis. It deliberately hides the fact that unlike in the case of ex-Telecom Minister A. Raja, who processed letters of intent by manipulating the FCFS criteria, the 2001 limited mobility licences received spectrum based on a detailed notification dated March 23, 2001 subject to investments in infrastructure and meeting rollout obligations. The first to meet the rollout obligations would be the first to get spectrum. This is very different from Mr Raja's tactics, which have been severely criticised by the Supreme Court and cited as the primary reason for cancelling the licences. Yet, the Reference conveniently chooses to paint all FCFS with the same brush.
A lie
The lowest point in the Reference lies in paragraphs 12 and 16 which claim that mobile licences till 2001 were granted 2G spectrum “with no upfront payment for spectrum.” This is a blatant lie. It is a matter of record that all 2001 licences — 17 mobile and 22 basic — made an upfront payment for spectrum. The government's bid to persuade the Court that investors were paying for the licence (a mere paper permit) and not spectrum is a non-starter considering that the Telecom Regulatory Authority of India (TRAI) on May 11, 2010, valued the Unified Access Services (UAS) licence, inclusive of national and international long distance as well as ISP services minus spectrum, at merely Rs.20 crore. The government will be hard pressed to explain its conclusions, especially since its Reference disagrees with itself in several paragraphs.
Lower still is a shocking claim that “no separate fee was payable for allocation of spectrum” for dual technology licences which received precious 4.4 MHz of Global system for mobile communication (GSM) spectrum in 2008 on their existing UAS licences of 2003 vintage. If these companies, primarily Reliance and the Tatas, already held UAS licences in 2003 and they didn't pay for GSM spectrum in 2008 — as the Reference claims — then what was it that they paid for? Why would these companies fork out Rs.1,658 crore each if they had already paid for licence and GSM spectrum came free? It doesn't end here. The Reference is riddled with similar senseless arguments.
According to the Reference, “In terms of the directions of this Hon'ble Court, GoI would be auctioning the spectrum in 2G bands.” The Supreme Court, however, has given no such direction. The Supreme Court knows that in the case of 2G, UAS licences with linked 2G spectrum were auctioned, and not spectrum. Contrary to the Reference, in paragraph 74(iv) of its February 2, 2012 judgment the Supreme Court states: “The Central Government shall consider the recommendations of TRAI and take appropriate decision within the next one month and fresh licences be granted by auction.”
By refusing to do honest homework, the questions raised in the Reference place 80 licences — seven of 1994 vintage, 22 from 2001, and 51 between 2003 and 2007 — under the Supreme Court scanner, creating tremendous uncertainty about their future. They also indirectly cast doubts about Mahanagar Telephone Nigam Ltd. (MTNL) and Bharat Sanchar Nigam Ltd.'s (BSNL) mobile licences granted in 2001 even while keeping the matter outside the Reference, since its cellular licences were given without auctions and without any entry fee.
Additional questions about dual technology licences also seem ridiculous for two reasons: the government is defending the legality of these licences in an ongoing litigation in the Supreme Court while questioning the same Court about their legal status in the Presidential Reference. Additionally, the Supreme Court's direction to the Central Bureau Of Investigation (CBI) of December 16, 2010 specifically seeks an investigation and a possible FIR into the allocation of dual technology spectrum — at least a large portion of it. Why dual technology should be included for a third opinion of the Supreme Court is anybody's guess.
Questioning whether there should be a ceiling on the acquisition of spectrum also has nothing whatsoever to do with the judgment cancelling the 122 licences. It is a straightforward Merger and acquisition (M&A) question for the TRAI and the Competition Commission of India. The Reference then takes a second bite at the cherry by seeking a clarification on whether auction is mandatory for the allocation of natural resources — an issue which has already been posed in its review petition filed on March 2, 2012.
