A ₹1.76 lakh crore scam — just notional?

Former telecom minister A Raja being garlanded by his supporters outside the Patiala House Courts after he was acquitted by a special court in the 2G scam case

Former telecom minister A Raja being garlanded by his supporters outside the Patiala House Courts after he was acquitted by a special court in the 2G scam case   | Photo Credit: PTI




The CAG report’s conclusions alleging a presumptive loss of 1.76 lakh crores were flights of fantasy and an exercise in fiction writing

Manish Tewari

The 2G saga began in 1994 with the announcement of the National Telecom Policy that opened the sector to private participation. Initially, eight private operators were granted mobile licences for a period of 10 yearsto operate in New Delhi, Mumbai, Kolkata and Chennai through a process called a beauty parade. Subsequently, In December 1995, 34 more mobile licences were auctioned across 18 telecommunication circles for a period of 10 years. A third licence was given to the Public Sector MTNL in the Metros and BSNL, for other telecom circles to launch mobile telephony services in the years 1997 and 2000, respectively. All mobile licences came with bundled spectrum granted by the government at administered prices.

A bulk of these private operators were unable to fulfil their contractual obligations and the then National Democratic Alliance government, which allowed them to migrate from a licence fee to a revenue share regime through a migration package in 1999, among other concessions, extended the period of their licence from 10 to 20 years. This migration package caused an actual, as opposed to presumptive, revenue loss to the government of ₹42,080.34 crore. In the year 2001, a fourth cellular licence was auctioned for a pan-India price of ₹1,658 crore.

Between 2001 and 2007, the telecom sector went through many policy fixes including telecom licences becoming technology neutral with the introduction of the Unified Access Services Licensing (UASL) regime in 2003. This stipulated that in future telecom licences and bundled spectrum would be granted on a first come, first served basis on the price discovered in the fourth cellular auction in 2001.

Inflection point

The inflection point came in April 2007 when the Telecom Ministry sought the opinion of the Telecom Regulatory Authority of India (TRAI) on a host of issues including capping the total number of telecom service providers in each telecom circle. At that point, in time there were 53 UASL applications pending disposal in the Ministry of Communications. This reference created a panic in the telecom industry. Between April and August 2007, by the time TRAI gave its recommendations, 167 new applications for telecom licences had been received. After the recommendations came in, the government set a cut-off date of 1st October 1, 2007 after which no licences for new applications would be received. By then, the total number of applications had mounted to 575.

That is when it got convoluted. Existing players, who had got the licences and bundled spectrum for a mere pittance in 1994-95, and then again through the fourth cellular auction in 2001, realised that when their licenses expired between 2014-2015 and 2021, respectively, they would not get renewed at the 2001 prices. The new licensees, who would now get their licences in 2007-2008 at 2001 prices, would continue till 2027 and 2028.

Misinformation campaign

Thus commenced a huge campaign of misinformation in which the Comptroller and Auditor General of India (CAG) also became a willing participant. The CAG by manufacturing the “presumptive loss theory” that alleged a loss of ₹1.76 lakh crore in the grant of bundled spectrum to the new licensees at administered prices while conveniently sweeping under the carpet the fact that all telecom licensees between 1994 and 2007 were also given bundled spectrum at administered prices. In fact, the policy of giving spectrum at administered prices as opposed to auction went across the Narasimha Rao, Deve Gowda, I.K. Gujral, Atal Bihari Vajpayee and Manmohan Singh governments. It is the reason for exponential teledensity, zero tariffs, and virtually free Internet connectivity. The As a member of the Joint Parliamentary Committee constituted to examine matters relating to Allocation and Pricing of Telecom Licenses and Spectrum it became more than evident especially after a rigorous cross examination of the officials of the C&AG led by Shri Vinod Rai that the conclusions arrived at in the CAG report alleging a presumptive loss of 1.76 lakh crores were flights of fantasy, an exercise in fiction writing. The report wrecked the nation. The principle therefore, enunciated by the Supreme Court in 2012 when it cancelled 122 telecom licenses requires a revisit.

