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Centre lost 26,000 crore due to: CAG
April, 07th 2010

The Comptroller and Auditor General (CAG) has accused telecom minister A Raja of causing a loss of over Rs 26,000 crore to the government by disregarding the advice of many experts and persisting with a faulty and outdated policy for issuing new telecom licences.

Raja, who has survived several calls for his removal over charges of corruption, single-handedly decided to continue with the policy that cost the government Rs 26,685 crore in revenue, CAG has said in its annual report. ET has access to the reports contents.

The explosive charge couldnt have come at a worse moment for Mr Raja, and is likely to strengthen the hands of his many detractors. Opposition parties have been baying for his blood and the Central Bureau of Investigation has been making progress in its investigation into the charges of corruption at the Department of Telecom (DoT).

The CBI, in an FIR filed in November last year, accused certain DoT officials and executives of some private telecom companies of collusion in a bid to get new licences. The agency said the licences were sold without competitive bidding at a nominal rate based on prices fixed in 2001, resulting in a loss of Rs 22,000 crore to the government. In its report, CAG has lent credence to some of CBIs charges.

Mr Raja could not be reached for comments despite repeated attempts.

A senior DoT official clarified that government decisions are taken based on merit than on immediate pecuniary considerations such as interest, profit/loss, etc. DoT also said that processing of licences is time-consuming as it involves various approvals and security clearances. CAG has sought responses from DoT on its observations.

CAG, a constitutional authority, audits all government departments and PSUs every year. Its reports are placed before Parliament. However, it is up to the government to take appropriate action on the findings.

CAGs audit of DoT relates to the issue of new pan-India licences in 2008 at Rs 1,651 crore, a price fixed in 2001 when mobile subscriber base was 45 million and industry valuations were poor. Nine companies were issued licences in a process that was controversial from the very beginning.

DoT advanced the cut-off date suddenly and then incorporated a first-come, first-served clause which some of the bidders got to know of in advance. Some months later, Swan Telecom and Unitech, two of the winners, sold a large stake in their operations to overseas companies at stupendous valuations.

This triggered a furore. The audit said many experts, including the telecom secretary, had suggested to DoT that the award of new licences needed to be re-examined since the entry fee had not been revised from 2001. The 2001 fee was based on criteria that did not exist in 2008. The industry had grown bigger, richer and the subscriber base had soared to over 300 million from 45 million.

It is evident from the above facts that despite the increase in number of applications and need to review the procedure, the decision to
continue with the existing procedures as well as terms and conditions for the issue of UAS licences was taken by the minister of communications and IT single-handedly," CAG has said.

CAG has also said the telecom policy clearly stipulated that allocation of radio spectrum and grant of wireless licence was subject to availability. However, in case the licensee was not allocated spectrum due to non-availability, it could roll out services using wireline technology. This implied that the applications could be processed even if spectrum was not available.

Hence, the decision to not process the applications due to non-availability of spectrum was in contravention of the policy guidelines for issue of licence and also resulted in loss of Rs 26,685 crore to the government on account of entry fee, the audit said.

The CAG report would make the CBIs case stronger, said an official of the investigative agency on condition of anonymity.

The Enforcement Directorate, too, has registered a case against two firms that were awarded licences through this process, once again highlighting the controversial nature of business dealings in the telecom industry.

The audit report has also pointed out that DoT did not process applications within the stipulated time of 30 days from the submission of applications and the previous telecom secretary misrepresented this fact to the Central Vigilance Commission in his letter dated March 30, 2009.

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