It is unlikely that this Presidential Reference will accomplish anything other than generating uncertainty for six-18 months and then starting afresh from exactly the same point as today. Since the Reference does not touch upon the 122 licences that have been cancelled, it cannot hope to impact any of the grief arising from that judgment. At the end of this mammoth exercise, the government would have, at best, taken the sector back by two years.
shalini.s@thehindu.co.in
Keywords: 2G licence cancellation, Supreme Court verdict, Presidential reference, natural resources auction
Shalini's piece is excellent, the Hindu's journalistic courage is commendable.
The 2G scam was disturbing not only because of the staggering amounts of money involved but also because it raised the specter of the UPA government abandoning the bedrock principle of parliamentary democracy --- "Collective Cabinet Responsibility". The Presidential Reference raises even more disturbing questions: Are senior members of the government who "had a fairly deep engagement with the 2G mess" attempting to revert, restrict, dilute or delay the Supreme Court's judgment? Does the 2G scam run lot deeper than Mr. Rajah? Is he a solitary bad apple in an otherwise clean basket or is he the 'fall guy' covering for more meaningful players?
If Shalini Singh could pick so many unpluggable holes in the Presidential reference, how many more the far more equipped learned Judges of the Apex court in the course of their answer to the Presidential queries will be able to find is anybody's guess. For misrepresentation or lies in the Reference by design or desperation the Supreme Court the only repository of the common man's hopes and aspirations in the face of the Executive's onslaughts on the economic interests of the the teeming millions should come down heavily on such contentions in the Reference.Loss to the Exchequer is,however irretrievable.Gain for the scamsters is permanent.The citizen's lot is just to feel elated for a fleeting moment at the Court castigating the scamsters in strong language!
Despite irregularities in the allotment of 2G licences in 2008, it did
not result in any loss to the exchequer; the entry fee was kept at 2001
level as advised by TRAI in order to give a level playing field to the
new operators; otherwise they could not have competed with those who
got licences at a low rates. The Telecom Policy 1999 moved away from
charging a high upfront fixed fee payable quarterly pro rata to the
number of subscribers, to one of revenue sharing. By this the govt has
already collected about Rs 100000 cr and still collecting Rs 14000 cr
p. a towards licence /spectrum fee. If they were auctioned there was no
way to keep the tariff at such low levels which in turn would have
affected growth. Today 900 million people enjoy mobile service at the
world’s lowest tariff-50 paise per min. Do we auction land for
industries/housing, tenements for LIG, rail tickets, LPG, power etc all
of which are scarce? To auction or not should be left to the Exc.
Kudos to Shalini and The Hindu for the bold portrayal of this 2G scam, and its reference to President. It is a game of buying time and the people will forget it by the time another bunch of scams come out. To cite an example-- Every newpaper wrote about the spl telephone cable laid from dayanidhi's house to Sun TV office.
What happened? It has a natural death and papers and people are more interested more Sensational news.
However Shalini deserves praise. In the Hindu long time back Bofors was exposed by a woman journalist, but nothing happened.
So in India verything is Joke making fool og Gullible people
Excellent article with depth understanding ! Appreciated .
Why the government is bent upon taking this path is not difficult to understand unless it wants to save somebody's skin by delaying and dragging the issue for ulterior motives?
It is OK for an individual to go to court hiding facts detrimental to him and present
case from his perspective. It is unthinkable for a government to do so,as all facts
of the case are in public domain,as so brilliantly brought out in the article by Ms
Shalini Singh.Yet,another point in old cases when FCFS was done is,at that time
there was really no data available on kind of prices likely to be got on auctioning
for resorting to only this mode (auctioning)for awarding licenses.This was not so in
present case,where 3G price data on auctioning was available as benchmark,to
ignore this mode of awarding spectrum licenses.The other glaring mistake is pre-
poning date for receiving proposals,which is never done in procurement.About
auctioning for natural assets as directed by SC,since its applicability is obviously
for future,it would have been prudent for govt to seek only this clarification as
their understanding from SC. It looks,UPA wants to mess up everything for the
next govt in 2014.
Very well prepared article from Shalini and The Hindu to publish it. Much appreciate it.
