• Like
  • Save
2G Spectrum Scam
Upcoming SlideShare
Loading in...5
×

2G Spectrum Scam

  • 2,912 views
Uploaded on

This paper is a brief representation of facts and analysis of 2G spectrum scam …

This paper is a brief representation of facts and analysis of 2G spectrum scam

This paper is a case study to the subject – 2G Spectrum Scam. The paper starts with a brief introduction to basic term like spectrum, 2G. It then sets the context of the case with discussing background. We then discuss the core of matter, defining the scam, role played by various regulatory bodies and the current state of affairs along with latest proceedings. Finally, we reflect upon the case with a brief analysis.

More in: News & Politics
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
No Downloads

Views

Total Views
2,912
On Slideshare
0
From Embeds
0
Number of Embeds
5

Actions

Shares
Downloads
0
Comments
0
Likes
2

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Governance and Public Policy - 2G Spectrum ScamGovernance and PublicPolicy2G Spectrum Scam Date: 29/04/2012 Team Members: Sahiba Sanan (HRLP029) Monika Sahni (HRLP022) Raman Girdhar (HRLP033) Pratibha Sangwan (HRLP012) Pradeepan N (MLP020) Prasoon Malviya (MLP017) Anurag Kanoongo (MLP015) ►This paper is a brief representation of facts and analysis of 2G spectrum scamSchool Of Inspired Leadership 1
  • 2. 2G Spectrum ScamContentsContents ......................................................................................................................... 2Executive Summary ...................................................................................................... 31. Introduction .............................................................................................................. 4 1.1 What is a spectrum? Why is it a national scarce resource? ...................................................... 4 1.2 What is 2G Spectrum and 3G?.................................................................................................. 42. Background .............................................................................................................. 53. What is 2G Spectrum Scam? .................................................................................. 6 3.1 Role of the former telecom minister A Raja ............................................................................... 6 3.2 Relation with Radia tapes .......................................................................................................... 7 3.3 Role of Finance Ministry ............................................................................................................ 7 3.4 Role of Prime Minister ............................................................................................................... 74. Role of Regulatory and Other Bodies .................................................................... 8 4.1 Role of CVC ............................................................................................................................... 8 4.2 Role of CBI/ ED ......................................................................................................................... 8 4.3 Role of CAG............................................................................................................................... 85. Current status and Proceedings............................................................................. 9 5.1 Companies which are being investigated .................................................................................. 9 5.2 What did Supreme Court said? ................................................................................................. 9 5.3 What has Government done so far? ......................................................................................... 9 5.4 Arrests made in this scam ....................................................................................................... 10 5.5 Latest proceedings on 2G Scam ............................................................................................. 106. Analysis .................................................................................................................. 117. References ............................................................................................................. 12 Governance and Public Policy 2
  • 3. 2G Spectrum Scam Executive Summary From the time allegations of misappropriation during the bidding for allocation of 2G spectrum surfaced, till Telecom Minister A Rajas ouster, high drama charged both politics and business world. 2G spectrum scandal involved officials in the government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money which the law mandated to be collected is estimated to be 176,645 crore (US$35.24 billion) as valued by Comptroller and Auditor General of India, however the exact loss is still disputed. This paper is a case study to the subject – 2G Spectrum Scam. The paper starts with a brief introduction to basic term like spectrum, 2G. It then sets the context of the case with discussing background. We then discuss the core of matter, defining the scam, role played by various regulatory bodies and the current state of affairs along with latest proceedings. Finally, we reflect upon the case with a brief analysis.Governance and Public Policy 3
  • 4. 2G Spectrum Scam1. Introduction 1.1 What is a spectrum? Why is it a national scarce resource? Spectrum is airwaves which are used in case of mobile and wireless communications. Each telecom operator is assigned a set of limited frequencies of airwaves which is licensed by the government. It is allocated in Mega Hertz (MHz) in telecom licenses. Different frequencies limited in number have different characteristics which are used for different purposes. The international telecom organizations have specified certain frequency bands for mobile services. Millions of calls happening every second simultaneously have to be assigned different frequencies (which are limited) for operation. This is why it is a scarce resource. 1.2 What is 2G Spectrum and 3G? 2G (or 2-G) is short for second-generation wireless telephone technology. It is the 2nd Generation of mobile phone services. Next phase of mobile services is 3G, or 3rd Generation. The only differences between the two spectrum is about the speed which is relatively more in case of 3G spectrum as it is of the latest technology.Governance and Public Policy 4
