Just two days after he was forced to resign from the Union Cabinet over his involvement in the 2G spectrum allocation scam, former communications minister A. Raja has been decisively nailed by the report of the Comptroller and Auditor-General of India tabled in Parliament on Tuesday. The report found Mr Raja went all out to allocate 2G licences to new players in a process which “lacked transparency and appeared to have been done with the objective of favouring a few firms”.

The CAG has said that not only did Mr Raja ignore the advice of the finance and law ministries but of the Prime Minister as well to increase the throwaway price at which spectrum was allocated in 2008 to new telecom companies. The report says Mr Raja also did not take into consideration suggestions by the then telecom secretary and member (finance) in the telecom department that in 2008 licences should not be given at 2001 prices when the telecom market in India was in a nascent stage.
The audit report also estimated that these actions led to the loss of a staggering `1.76 lakh crores to the national exchequer going by the revenue generated by the 3G auction.
Deputy comptroller and auditor-general Rekha Gupta said it was now up to Parliament’s Public Accounts Committee to decide if the licences of firms which did not meet the criteria when their applications were filed should now be cancelled.
The CAG report also accused Mr Raja of tinkering with his own department’s “first-come-first-served” policy in spectrum allocation. He is also in trouble over the fact that a majority of licences (85 out of 122) were given to ineligible companies.
Among other companies, Anil Ambani’s Reliance Communications has also come under CAG scrutiny in the report for its 10.71 per cent stake in Swan Telecom, which is against the existing telecom rules. Under these regulations, a company is barred from having a stake of over 10 per cent in two different telecom companies at the same time. “Swan Telecom was a front for Reliance Communications,” Ms Gupta said.
The CAG report also says that undue benefits were given to Reliance Communications in granting of GSM licences when the telecom department allowed dual technology in the country.
In what appears to be clear evidence that Mr Raja was trying to favour some telecom companies, the CAG has said some companies had prior information on the telecom department’s decision to arbitrarily change the criteria for allocation of 2G licences and had accordingly prepared papers to jump the queue.
“It was noticed that 13 applicants were even ready with the demand drafts drawn on dates prior to the notification of the cutoff date. Evidently, these applicants had advance information about the issue of the notification by the telecom department which enabled them to take appropriate advance action ... and prepare relevant documents for complying with the conditions in spite of the changed time limit for compliance from 15 days to about half a day,” said the report. Due to this, Swan Telecom, which submitted an application in March 2007 for Delhi, was given spectrum in August 2008, while Spice Communications, which had submitted its application way back in August 2006, is yet to be allotted any spectrum.
However, what shows greater collusion in the issue of 2G licences, the audit report has found, is that a majority of the new firms given licences managed to obtain them even though they were ineligible. These firms include Uninor, Allianz Infratech (merged with Etisalat DB), Loop Telecom, Videocon Telecommunications and STel. “Many of these companies suppressed facts, disclosed incomplete information and submitted false and fictitious documents for getting licences,” the CAG said.
When asked if the CAG was giving a clean chit to the Prime Minister and other ministers, Ms Gupta replied: “We have not given a clean chit to anyone.”
The CAG also found that nine existing operators — including Bharti, Vodafone, Idea and Reliance — were given spectrum beyond the contracted quantity of 6.2 Mhz without any upfront charges.
Reliance Communications, in a statement, said it had no shareholding in Swan Telecom (now known as Etisalat DB Ltd) at the time of the grant of licence or any time thereafter. “Reliance Communications has always been in full compliance with all applicable laws, rules and regulations, and there has been no violation of our licence conditions at any stage on account of crossholdings in excess of 10 per cent,” said the company in a statement.
The alleged 2G spectrum allocation scam pertains to 2008 when the new companies were given pan-India licences for `1,650 crores — which was the price at which the spectrum was allotted in 2001. These firms then went to sell their stake to foreign firms for huge amounts — even when they had no infrastructure on the ground, giving rise to allegations of corruption in the granting of new licences.