@Sanjay; First, the scope of the existing "limited" review petition could always be extended instead of indulging in this senseless and sweeping (not to mention factually incorrect and full of malicious falsehoods) reference, that only ended up muddying the field for all economic policies across all sectors. Second, to anybody with half a brain there is *no ambiguity*, if only the government really applies its mind and heart into the Supreme Court's judgement and implements *its own policy* in good faith instead of upping the stakes in this forced showdown with the apex court. Third, (and this has multiple subpoints), the question is not about who sets the policy -- but about why was this policy set (and implemented, over and above the PM's objections) in such a manner at all. Do not forget, there is prima facie evidence of bribes and corruption, and *that* is what led to the invalidation of the 122 licenses. Fourth, no, that is *not at all* what the judgement said, read it again.
A wonderful article telling the peope how rediculous this presidential refference is . The country is wondering at the pains this govt is taking to squash the order of supreme court cancelling the the 2G licenses . Any sensible man can understand that by this SC order , some body highly placed in the govt must be loosing lots of money from their binami owned companies .
Great article by Shalini Singh. One of the problems in this country is
that people understand corruption (media does a fairly good job of
exposing it) but they don't understand the subtle cunning maneuvers
that the government performs to get away with their corruption /
incompetence. Unfortunately, media is doing a terrible job of
translating these intricate maneuvers into plain speak. This is a
great exception.
On the face of it, the presidential reference seems to be a valid
question being posed by the government. Is the judiciary within bounds
to "interfere" with executive decisions. The government is shameless
enough to ignore the background. And, I believe the judiciary will
rightly respond "yes, we can't interfere as long as the executive
doesn't loot the nation in the name of executive privilege to decide on
asset allocation."
To the reader with the inane question: "Can drinking water be
auctioned?".. Is drinking water being sold by profit-maximizing
corporations?
Shalini singh's analysis clearly explains how the presidential reference on 2G is ill conceived.In a round about way the UPA Govtt is trying to seek a review of the judgment that set aside the licenses.Govtt time and again is trying to justify the FCFS non auction by taking shelter under the precedences that even the NDA Govtt followed on which Shalini singh opinion has said there was transparency then.While the Ministers are undoutedly empowered to lay down policies,the bureaucracy is there also to caution on the flaws in policies.No less a person than the present Governor as Finance secretary in 2008 cautioned the then FM on the perils of the course adopted and the then FM did not heed.If UPA has shown wisdom in auctioning 3G spectrum and safeguard the exchequer clearly indeparture from their FCFS policy on 2G,why was this wisdom wanting for 2G similarly.It is nothing but an abdication of responsibilityby both the PM and the then FM.The supreme court will cerainly rubbish the move
I still do not understand what is wrong if we auction every resource that govt or country has if govt do not want to deal that directly? Why we should give first come first serve if there is immense competition exists in the market.
Congratulation to Shalini Singh for an educative piece of writing. Like many mercy petitions languishing with the President, this will also go on for several months/years and by then this President would retire so that she need not have to examine the matter al all !! This is also a mercy petition to the President as the Supreme Court has given a stringent judgement akin to a death sentence!!.
Let us wait and watch whant this President does.
Another excellent piece from Ms Singh.
It is incumbent on any govt to act in the best interests of the nation
(this rules out any justification of corruption). It is common sense
that scarce resources are used prudently (this rules out both misuse
of resources, and granting licences at sub-optimal prices). It is also
common sense that ‘non-renewable’ natural resources (oil, gas, coal,
minerals etc) are used even more carefully, not only taking into
account the interests of the present generation of citizens but also
that of the future generations.
Many citizens are puzzled to understand how FCFS was adopted by India,
when in 1959 Prof Ronald Coase pointed out the benefits of auctioning
spectrum in his Nobel (Econ) prize winning work!
The citizens look to the SC to put matters right not only for
licensing of spectrum (and any other similar allegations) but also to
set guidelines for using/developing nation’s natural resources, to
prevent any future plundering of national wealth.
