Telecom scam: CBI raids DoT offices

In an unprecedented move, the CBI on Thursday raided the offices of the Department of Telecom (DoT), alleging criminal conspiracy between DoT officials and private firms in the allotment of 2G spectrum

As the Central Bureau of Investigation (CBI) on Friday raided the offices of 10 telecom firms in connection with the probe, DMK member of Parliament Kanimozhi protested to Prime Minister Manmohan Singh against the CBI action. She is learnt to have conveyed her father and Tamil Nadu chief minister M Karunanidhi’s unhappiness over the investigation.

TOI was the first to report the unusual twists and turns in DoT's decision-making process in the matter, and closely followed the sequence of events from July 2007 -- when the rush for new telecom licences began -- to January 2008, when spectrum was allocated to the new entrants -- right up till November 2008, as the controversy snowballed.

CBI officials said a case under the Prevention of Corruption Act had been registered against unidentified DoT officials and "private persons" before the raids were carried out in the Wireless Planning Cell (WPC) and in the office of the Deputy Director General (Access Services) at Sanchar Bhawan.

According to the agency, all records pertaining to the allocation of spectrum to new entrants in January 2008 are being examined to ascertain whether or not there was any irregularity in the process.

It is learnt that AK Srivastav, DDG Access Services 1; Ashok Chandra, Wireless Advisor and P K Mittal, DDG Access Services Cell 11, the senior officers in charge of these divisions, were taken to CBI headquarters for questioning. The CBI raid started at 10am and finished at around 6pm.

The Central Vigilance Commission (CVC) had earlier asked CBI to probe alleged irregularities in the award of Unified Excess Services Licenses to private companies and the resultant loss of Rs 22,000 crore to the government.

The CVC had asked CBI to investigate the identities of all beneficiaries in two companies that had bought stakes in Swan Telecom and Unitech Wireless Services. The two licencees had sold their stake even before they rolled out services for which they had been awarded licences.

Unitech and Swan sold their equity to Telenor and Etisalat, respectively, at roughly Rs 9,000 to Rs 10,000 crore each -- or six to eight times the price at which they had received spectrum from the government.

Sources said though there was no quantification done on what was the loss to the government on this account, a rough estimate based on what these telecom companies earned by offloading their stake could be anywhere between Rs 20,000 crore and Rs 22,000 crore.

However, industry watchers claim that the extent of the loss to the exchequer could be as high as Rs 50,000 crore. They point out that DoT gave away 2G spectrum to 120 licencees at roughly Rs 9,000 crore when the market value was probably closer to Rs 60,000 crore.

DoT chose to follow a first-come-first-served (FCFS) process to handpick companies though it could easily have chosen a global auction for 2G spectrum, as has now been prescribed for 3G. The refusal to hold auctions when demand for spectrum far outweighed its supply marked a departure from the policy of auctioning 2G spectrum till 2001.

Telecom minister A Raja had argued that he merely followed TRAI's recommendations. However, TRAI vehemently denied making any such recommendations. Former TRAI chairman N Misra had clarified on many occasions, including in a letter to DoT, that his recommendations should be read in their totality. He had accused the government of cherry picking portions of TRAI's recommendations rather than following them as a whole.

The previous DoT secretary, D S Mathur, was asked to sign the new licences in 2007, but refused to do so till he retired in December 2007. Once he was replaced, 120 licences were subsequently awarded in January 2008.

When criticised by the media and the opposition, Raja said his predecessors, Dayanadhi Maran and Arun Shourie, had followed the same FCFS policy. The big difference, however, was that there was no queue for spectrum during Shourie and Maran's tenure. At the time that Raja chose to give away spectrum to a select 120 companies, there were already 575 applications waiting and more could have followed.

Raja was also accused of abruptly announcing a cutoff date and favoring only those companies that had come in on or before September 25, 2007, even though the government had officially asked for applications till October 1, 2007.

The manner in which spectrum was allocated to companies within the FCFS norm also came under attack as there was no clarity whether winners were being selected based on date of application or date of licence fee payment.

What is the scale of the telecom spectrum scam?
While all kinds of estimates have been made by various people, the most commonly cited
figure is Rs 60,000 crore. That is the amount of money the exchequer is alleged to have lost by allocating spectrum to telecom operators dirt cheap.

What is the basis for this claim?
In January 2008, licences were given on a first-come-first-served basis to operators at a price of Rs 1,651 crore per licence. These licences came with the spectrum needed to run operations. The price was determined on the basis of the last auction of spectrum done in 2001. Critics argued that the actual market price of spectrum in 2008 was about six times that price.

Why six times?
A couple of companies, Swan and Unitech, that had acquired telecom licences subsequently sold stakes which indicated valuations about six times as high the price they had paid for their licences. Since these companies had no telecom assets other than the licences, critics pointed out that this was in fact a market valuation of the spectrum.

How is Raja involved?
Those making the allegations say the decision to follow the first-come-first-served principle and not auction spectrum but give it at 2001 prices was taken by Raja as telecom minister. Also, he is alleged to have arbitrarily shifted the cut-off date for applications to suit operators he was favourably inclined towards.

What is Raja's defence?
He insists that he was merely following the precedent set by his predecessors and the advice of the telecom regulator, TRAI. His predecessors and the regulator have vehemently denied these claims. Raja also says auctioning wasn't followed because he wanted to keep the cost of telecom services low for consumers, a claim that hasn't found too many takers.

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Opposition parties on Friday demanded that Telecom Minister A Raja be sacked to allow a fair probe into the alleged corruption in spectrum allocation, as CBI continued searches in offices of the ministry and mobile operators.

BJP's Prasad said his party wants Raja to be sacked forthwith by the Prime Minister and CBI should be given a free hand in the investigations.He said if Raja continues as minister "there were apprehensions that he may create impediments in the investigation".

The Communist Party of India (Marxist) said it was shocking that Mr. Raja reiterated that he would continue in office despite the investigation.It said that in the interests of having a fair probe, it was essential that the Minister not continue in office.
CPI-M leader Sitaram Yechury said his party wanted fixing accountability in the issue.

The CBI is probing allegations of connivance of ministry officials with private companies in allocation of spectrum, which may have caused a loss of Rs 22,000 crore to government.

Meanwhile,The DMK is seething with resentment over CBI's raids on the offices of Department of Telecommunications headed by partyman A Raja and the very day after, Tamil Nadu chief minister M Karunanidhi has lodged a strong protest with Prime Minister Manmohan Singh.

According to sources, the Tamil Nadu chief minister conveyed to the PM and Congress leadership that CBI's raids on the offices of Raja's ministry were inconsistent with Congress's strong defence of the commmunications minister over the 2G spectrum scam.

DMK sources in Chennai said Karunanidhi impressed upon the PM that he felt Raja was being unnecessarily humiliated, as he had consulted the PM on the spectrum allocation issue all along. The DMK stalwart also argued that the PM's decision to retain Raja in the communications ministry was clear evidence of his innocence. He also pointed out that Congress had defended the communications minister all along both in Parliament and in public, and even campaigned for him in the Lok Sabha elections.

The protest coincided with CBI expanding the investigation by raiding offices of some of the top telecom service providers and strong demands from BJP and CPM for Raja's resignation.

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