People's Democracy

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


No. 50

December 12, 2010

Who is Afraid of 2G?


Prabir Purkayastha


THE 2G scam is being stone-walled by the ruling UPA both in parliament and outside. A joint parliamentary committee would have both the right and the authority to go into the conduct of the various ministers, the regulatory body namely TRAI and also examine the different dimensions of the case. If Congress is not involved, blaming Raja in private as the sole perpetrator of the 2G scam, why is the Congress shying away from a JPC?


While Raja’s guilt is now public, the only question remaining is whether he can be brought to book, the larger question still remains. For whose benefit did Raja act? If Rs 1.76 lakh crore of a scarce natural resource –- the spectrum – was gifted away, who benefited from this private appropriation of this national resource? In other words who dun’it?  For this, the media, which has been vociferous on Raja has been remarkably quiet.


We have now two sources of information – one the pain-staking research done by CAG and the other the Radia tapes. Both can be used to bring out the hidden contours of the 2G scam and answer who was behind the scam.




The CAG report makes clear some of the beneficiaries. One is of course the real estate company, Unitech. They were in deep financial crisis with the sinking of Lehman Brothers, and the sudden collapse of the financial markets.  Suddenly, they were faced with large projects which they were undertaking and no money to execute them. If Unitech had been unable to lay hands on money very quickly – either through borrowings or any other way, it is quite possible Unitech would have collapsed.  The records now make clear that the 2G licenses were the mechanism through which Unitech re-floated itself.


One part of this is already widely known -- Unitech sold its shares to Telenor. The CAG report says that 67.25 per cent shares were transferred at a price of Rs 6,120 crore to Telenor Asia. The CAG report also makes clear that apart from the licenses, Unitech had made virtually no investments in the telecom companies it had floated. It is clear that if we take out Rs 1,651 crore it paid for the licenses for the 22 circles, it made a windfall profit of three times that amount, plus it still retained about one third of the shares it could unload later in the market.  All in all, a neat hefty gain of about Rs 10-12, 000 crore in six months on an investment of Rs 1,651 crore. Plus whatever it took to bend the system. As we all know –thanks to CAG -- bending the system consisted of illegal papers submitted to DoT, as none of the Unitech companies met the license conditions and of course Raja’s famous first-serve-my-friends irrespective-of-who-comes rule.


But this is not all that Unitech got. Nor was Raja the only one helping Unitech. Pioneer reports that Unitech got loans of “Rs 10,000 crore from various public sector banks, including the SBI which doled out more than Rs 8,000 crore”. If this is true, there is more to the 2G story than has become public.


It seems Unitech was not the only beneficiary of the banks. A total of five of the companies – all of them held to be ineligible by CAG – got a total of Rs 26,000 crore from public sector banks as loans. The list includes Swan Telecom, Unitech, Loop, Datacom (Videocon) and STel. All of this when the CBI was known to be investigating the scam and complaints had been filed with the CVC.


Is this why the Congress is afraid of a deeper probe? Did all this happen with these companies waving in front of the banks the telecom licenses that they had illegally secured or were there more hands in the till, than Raja’s? Was it a collaborative venture in which Raja and the ministry of telecom were undoubtedly the lynch-pins but by no means the only ones? Is that why a Manish Tewari keeps on talking about a “presumptive” loss whenever the 2G scam is discussed on TV, diverting it from any other discussion?


Well the presumptive loss claptrap that Manish Tewari pulls is very easy to dismiss. Just cancel the illegal licenses and auction them again. Or ask the companies to pay a benchmark price based on the 3G spectrum and see what happens. In spite of patent illegalities in the award of licenses to companies who have lied and submitted false papers, why is the UPA and the Congress still sticking to these companies? We come back to our initial question, who dun'it and what does the UPA have to hide?


The second set of questions pertain to the Radia tapes, Ratan Tata and his outburst about privacy and India having become a banana republic.