I entirely with the comments above by Mr. S Srinivasan. I admire Ms Shalini Singh's clarity, depth in understanding the issues involved and the research she does for the simple understanding of the reader. Kudos to her and Hindu for the article.
It is a pity that the so called legal Ministers in the cabinet show their hollowness for pure selfish ends - they all are a party for the state of affairs in the telcom ministry! Mr. Clean, the PM should now be held responsible for retarding the growth as well as for possible delays in finalizing the 2G spectrum auction!!
Shame on this government!!
I congratulate Shalini for the critical analysis of the Presidential Reference. I hope the Supreme Court is made aware of these facts. It looks this is a final attempt by the Singh-Sonya Govt to save the Raja-Kollai-(read Karuna-)Nidhi gang from the 2G loot case.
The Supreme court should also instruct at the end of this, how to divide the loot so in a secure manner so that the lid is not blown off the Hook as in this case of 2G!
Overall point is that Govt is in a BIG Quandary, neither they can support or shield the wrong doers. They want to drag the issue as much as possible buy time to undo the wrong,as though they want to say we are straightening all the loopholes, but we as the customer will be sufferer, what does GOI going to do about it. Simple BLUE MURDER by the Congress Govt in lots of lots off scam, high time they are dethroned and we get a totally new set of well educated and corrupt free ministers to run the Govt. Some times one feels that ARMY RULE may help, as they bring in discipline and no nonsense approach to issues, then INDIA will SHINE.
Asset and expenditure valuation for the service providers in correct and transparent manner with a fixed margin of profit for running operations will bring real benefit to users.Corporate method of adopting accounting procedures by inflating expenditures and showing less return from usage to enhance business profits is a known practice by corporates to inflate their profits.
Another brilliant report.Kudos to Shalini Singh and the Hindu.The scam was planned in advance and ill executed.The conspirators were many.All the checks and balances prescribed in the book were breached.The daylight robbery was there for all to see.The spoils were duly shared between the perpetrators and their respective mentors.Massive cover up operations were launched. Investigations were scuttled,delayed and misdirected.In desperation Several false steps were taken.These left many holes.Citizens may never know the full facts,but they know that the ruling coterie has managed to thwart meaningful investigation.People are indebted to Swamy, Prashant, Shalini etc.
If the Supreme Court chooses to answer the questions raised in the
presidential reference, they will understand the difficulties and complexities of policy making. After attempting to explain the all the question that arises due to the cancellation of 2G licences, I hope the Supreme Court Judges will never again attempt to jump into the complex exercise of policy making.
If the policies made by executive are bad, we the people have the right to pull them down through election once in 5 years. But if the policies made by Supreme Court Judges are bad, then who is responsible?
The presidential reference is a right step for many reasons. First, the scope of the pending review petition is limited. Second, the government has already accepted cancellation of 122 licences but now the government is seeking clarification over the ambiguity regarding all licences awarded since 1997, so as to pave a way for clear guidelines for foreign investors in telecom sector. Third, even though courts can quash erroneous implementation of policies but can't question the policy per se, which is a sole domain of executive. In the current context, how can courts say that auction was a better route than FCFS when the telecom sector itself was opening up and the goal itself was to increase tele-density? Fourth, the 2G order also pointed auctions as the only route in case of natural resources. This is utterly surprising pronouncement since policy on different natural resources will have to be judged differently. Can drinking water be auctioned?
This is called "ROLLING AFTER FALLING " . Seems the UPA or rather the Congress stalwarts havent learnt ther lesson yet They are desperately trying to wipe off the muck from their face ,with no concern for the implications for the country or the UPAs' reputation .
All the same, is it not better that all issues about validity of old lisences be settled once and for all. While cancelling 122 lisences the Supreme Court had said that they have not ruled about earlier lisences as there was no plea before them! After some time someone like Subrahmanyam Swamy can submit another petition asking for cancellation of earlier lisences on same grounds of 'un-constitutionality'
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