Manish Tewari was Information and Broadcasting Minister in the UPA government and member of the JPC that examined the telecom sector for 1994-2009




The UPA government was itself convinced of the illegalities. Now, it argues otherwise

Bhupender Yadav

The infamous 2G scam had captured the imagination of the common man and exposed the extent of systemic corruption in the United Progressive Alliance (UPA) regime. Betrayed by the then UPA government, the common man decisively voted it the UPA out of power. first from the Centre in 2014, and then state-by-state in the past three years. However, in line with its habit of misleading the public, the Congress party seems to be treating the trial court judgment as a badge of honour. In one stroke, the Congress party has now conjured up a ‘zero loss theory’ which not only contradicts all the opinions of experts and government reports but is also at variance with its earlier alibi. A careful analysis of the entire case exposes these hollow claims.

First, far from contradicting the arguments put forth by the Supreme Court in Centre for Public Interest Litigation vs. Union of India2012, the trial court judgment does not even refer to them. The apex court had held in 2012 that the entire policy of spectrum allocation adopted by the UPA government was “…wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality”. The court in unequivocal language, said that the way the Letters of Intent (LoI) were granted to applicants “leaves no room for doubt that everything was stage-managed to favour those who were able to know in advance change in the implementation of the first-come-first-served principle.”

Policy paralysis

Second, the trial court ruling itself has a few issues. In paragraph 1,806 of the judgment by the Learned Court, it is observed that it was the officers who misled the Prime Minister’s Office(PMO). The Congress Party uses this reasoning to absolve itself of all guilt. Ironically, this excuse exposes the extent of irresponsibility of the UPA government. That the highest political office of the nation could so easily be misled speaks volumes about its capability to handle complex matters of policy. This is what the Bharatiya Janata Party has been trying to tell the people of this country. Institutional governance during the UPA’s tenure became so weak that it neither had enough control over its officers nor its Ministers. This weakness was the foundation of policy paralysis under the UPA government.

Third, contradictory alibis from the Congress Party expose logical inconsistencies. The UPA government in the arbitrary selection process of 2007-2008 had given away 122 licences for a paltry ₹9,200 crore. However, under the Supreme Court-mandated auction-based allocation in 2014, the same government could recover ₹68,000 crore. If there was indeed ‘zero loss’, how can the Congress party explain these increased revenue gains? Appearing before the Hon’ble Supreme Court in the Natural Resources Allocation Case of 2012, the then Attorney General submitted that the UPA government did not question the correctness of the 2G judgment. This clearly indicates that the Congress led UPA government was itself convinced of the illegalities. Even former Prime Minister Dr. Manmohan Singh had put the blame for the 2G scam on the then Telecom Minister. He claimed that the scam was a result of “compulsions of the coalition government” and that “compromises had to be made” while managing such a government. What does it mean for a former Prime Minister to say that he was ‘compelled’ and that he made ‘compromises’? He now says that the allegations were “without any foundation”. Suddenly, those compulsions seem to have evaporated into thin air.

2G scam is no fiction

According to the CAG report, the 2G scam resulted in a loss of about ₹1.76 lakh crore to the public exchequer. adopted by the then UPA government instead of a transparent auction-based allocation. The Congress Party claims that these figures are not based on tangible grounds. On the other hand, what is tangible are the revenue gains of ₹1.75 lakh crore in spectrum allocation realised by the current NDA government under the leadership of Prime Minister Shri Narendra Modi in 2015-2016. How does the Congress Party explain this ‘tangibility’?

Every rupee of Public money is hard-earned. by the sweat of the common man. But today the proponents of ‘Zero Loss Theory’ regard the entire 2G scam as fiction. However, People’s loss of trust in the Congress Party is not just about the uncountable number of zeroes in the loss figure, but Rather, it is about the audacity with which these losses are being justified. The pillars of UPA’s corruption keep reminding people of the policy paralysis and malfeasance that existed during the Congress-led UPA regime. No matter how hard the UPA tries to bury its sins, its fraudulent arguments find no takers in a New India.