  • 5. 2G Spectrum Scam 2. Background In India there are 22 Telecom circles and metros (Each state being a circle like Bihar, U.P, Mumbai, Tamil Nadu, New Delhi etc.). For each Circle or metro there is a separate license issued. For each license a separate application needs to be submitted. A company is said to have a Pan India License in case it has telecom license for all the 22 Telecom circles or metros and the value for the Pan India License was Rs 1658 Cr which was used as a reference rate for issuing telecom License in future at First Come First Serve (FCFS) basis, which became the matter of scam. The FCFS policy was used at the time when the applications for receiving licenses were very limited in number but gradually there was an increase in the application number from 51 in 2003 to 575 in 2007. Therefore with so many applications government should have adopted the auction route for issuing telecom license rather than using FCFS policy.Governance and Public Policy 5
  • 6. 2G Spectrum Scam 3. What is 2G Spectrum Scam? The government awarded 122 telecom licenses for 2G spectrum in January 2008 at 2001 rates (Rs 1,685 crore) ignoring the current market value of the spectrum which was potentially high. Due to limited availability for civil use and increased telecom operators, telecom firms were willing to pay a price of around Rs.11,000crore for acquiring pan India telecom licenses. This was very evident when Vodafone bought a 67% stake from Hutch for a price of Rs.75,000. Even if we consider the spectrum cost to be 15%, it would amount to Rs.11,250 crore. As of October 2007, there were 575 applications for telecom license. In spite of increase in the market value to Rs.11,000 crore, the then Telecom minister A.Raja decided to sell in for the same price as of 2001. In this mean time, many organizations opened fake new firms for getting licenses, and these include Swan Telecom, Loop Telecom, Datacom solutions pvt. Ltd, etc. A total of 18 companies were issued 122 licenses by DoT on First Come First Served (FCFS) basis. A lot of them in turn sold their licenses foreign players for a much higher rate.  Swan got license for 1,537 crore (US$306.63 million) and then it sold 45% stake to UAE based company Etisalat for 4,200 crore (US$837.9 million).  Unitech Wireless, a subsidiary of the Unitech Group, got license for 1,661 crore (US$331.37 million) and later sold 60% stake for 6,200 crore (US$1.24 billion) to Norway based company Telenor. All these licenses were then later cancelled by Supreme court. 3.1 Role of the former telecom minister A Raja All those telecom operators are close aide of either A.Raja or congress party. Through their connections they all are informed to apply before October 25th. On October 25th, A.Raja issued a press release dated 24/09/2007 that the last date for applying for new license was October 1st 2007. In the 5 days between 25th-1st, there have been 343 new applications requesting licenses. A.Raja never expected this much new applications within that time. So, he asked DoT officials to change the policy, but they opposed. So, he waited for the retirement of two senior officials of DoT. Then he brought his aide Mr.Siddhartha Behura as secretary of DoT. Then he issued a notice on January 10th 2008 that license will be given only to those who applied before 25/09/2007. The same day noon he issued a the shortlist of those companies which were shortlisted and asked those companies to come between 3:30 P.M.-4:30 P.M. that day itself with a Letter Of Intent(LOI). All thoseGovernance and Public Policy 6
  • 7. 2G Spectrum Scam companies who are in the friend list of A.Raja prepared all their demand drafts for Rs.1685cr and other guarantees a day before, since they already know about these announcements. 3.2 Relation with Radia tapes Nira Radia was also another big name in 2G spectrum scam. Nira Radia runs public relation and consultancy companies. Radia have very close relationship with A. Raja and with that time Chief Minister Mr. M. Karunanidhi. She has influenced 2G spectrum license decisions by lobbying for Tata, unitech, reliance and bharti. 3.3 Role of Finance Ministry Finance Ministry also played major role. Entry fees for 2G-spectrum licenses deposited into the account of Finance Ministry by DOT. Earlier in Nov 2007 Finance Ministry showed objection over the license process by writing a letter to DOT but latter in Jan 2008 they wrote another letter to A. Raja that process is accepted this time but next time licenses should be auctioned. Then Mr. A. Raja converted (LOI) letter of intents into licenses. 3.4 Role of Prime Minister On the same lines, Prime Minister’s office is also involved in this scam. Prime Minister’s office objected in Nov 2007 over the process and suggested to go by auction but by Jan 2008 they also took u turn. Mr. A. Raja sent three letters to Prime Minister explaining him how to process application and insisting to follow FCSC policy and allocate licenses @ 1658 crore(approx).Governance and Public Policy 7
