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In a damning disclosure in the 2G spectrum scam, former Finance Secretary and present RBI Governor D Subbarao has told the CBI he had persistently objected to the throwaway pricing of spectrum by former Telecom Minister A Raja. Subbarao has also revealed that the Department of Telecom under Raja deferred the crucial meeting of the full Telecom Commission on spectrum pricing and went ahead with the controversial allotment of 122 licences during the intervening period.
Subbarao further revealed that he had objected and asked to stay the allotment of Dual Technology Policy, which benefited Reliance Telecom and Tata Teleservices. He gave this directive to then Telecom Secretary DS Mathur through a letter dated November 22, 2007. Rao objected to allotting GSM licences to Tata and Reliance without auction at a throwaway price fixed six years back. The DoT under Raja’s tenure, however, chose to completely ignore his directives and went ahead with 2G spectrum allocation in January 2008.
“The purpose of this letter is to confirm if proper procedure has been followed with regard to financial diligence. In particular, it is not clear how the rate of Rs 1600 crore, determined as far back as in 2001, has been applied for a licence given in 2007without indexation, let alone current valuation. Moreover, in view of the financial implications, the Ministry of Finance should have been consulted in the matter before you had finalised the decision. I request you to kindly review the matter and revert to us as early as possible with responses to the above issue. Meanwhile, all further action to implement the above licences may please be stayed,” Subbarao had said in his letter to Mathur dated November 22, 2007.
Through a letter dated November 22, 2007, Subbarao objected to spectrum pricing approach of the DoT that was being pursued then.
Rao is a prosecution witness in the 2G spectrum scam case and the six-page statement recorded under Section 160 of the CrPC is part of the first chargesheet in the case that was filed earlier this month.
On the issue of delaying the meeting of Telecom Commission that was supposed to deliberate upon the issue of spectrum pricing, Subbarao told the agency, “…a meeting of the Telecom Commission was scheduled for 9.1.2008, wherein pricing of spectrum was an agenda item. However, this meeting was rescheduled by DoT to 15.01.2008.”
Interestingly, as many as 122 spectrum licences were issued in the intervening period of the said Telecom Commission meeting.
He further said, “On 10.01.2008, 122 LoIs (Letter of Intent) were issued by the DoT and the entire circumstances changed. The option of auction, which we had been pursuing as a method of pricing spectrum became no longer feasible, as DoT said that the entities given LoIs were contractually entitled to entry level spectrum. Thereafter, since auction of spectrum was no longer possible, our focus shifted to ensuring that the financial interests of the Government were not further compromised.”
Subbarao went on to state that the DoT got the Terms of Reference (ToR) of a GoM amended and the crucial issues of spectrum pricing and allocation were dropped. Subsequently, the Department of Economic Affairs kept pursuing with the DoT the issue of spectrum pricing but the DoT ignored all the references saying “spectrum pricing is a continuing responsibility of DoT and it is neither necessary nor feasible to include spectrum pricing in the ToR of the GoM.”
The statement also suggests that the DoT had itself estimated that Adjusted Gross Revenue/MHz had increased by 3.5 times between 2003-04 and 2007-08 and on this basis the per MHz price of spectrum works out to be Rs 1312 crore per MHz for operation on pan India basis as compared to Rs 375 crore per MHz.
The DoT wanted the pricing of spectrum to be deferred till the auction of 3G and Wimax, Subbarao said citing a DoT note that was not agreed by the Finance Ministry.
Subbarao further revealed that he had objected and asked to stay the allotment of Dual Technology Policy, which benefited Reliance Telecom and Tata Teleservices. He gave this directive to then Telecom Secretary DS Mathur through a letter dated November 22, 2007. Rao objected to allotting GSM licences to Tata and Reliance without auction at a throwaway price fixed six years back. The DoT under Raja’s tenure, however, chose to completely ignore his directives and went ahead with 2G spectrum allocation in January 2008.
“The purpose of this letter is to confirm if proper procedure has been followed with regard to financial diligence. In particular, it is not clear how the rate of Rs 1600 crore, determined as far back as in 2001, has been applied for a licence given in 2007without indexation, let alone current valuation. Moreover, in view of the financial implications, the Ministry of Finance should have been consulted in the matter before you had finalised the decision. I request you to kindly review the matter and revert to us as early as possible with responses to the above issue. Meanwhile, all further action to implement the above licences may please be stayed,” Subbarao had said in his letter to Mathur dated November 22, 2007.
Through a letter dated November 22, 2007, Subbarao objected to spectrum pricing approach of the DoT that was being pursued then.
Rao is a prosecution witness in the 2G spectrum scam case and the six-page statement recorded under Section 160 of the CrPC is part of the first chargesheet in the case that was filed earlier this month.
On the issue of delaying the meeting of Telecom Commission that was supposed to deliberate upon the issue of spectrum pricing, Subbarao told the agency, “…a meeting of the Telecom Commission was scheduled for 9.1.2008, wherein pricing of spectrum was an agenda item. However, this meeting was rescheduled by DoT to 15.01.2008.”
Interestingly, as many as 122 spectrum licences were issued in the intervening period of the said Telecom Commission meeting.
He further said, “On 10.01.2008, 122 LoIs (Letter of Intent) were issued by the DoT and the entire circumstances changed. The option of auction, which we had been pursuing as a method of pricing spectrum became no longer feasible, as DoT said that the entities given LoIs were contractually entitled to entry level spectrum. Thereafter, since auction of spectrum was no longer possible, our focus shifted to ensuring that the financial interests of the Government were not further compromised.”
Subbarao went on to state that the DoT got the Terms of Reference (ToR) of a GoM amended and the crucial issues of spectrum pricing and allocation were dropped. Subsequently, the Department of Economic Affairs kept pursuing with the DoT the issue of spectrum pricing but the DoT ignored all the references saying “spectrum pricing is a continuing responsibility of DoT and it is neither necessary nor feasible to include spectrum pricing in the ToR of the GoM.”
The statement also suggests that the DoT had itself estimated that Adjusted Gross Revenue/MHz had increased by 3.5 times between 2003-04 and 2007-08 and on this basis the per MHz price of spectrum works out to be Rs 1312 crore per MHz for operation on pan India basis as compared to Rs 375 crore per MHz.
The DoT wanted the pricing of spectrum to be deferred till the auction of 3G and Wimax, Subbarao said citing a DoT note that was not agreed by the Finance Ministry.