Bhupender Yadav is a BJP Member of Parliament in the Rajya Sabha




In our outrage, we have lost sight of public policy objectives and how they are to be realised

Rahul Khullar

The Rs 1.76 lakh crores presumptive loss estimate was absurd then as it is now. It was discredited at the time by economist Surjit Bhalla, now member of the Prime Minister’s Economic Advisory Council. In the criminal case on the 2G scam, even the Central Bureau of Investigation pegged the loss at less than 25% of the CAG’s number. The number is not founded on sound economic logic or technical analysis. At best, it was a product of mechanical arithmetic.

However, a verdict of ‘not guilty’ does not necessarily imply innocence. Remember O.J. Simpson? Special court judge O.P. Saini ruled that the charges of criminal misconduct and criminal conspiracy failed for want of evidence. There were serious irregularities that raised the presumption of graft. That the graft could not be proved does not mean there was no rent-seeking. The There is no denying that the egregious estimate of losses led to media sensationalism. Some would argue that the exaggerated number was designed to draw attention to the CAG’s report. The resultant national navel gazing has and self-flagellation led to some real rather than very real losses.

Key objectives overlooked

Key public policy issues were swept away by the tsunami that followed. The objective of providing universal affordable access and broadband all but disappeared. The public policy choice of administrative allocation of spectrum (provided it was done fairly) versus the auction method never got seriously discussed. The media and the Supreme Court in 2012 decided the matter. A distrusting media would not believe that the government could allocate spectrum impartially. But was the administrative mechanism flawed? Couldn’t any quasi-rents be clawed back through higher licence fees? Or get spent on universal roll-out obligations cast on the private sector? (as in some Scandinavian countries)? In telecom, the revenue-sharing model had worked quite well. And does in other fields too, e.g., petroleum exploration. In the frenzy, a meaningful discussion got lost as outrage overtook the nation.

The other real cost was the resultant bureaucratic collapse. Mala fide could be easily alleged. In the vitiated atmosphere, no benefit of the doubt was forthcoming. This engendered real fears about the consequences of decision-making. The response: bureaucratic shutdown. Indecision has been the norm since 2011. And the resultant losses are real, not imaginary. Presumptive loss is a dangerous concept in hindsight. Decisions in the bureaucracy are always taken with incomplete information; these are all decisions under uncertainty. So, seen in retrospect, there can always be a presumptive loss. The exaggerated estimate of presumptive loss and the ensuing storm have had an enduring impact on decision-making in the civil service. It will take a huge effort (which should be made) to repair this damage.

Public loss vastly exaggerated

The Supreme Court decided to cancel all the licences. The ground for this was that the government’s actions were arbitrary. Had foreign (and even some domestic) investors done anything wrong? If not, why penalise them for the misdeeds of the government? Companies lost billions of dollars. This will now come back to haunt us as private parties gear up for arbitration proceedings. Once again, real, not presumptive, payouts are involved.

But the same court SC declined to take a position on the public policy choice when the presidential reference was made. They left it to the government to decide when a public resource was to be auctioned or not.

Undoubtedly, there was some public loss. The acute shortage of spectrum led to a premium over the administered price; that was the rent that parties were seeking. Also, doubtless is that there were grave procedural irregularities. The points to ponder are these. We could have arrived at desirable outcomes without the cacophony and the media circus. If public loss had not been vastly exaggerated, we may have been able to avoid some of the real costs. And the option of administrative allocation of spectrum merited further discussion; it may not entail the losses alleged. In our fury, we have lost sight of public policy objectives and how they are to be realised to this day. This must change.

Rahul Khullar was the chairman of the Telecom Regulatory Authority of India from 2012 to 2015

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Printable version | Jun 4, 2020 12:03:26 PM |

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