  • 8. 2G Spectrum Scam 4. Role of Regulatory and Other Bodies 4.1 Role of CVC On 4th May 2009, an NGO named Telecom Watchdog filed a complaint to the Central Vigilance Commission (CVC) on the illegalities in the spectrum allocation to Loop Telecom. On 19 May 2009, another complaint was filed to the CVC by Arun Agarwal, highlighting grant of spectrum to Swan Telecom at throwaway prices. The case was initially referred by the CVC to the CBI for further investigation on 12.10.2009 as the DoT officers were not forthcoming with the right answers/information. 4.2 Role of CBI/ ED On 21.10.2009, the CBI registered an FIR against unknown persons and officials. On 22.10.2009, the CBI raided the DoT’s headquarter and took away the files relevant to 2G spectrum. The offices of private companies who got the licenses were also raided. The officials were questioned by the CBI. The ED (Enforcement Directorate) also carried out its investigation independently. Initially CBI as well as ED were investigating the matter, but after sometime, further investigations were stopped and Supreme Court appointed CVC in Feb 2012 to help it monitor the investigations done by the CBI, Enforcement Directorate, Income Tax and others in view of involvement of several influential persons in the scam. 4.3 Role of CAG Comptroller Auditor General of India (CAG) started auditing of new licenses in March 2010. On 8.11.2010, CAG submitted it’s report to the President of India which had the following two findings:  It estimated the loss on account of 2G scam as Rs 1.76 lakh crore.  It also found that of the 122 licenses issued on 10.01.2008, 85 licenses were issued to companies which were not eligible to get licenses.Governance and Public Policy 8
  • 9. 2G Spectrum Scam 5. Current status and Proceedings 5.1 Companies which are being investigated Companies wich received licenses from Raja in Jan 2008 are being investigated: Unitech (Unionor), Swan Telecom (DB Etisalat), Loop Telecom, STel, Datacom/Videocon, Shyam Telecom (MTS), Spice, Idea, Reliance Communications, and Tata Teleservices. Loop Telecom Pvt Ltd, Loop Mobile India Ltd, Essar Tele Holding, Essar (Parent group of Essar Tele Holding) In addition some companies of Raja associates and Ms. Nira Radia are also being investigated for the routing of money. 5.2 What did Supreme Court said? Mr. Raja had quit only after the Hon’ble Supreme Court made several observations during the hearing PIL (Public interest litigation) including the one “that the same minister is still continuing”. Investigation took momentum after SC’s comments, “does CBI do this kind of slow investigation in every matter, how long will it take .... 20 years”. SC’s ordered the court to monitor the investigation. SC also feared governments and corporate interference because of which it had ordered the before filing of the charge-sheet, the investigating agencies (CBI, ED, I-T) must produce before the SC the charges that it is likely to file and the evidence collected to support them. SC also made statements regarding no arrest made in the case. 5.3 What has Government done so far? Role of government is considered crucial in such cases however in this case the government dint do anything significant rather Mr. Kapil Sibal started a campaign against the CAG calling their figure of loss Rs 1.76 Cr as erroneous. He further went on saying that no loss has happened. Later, he started saying that the government followed the same policy of FCFS (First Come First Serve). So whatever is happening, it is because of the Supreme Court, pressure from opposition parties and media. Following the pressure, first Mr. Raja resigned. Thereafter, after Mr. Kapil Sibal took over as Telecom Minister. He issued show-cause notices to certain companies and collected aboutGovernance and Public Policy 9
  • 10. 2G Spectrum Scam Rs 280 Cr as penalty from them for not fulfilling the rollout obligations. Thereafter, government has not taken any step. 5.4 Arrests made in this scam As on 13.2.2011, CBI has arrested four people: 1. Mr. A Raja: Telecom Minister when the licenses were granted 2. Mr. Siddharatha Behura: Telecom Secretary when licenses were granted 3. Mr. RK Chandolia: Rajas private secretary when licenses were granted. 4. M. K. Kanimozhi: Member of Parliament and daughter of M. Karunanidhi 5.5 Latest proceedings on 2G Scam On 12th April 2012, the government filed presidential reference in Supreme Court seeking the courts opinion on various issues arising from its 2 February 2012 judgment On 2 February 2012 Supreme Court of India delivered judgment on petitions filed by Subramanian Swamy and Centre for Public Interest Litigation (CPIL) which had challenged allotment of 2G licenses granted in 2008. The Supreme Court quashed all 122 spectrum licenses granted during the tenure of former communications minister A Raja. Along with this the bench has also imposed fine on Unitech Wireless, Swan telecom and Tata Teleservices and some others.Governance and Public Policy 10
  • 11. 2G Spectrum Scam 6. Analysis Loss of Rs. 1.76 lakh crore is enormous. In order to recover this loss, one way was to cancel all the 122 licenses and then auction the spectrum. Now Supreme Court’s decision has already cancelled all the 122 licenses. Now, if 122 companies can be allowed to participate in the auction, they may get a chance to continue their services by paying the right market price for the spectrum. Now comes a question - Will this affect the tariff prices paid by the customer? Not actually. Today, Market is very competitive due to which even new operators also tend to reduce the tariff prices to gain market share. Moreover, after getting spectrum at cheap prices, when companies sold their share / or spectrum at extremely high prices, there was no impact on tariff prices by the new buying companies. One more important point needs to be analyzed. All those 122 companies who are involved in the scam, if have sold their share to other foreign companies at high prices after getting the spectrum at cheap prices, troubling the foreign companies that bought share may not be fair. Only, the original company’s which were involved in licensing should bear the consequences.Governance and Public Policy 11
  • 12. 2G Spectrum Scam 7. References 1. http://www.ndtv.com/article/india/what-is-2g-spectrum-scam-66418 2. http://www.2gscam.co.in/ 3. http://en.wikipedia.org/wiki/2G_spectrum_scam 4. http://wosy.org/docs/2G%20Spectrum%20Scam.pdf 5. http://cag.gov.in/html/reports/civil/2010-1_19PA/Telecommunication%20Report.pdf 6. http://articles.economictimes.indiatimes.com/2012-02-02/news/31017253_1_2g- spectrum-licences-spectrum-efficiencyGovernance and Public Policy 12