Opinion The entire spectrum of allegations

Several political parties,especially the Bharatiya Janata Party,have called for the resignation of the Union Minister for Communications and Information Technology,Andimuthu Raja. Several telecom operators,including BSNL,have been accused of inflating the number of subscribers they have,in order to acquire scarce spectrum. Moreover,several telecom operators have been accused of passing off local loop revenues as long distance revenues,as well as off passing off value added services as internet operations,in order to save hundreds of crores in licence fees.

The main controversy arises due to the allocation of 2G telecom licences in January 2008,accompanied by 4.4 megahertz of start-up spectrum,on a First Come First Serve (FCFS) basis,at the same price of Rs 1,651 crores which prevailed in 2001. Raja argued that his decision to allot licences on the FCFS basis rather than holding auctions was based on the new National Telecom Policy of 1999. While it is true that telecom licences were awarded on the FCFS basis prior to 2003,a decision of the Union Cabinet of October 31 2003,when it introduced Unified Access Service Licences,had stated that all future licences should be auctioned. The Vajpayee cabinet had accepted TRAI’s recommendations on UASL. In Section 7.39 of its recommendations on UASL,TRAI had recommended: “As the existing players have to improve efficiency and utilisation of spectrum and if the government ensures availability of additional spectrum,then in the existing licensing regime,they may introduce additional players through a multi-stage bidding process as was followed for the fourth cellular operator.” This was accepted in toto by the Vajpayee Cabinet.

Moreover,a judgement of the High Court of Delhi in 1993 had ruled that the FCFS principle was arbitrary,unjust,and unfair. Justice D.P. Wadhwa had ruled on September 21 1993 in Home Communication v. Union Of India and Others regarding the allotment of time slots on satellite channels of Doordarshan: “The basis of first come first served for allotment of time slots on satellite channels is arbitrary. It is unreasonable,unjust and unfair.” This was reiterated by Justice Anil Dev Singh of the High Court of Delhi in 1998. On the other hand,the High Court of Madras found nothing wrong in the FCFS principle when it dismissed a writ petition challenging Doordarshan’s decisions on January 27 1993.

Raja’s statement that nowhere did the TRAI explicitly state that the price discovered in the 2001 auction should not be adhered to in future is not wholly correct. Section 2.73 of the TRAI’s August 2007 recommendations states: “In today’s dynamism and unprecedented growth of telecom sector,the entry fee determined then (2001) is also not the realistic price for obtaining a license. Perhaps it needs to be reassessed through a market mechanism…” While it is true that TRAI’s recommendation is vaguely worded and does not explicitly recommend auctioning of the spectrum,it certainly indicates that the spectrum could not be allocated in January 2008 at the same price that it was allotted in June 2001.

Raja’s claim that he had the backing of the Finance Ministry is also not wholly correct. Former Finance Secretary (and currently governor of the Reserve Bank of India) Duvuri Subbarao had written to the then Secretary of the Department of Telecommunications,Dinesh S. Mathur,on November 22 2007: “The purpose of this letter is to confirm if proper procedure has been followed with regards to financial diligence. In particular,it is not clear how the rate of Rs 1,600 crore,determined as far back as 2001,has been applied for a license given in 2007 without any indexation… In view of the financial implications,the Ministry of Finance should have been consulted in the matter before you finalised the decision.” Subbarao went on to instruct DoT to “kindly review the matter and revert to us as early as possible with responses to the above issues. Meanwhile,all further action to implement the above licenses may please be stayed.”

Raja also ignored a memorandum sent to him by then Telecom Secretary D. S. Mathur and then Member Finance of the Telecom Commission Manju Madhavan dated October 25 2007 which stated: “Existing criteria of entry fee was based on the entry fee paid by the fourth cellular operator,which was decided based on 3-stage informed ascending financial bidding at that time (year 2001). The Indian telecom sector has witnessed tremendous growth due to the continued liberalisation and has emerged as the fastest growing telecom network in the world. Therefore,the bidding / auction process will establish the entry fee based on current market perception.”

A. Raja has a lot to answer for.

The writer,an alumnus of Carnegie Mellon and IIT Kanpur,heads a telecom consulting firm in Delhi