People's Democracy

Big Scam In Spectrum Allocation: Hold Enquiry

The Polit Bureau of the Communist Party of India (Marxist) issued the following statement on November 6, 2008

THE manner in which the 2G spectrum was allocated by the communications ministry has led to a huge scandal.

It is now clear from the sale of shares by Swan and Unitech that more than Rs 60,000 crore has been lost to the national exchequer by giving away scarce spectrum at a fraction of the market price. The CPI(M) is shocked that the UPA government, instead of addressing the huge scam that has taken place on the allocation of the fourth licence in 2G mobile services has taken the position that nothing needs to be done.

For the release of the fourth licence and the spectrum required, the communications ministry adopted a completely inexplicable principle of `first come first served� for allocating the licence as well as a licence fee based on 2001 price. These 2G licences were priced at 2001 levels allegedly to keep the costs low for the consumers. However, this was not ensured through the licence terms and conditions. As a result, the parties who had secured these licences have sold or are selling their shares at huge profits.

The deal between UAE�s telecom operator Etisalat and Swan Telecom, and Unitech and Talenor (of Norway) has brought out the magnitude of largesse that has been doled out. Swan Telecom bought a licence for 13 circles along with the necessary 2G spectrum for a paltry Rs 1537 crore. Subsequently, it has sold 45 per cent of its stake to Etisalat for $900 million, taking its book value to $2 billion. This is without putting up any infrastructure, let alone starting operations. The Unitech-Talenor deal is no different. Unitech like Swan had not spent a single paisa for executing its licence. It has now sold 60 per cent of its stake to Talenor for Rs 6120 crore while paying only Rs 1651 crore as licence fee. The government has actually got only one-sixth of what it would have got, had it gone through a fresh auction route � a loss of Rs 10,000 crore to the exchequer on Swan and Unitech licences alone.

The total loss to the exchequer of giving away 2G GSM spectrum in this way, including to the CDMA operators, is over Rs 60,000 crore and must rank as one of the biggest financial scam of all times in the country.

Instead of redressing what has become an open scandal, the government has dealt with the question as to whether these companies can sell their shares legally. This is not the issue. The issue is if scarce national resources are given away at throwaway prices and these are then sold at many times that price, what should the government do? It should either invoke fair trade practice/anti-monopoly sections, or look at other operative sections of the licence to see how this can be prevented. If no other recourse is available, it must levy a windfall tax on such speculative transactions. The CPI(M) demands the holding of an enquiry to find out how a scam of this magnitude could be carried out and to put in measures in the licences so that this does not recur in the future.

The Polit Bureau warns the government that the 3G licence issue also needs to be addressed properly. Otherwise, the government will lose huge revenue shares from the existing 2G licensees, as they switch from 2G and 3G spectrum. Already, one company is reported to be using the difference of revenue shares between different applications �mobile, long distance and internet � to under report its earnings in some segments. This is seriously impacting government�s revenue share. The 3G licence has similar potential. With the 2G experience, the government must ensure that adequate provisions are now put into the licence terms and conditions so that another fiasco can be avoided.