First of all, the key question is on whose behalf was Radia pulling the strings to secure Raja his berth as telecom minister again? It is clear from the tapes that Raja getting a second term as telecom minister was of vital importance to Radia. If we look at the list of beneficiaries of the telecom scam, it is clear that the only one who benefited from the telecom scam and was also a client of Niira Radia, was the Tata Group. Tata and Reliance (Anil Ambani) both held CDMA licenses and were eager to enter the far more lucrative GSM market. While Anil Ambani's Reliance Telecom was definitely one of the players behind Raja,  Niira Radia was working for Mukesh Ambani and locked in a bitter battle with Anil’s PR apparatus. This is borne out by the Vir Sanghvi- Radia conversation and his subsequent column where he virtually repeats about Anil Ambani whatever Radia tells him on the phone. Anil’s access to Raja therefore was not through Radia and  an independent one. The CDMA operators -- Reliance and Tatas -- also got GSM licenses at 2001 price in 2008 and therefore made a killing. The only conclusion one can come to is that amongst the major telecom companies who benefited hugely from the scam and were tied up with Raja via Radia is the Tatas.


This was not all. Tata also sold about 25 per cent of equity of his Tata Teleservices to NTT Docomo for about Rs 13,000 crore. Raja's allowing acquisitions in contravention with DoT guidelines earlier was the key to Unitech, Tatas, and Swan selling part of their equity at these prices. And as the CAG report has held, the spectrum was the most valuable part of what these companies were selling.


This makes a mockery of Tata’s claim to privacy. One cannot employ a wheeler-dealer to pull strings in the government, who was also in all kinds of financial “jugglery” and therefore under the Enforcement Directorate scanner, and then howl about banana republics and privacy. The simple question is that the tapping of Radia's phone line was to do with possible financial crimes and does not appear to be done with any political motive. Is Tata saying that all telephone conversations, even when crimes are being discussed and planned, should not be subject to State tapping? Or they should be tapped only for non-financial crimes such as national security? If he employs a person because of her ability to  corrupt the system, why should he now shelter behind privacy? Privacy for crooks? If he is so high-minded, why does he not offer to pay the difference between the market price for the under-valued license he secured?  One cannot benefit from crime and yet claim high moral ground!


The third beneficiary in this who dun'it is of course Anil Ambani. He benefited in two ways. One part of his scam is pretty straight forward. He, in company with Tatas, benefited equally from getting a cross-over All India license at 2001 prices. So, like Tata, he also got GSM, his license at dirt cheap price. But that is not all he got. The CAG report also makes clear that Swan Telecom had Reliance Telecom's equity to the tune of Rs 1,002.79 crore in contrast to Tigers Traders Private Ltd, which held nearly 90 per cent stake, but had put in just Rs 98.22 crore. Reliance Telecom paid a Rs 999 premium on Re 1 shares of Swan, a company that was registered only a few months before. Further, CAG says, “Audit also found that the email ID of the corporate as well as registered office of   the Swan Telecom Private Limited in their application dated March 2, 2007 was shown as [email protected] The same email ID ([email protected] also was given for the correspondence address and the

 authorised contact person of the applicant company”. Swan was nothing but a front organisation for Anil Ambani group. Since Anil already had a GSM license, the one he got in the name of Swan was up for sale. According to the CAG report, Swan sold 44.73 per cent of its shares at Rs 3,217 crore to Etisalat International India Ltd.

Who holds the rest of the shares now is still a question. Anil Ambani's group denies that it holds the rest of the shares, but they have yet to explain why the company secretary Hari Nair  had given a Reliance email address as his address and who is this Mr Hari Nair? And why does he have a Reliance email address if he does not belong to Reliance?


The key issue before the Congress and the UPA is that they either stonewall all the questions and let the corporate houses pocket all the wealth generated from this gross undervaluation of the spectrum or come clean and take action. Action is not just throwing Raja out after resisting the demand for his ouster for as long as they could. The UPA is already complicit in the cover up of the telecom scam by slowing down the CBI probe and then putting in a CVC – PJ Thomas – who was himself a party to the telecom cover up. This apart from his having a pending criminal case against him.


Till date, there is no movement in trying to recover the Rs 1.76 lakh crore the country has lost due to giving away spectrum at throw away prices to the fat cats in the country. We need action – cancellation of licenses and some cases being launched before any one will take the government's claims on telecom seriously.


The final question – why is the Congress afraid of 2G? Or what is it about 2G that scares the Congress?