People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 46

November 14, 2010



Probe 2G Scam to Recover Losses



IRRESPECTIVE of how the current impasse in the parliament over the demand for a joint parliamentary committee (JPC) to probe into the massive 2G  spectrum scam unfolds, it is clear that the country is being pushed deeper into the murky morass of crony capitalism. 


Actually, crony capitalism is a tautology.  Capital in its urge to maximise profits invariably seeks to bend, if not, violate all rules and regulations. Nepotism in awarding contracts, sweet heart deals in disposing off public properties (like, for instance, the  outrageous sale of public sector, Balco and Centaur Hotel, Juhu, Mumbai by the earlier NDA government) and creating illegal and new avenues for money laundering and looting public resources are some of the forms that crony capitalism takes.  The capitalist state puts in place certain rules and institutionalises regulators to ensure adherence to these rules in order to provide a level playing field for the capitalists. However, given the fundamental nature of capitalism, where the big fish eats the small ones, these rules and regulations are pushed to the limits of violation.  Capitalism inherently breeds cronyism. 


In countries like India, late entrants into the global capitalist system, (particularly when it embraces the neo-liberal economic trajectory of globalisation) such cronyism becomes all pervasive trapping in its web governmental institutions, indeed, the entire government itself.  This has precisely been the case in the current 2G spectrum scam, with the Supreme Court now dragging in the prime minister and his office. 


To illustrate how such crony capitalism operated in this 2G spectrum scam, consider the following:


For the release of the fourth license and the spectrum needed  for operationalising  the corresponding universal access service license in January 2008, the communications ministry adopted a completely inexplicable principle of `first come first served’ as well as a license fee based on 2001 price.  These 2G licenses were priced at 2001 levels allegedly to ensure that the spectrum should not become expensive, presuming that the benefit would be passed on to the consumers.  However, this was nowhere ensured through the license terms and conditions. As a result, the parties who had secured these licenses have sold or are selling their shares at huge profits.


The deal between UAE’s telecom operator Etisalat and a Bombay-based builder’s Swan Telecom has brought out the magnitude of largesse being doled out.  Swan Telecom bought a license for 13 circles along with the necessary 2G spectrum for a paltry Rs 1,537 crore.  Subsequently, it had sold 45 per cent of its stake to Etisalat for $900 million without putting up any infrastructure, let alone starting operations.  This, therefore, was the market price for the spectrum at around $ 2 billion, as against the price of $300 million SWAN paid.  With the present exchange rate, this would mean that Swan had got a value 5.9 times of what it had paid just eight months earlier in January 2008 without having spent a single paisa in operationalising its license. The government has actually got only one-sixth of what it should have got, had it gone through a fresh auction route – a loss of Rs 4,500 crore to the exchequer.


But this is not all.  Even this loss proved to be an underestimate when one finds the details about the later Unitech-Telenor (of Norway) deal.  Here, Unitech like Swan had not spent a single paisa for executing its license.  It had sold a 60 per cent stake of the telecom firm,  which had paid Rs 1651 crore as license fee for all the 23 circles which it had applied for, to Telenor.  Obviously, Unitech got a better return on its sale because it had given away majority stake and had larger number of circles.  Unitech had got 6,120 crores. Unitech, thus, had got a valuation which is seven times more than  what it had paid.   


For a number of these corporations, who were awarded the so-called 'first come first served' licenses, the promoters are either unknown or shadow companies. This further reinforces the doubts regarding the bona fides of these companies as also the intent of the policy.


In the interests of the country, it is absolutely essential that this colossal scam must be thoroughly probed. Hence the demand for a JPC.  The JPC must not only identify the culprits and prepare the grounds for their punishment, but it must also study the manner in which the system has been so grossly manipulated to allow such a scam to take place. On this basis, more effective rules and regulations must be drawn up to ensure that such known avenues of manipulation are minimised, if not plugged. 


Probing the 2G spectrum scam is not only in the interest of upholding political morality.  This is absolutely essential. The probe, however, must also result in recovering to the national exchequer the loss estimated by the CAG to be  of a mammoth Rs 1,76,379 crores. Our estimations of this loss, stated in these columns earlier, is to the tune of Rs 1,90,000 crores.  All those who have been allocated the 2G spectrum at throw away prices must be made retrospectively to pay the difference.  The benchmark can be the  auction price of the 3G spectrum that is available in public domain.  The licenses of those corporates who refuse to do so must be cancelled and these must be freshly auctioned. 


Again, the recovery of these monies, unscrupulously looted, is not only to reassert public morality.  This recovery is much needed to improve the livelihood of the vast mass of the Indian people.  Take for instance, the issue of food security.  It has been estimated that to provide all Indian families (APL and BPL) 35 kg of foodgrains at Rs 3 a kilo, it would cost an additional food subsidy of Rs 84,399 crores.  The loot in the 2G spectrum scam is nearly double of what is required to provide food security to all Indians.  Or, for that matter, to ensure education for all, it is estimated by the National Institute for Educational Planning and Administration (NIEPA) to cost Rs 34,000 crore annually for the next five years.  A  total of Rs 1.7 lakh crores.  This is less than what has been looted in this 2G spectrum scam.  The scam accounts for nearly six times of the health budget proposed for this year.


A government that continues to wear the pretence of concern for the aam admi must be forced to speedily uncover the manner in which such a colossal loot of our country’s resources has taken place.  Further, the government must be forced to recover this loss and put these huge sums of money to provide the much-needed food security, education and health for our people. 


(November 17, 2010)