Dirty Spectrum

The 2G scam throws light once again on how corporate power leaves no stone unturned in making governments act in its interest
Sanjay Kapoor Delhi

On January 10,2008,chaos descended on Delhi's Sanchar Bhawan, headquarters of the Department of Telecommunications (DoT). Hundreds of senior executives from different private companies converged there to get a piece of the highly lucrative telecom business at seemingly 'discounted prices'. The valuable spectrum was being sold short by the government. As it was to be served on 'first come, first served' basis, there was a mad scramble among the desperate executives to submit their Letter of Intent forms with a bank draft. Madness took hold of Sanchar Bhawan. Executives fought among themselves and with DoT officials to be served first. Fisticuffs were bared and abuses rent the air before security intervened. India's biggest scam worth Rs1,75,000 crore or $39 billion, when 120 licences were given out at throwaway 2001 prices, befittingly, had a tumultuous opening. 

Before DoT decided to allocate the licences, business circles had been agog with rumours of how a telecom company had paid off a prominent Chennai-based politician to extract a major favour from him. Such transactions contributed in shaping the content and design of the processes adopted to allocate licences and determine price for spectrum - a finite natural resource. As brought out so candidly and forcefully by the Comptroller and Auditor General (CAG), the telecom scam - as we understand it now, where ineligible companies with no telecom experience were allocated licences - was done at the behest of a clutch of telecom companies. These companies also benefited from an extra allocation of spectrum, far beyond their needs. The CAG report, to its credit, has shown how various arms of the government are putty in the hand of corporate interest, how big money bilked from the system is used not only for bending individual ministers, but also to blunt the power of the prime minister's office.

 The CAG report confirms much of the media investigation from the very time the issue of 2G allocation came out in the open. Despite the then telecommunication minister A Raja's insistence that he had the power to do as he wished when it came to allocating telecom licences or fixing their price, he was questioned by the then law minister, HR Bharadwaj, who suggested that the matter should be referred to the Empowered Group of Ministers. So incensed was Raja with this suggestion that he complained to Prime Minister Manmohan Singh. Hardnews learnt that the DMK leadership conveyed to UPA Chairman Sonia Gandhi and her advisor, Ahmed Patel, that DMK should be allowed functional freedom as part of the ruling coalition, otherwise the central government could be destabilised. 

Evidently, DMK was prompted to display its muscle to the Congress and UPA leadership by its favourite corporate house, which had also softened up friends in the Congress and the government, say sources. It was also suggested that the proposed civil nuclear deal with the US could run into problems if the interest of the allies was not looked after. Otherwise, there is little reason why the prime minister and his council of ministers air perfunctory objections and allow Raja to get away with what he wanted to do. 

 Raja, who had the benefit of some solid advice from corporate groups like the Tatas and Anil Ambani, ensured that his decision had the imprimatur of the Union cabinet. He cherry-picked policy decisions that would serve his interest as well as that of his friends. A trained lawyer himself, Raja built up a strong legal case to prove that he was not wrong. He has been saying that he sold the licences cheap so as to facilitate inexpensive mobile telephony for a large mass of poor India. 

As CAG findings subsequently fleshed out by the telephone intercepts of lobbyist Niira Radia reveal, many of the ineligible companies that got the licences on January 10, 2008, were benamis of other telecom companies. Take the case of the controversial company called Swan Telecom. The report states, "...it would therefore appear that Swan Telecom Private Ltd, while applying for the UAS (Unified Access Services) licences in 13 service areas, was acting as a front company on behalf of RTL (Reliance Telecom Ltd), and their application was, in effect, against the intent and spirit of the UAS licensing guidelines." RTL's share holding was 10.71 - much higher than official cross holding norms. Its total equity stake was Rs 1,002.79 crore, a lot more than that of the majority partner, Tiger Traders. 

Anil Ambani's company RTL, CAG says, got DoT's support in different ways too! "It got the spectrum before others in the queue... and Reliance Communications was favoured in the spectrum allocation while getting access to a dual technology licence for offering both CDMA and GSM services."

Later, Swan Telecom sold 45 per cent of the stake to UAE-based Etisalat for $900 million. It is anyone's guess how the gains from this sale were divided. 

The Tatas, however, got a raw deal in the allocation of spectrum - it's still waiting, and its hand is visible in Unitech's bid. The Radia intercepts show that the Tatas made provision for cash-strapped Unitech. Investigators are trying to find out whether the funds that came Unitech's way for picking up the licence were provided by the Tatas. Later, Unitech sold a major stake to Norwegian public sector telecom company Telenor. 

Other companies that benefited from Raja's corruption were Loop Telecom, Datacom Solutions and S Tel. 

THE CAG REPORT compelled the prime minister to ease Raja out from the Union cabinet, but this has scarred him and his government. He would find it difficult to disown Raja's action in allocating spectrum as in the cabinet there is "collective responsibility", nor can he shirk the fact that he was in the loop about how the recalcitrant telecom minister was going about the sale and how he was resisting the idea of auctioning a scarce resource. Manmohan Singh's problems get aggravated as Raja was opposed to the auction of 3G spectrum, too, but in this case Raja was prevailed upon. The proceeds from the 3G auction, in fact, lent greater flesh to Raja's malfeasance. 

Another sticky area for the prime minister is that the reason for the corruption is the policy, approved by the cabinet, and not the conduct of allocation. It would be interesting to see how his advisors help him traipse out of this tricky minefield. 

Janata Party leader Subramanian Swamy, who wanted permission to prosecute A Raja, may have bailed out the prime minister by saying that he had nothing to do with the scam and was, in fact, the only one who had resisted the idea of Raja's return to the Union cabinet after the UPA got re-elected in the 2009 General Elections. Swamy threw a bombshell when he claimed that copious amounts of money were flown out of India in corporate jets. Scandalously, he accused relatives of key Congress leaders. Swamy's allegations may be difficult to verify, but the telecom scandal will reverberate long as the new Telecom Minister Kapil Sibal goes about cancelling the licences of some of the ineligible beneficiaries. What remains to be seen is whether the "ineligible beneficiaries" who greased their way to reckoning will keep their trap shut or open many a Pandora's box.

This story is from the print issue of Hardnews: DECEMBER 2010