Politicians Are More Dangerous Than Terrorists!

A scam, a yawning deficit
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Union Minister for Communications and Information Technology Andimuthu Raja is on a hot seat that gets hotter by the day as general elections draw near.

He has tried to defend his actions while answering allegations that he deliberately under-priced electro-magnetic spectrum — a scarce national resource, especially in cities — allotted to a clutch of privately-owned mobile telecommunications companies, thereby causing a huge loss to the exchequer.

The minister has claimed he followed existing rules while allotting spectrum, and that his decisions have been endorsed by the Prime Minister and finance minister.

Raja has even offered to resign his post if found “guilty”, while his mentor, Tamil Nadu chief minister and DMK chief Muthuvel Karunanidhi has claimed he is being attacked because he is a Dalit. These arguments are disingenuous at best and factually incorrect at worst.

Facts that have recently come to light indicate that the telecom spectrum scam is the biggest financial scandal in the history of Independent India, involving an amount not less than Rs 50,000 crore and possibly as high as Rs 1,00,000 crore — as much as one-fortieth of the country’s national income. This sum is certainly more than the total amount spent by the Central government in a year on health-care and roughly three-fourths of the fiscal deficit indicated in the Union budget for the current financial year.

The scam acquired a new dimension when promoters of three Indian companies holding telecom licences decided to offload a hefty part of their equity stakes in these firms. Swan Telecom sold 45 per cent of its shares to Etisalat (of the United Arab Emirates) for Rs 4,100 crore; Unitech Wireless offloaded 60 per cent of its stake to Telenor (of Norway) for Rs 6,200 crore; and Tata Teleservices sold 26 per cent of its shares to NTT DoCoMo of Japan for Rs 13,230 crore.

These transactions clearly confirmed the worst apprehensions earlier expressed (in The New Indian Express and elsewhere).

Since the first two companies mentioned have no assets worth the name other than a licence that came with bundled spectrum, each all- India mobile telephony licence sold by the Department of Telecommunications (DoT) for a sum of Rs 1,651 crore (based on prices prevailing in 2001) in January this year actually had a market value that was six to seven times higher, or over Rs 10,000 crore.

In other words, even the finance ministry (far from endorsing Raja’s decisions) had grossly underestimated the loss to the exchequer when it pointed out in an internal note that the DoT should have obtained Rs 31,453 crore for the 120 licences given to nine corporate entities with start-up spectrum in the first quarter of 2008, instead of the Rs 8,987 crore actually obtained. In the middle of the year, North Block estimated the loss to be Rs 22,466 crore. But this figure could be close to three times higher.

If the losses incurred by the government on account of allotment of excess spectrum to existing players such as Bharti, Vodafone and Idea — as pointed out many times by Amar Singh, general secretary, Samajwadi Party, in letters to the Prime Minister made public — are added, the total loss could rise to Rs 80,000 crore. The figure could notionally rise by another Rs 20,000 crore if one considers that stock market indices have collapsed by 60 per cent since January. Thus, the total loss to the country could be as high as Rs 1,00,000 crore.

Raja’s argument that he merely followed the procedures followed by his predecessors does not absolve him of the responsibility of having under-valued spectrum and followed an opaque and clearly discriminatory first-come-first-served (FCFS) policy of allotting licences with spectrum. Even in this respect, he has been economical with the truth. To claim, as he did, that telecom licences were not publicly auctioned is factually incorrect. The figure of Rs 1,651 crore was arrived at after an auction in 2001.

The minister’s claims that he followed the guidelines laid down on the National Telecom Policy of 1999 (NTP99) when the BJP-led NDA government was in power and that he stuck to the recommendations of the Telecom Regulatory Authority of India are also untenable. In no official policy document — neither the NTP99 nor various consultative papers published by the TRAI — has it been stated that a FCFS policy should be followed, leave alone preferred to a system of public auctions of spectrum.

Even while following the FCFS system, the department headed by Raja acted in an arbitrary manner. The cut-off dates for submission of applications were announced with only a 72-hour notice period, a new date for capping applicants was suddenly chosen and licences were awarded in a chaotic melee at Sanchar Bhavan (DoT headquarters).

On January 10, at 2.45 pm, the DoT posted an announcement on its website saying letters of intent would be issued between 3.30 pm and 4.30 pm and that application fees (worth over a thousand crore rupees in many cases) would have to be paid immediately by demand draft with supporting documentation. Licences with spectrum were given to those who deposited their fees first by even a fraction of a second. In the mad melee, well-heeled CEOs were manhandled by hired bouncers and DoT staffers were bashed up before the cops turned up, late as usual. Was this is the best way to allot spectrum, Mr Raja? The TRAI chairman has gone on record saying the regulator never suggested the FCFS system and that the government chose to accept its recommendations selectively, cherry-picking only the ones that suited the DoT. The department, in turn, has chosen to criticise TRAI chief Nripendra Mishra, himself a former secretary, DoT, claiming he had prepared the ground for what took place subsequently.

Another facet of the scam is that the terms and conditions of the licences issued did not specify share “lock-in” conditions or “rollout” obligations before the shareholding patterns of licencee companies could undergo major changes. In the absence of such conditions, licence-holding corporate entities have been able to reap windfall superprofits in barely eight or nine months. Significantly, some of these entities are real estate companies with no experience in telecom — all in the name of infusing competition and breaking up a so-called cartel that Raja claims is working against him because he threatened their cozy oligopoly.

Behind the bravado, the obfuscation and the resort to legalese, certain facts cannot be denied by lawyer-politician Raja. The licences issued under his tutelage are worth many times the price at which they were sold. The Central Vigilance Commission and the Comptroller & Auditor General of India are both reportedly inquiring into the scandal. A slew of legal suits are in the pipeline.

By the time these reports come out and court judgments are delivered, the next general elections would either be imminent or over. Therefore, the question that remains is whether or not Raja will be held accountable for his actions while he remains a minister in the Union government. Your guess would be as good as mine.

About the author:

Paranjoy Guha Thakurta is a political commentator based in New Delhi.