After the 2G spectrum allocation scam during the former UPA government, another major telecom scandal in the allocation of 4G spectrum (Broadband and Wireless Access – BWA) ) has now been exposed in its latest report submitted by the Comptroller & Auditor General (CAG) to the central government.
Reliance Industries and the UPA government.
During May-June 2010 the auctions for 3G and 4G were concluded. The 3G auction fetched Rs 16,750.58 crore for 5+5 MHz spectrum in 2100 MHz (or 2.1 GHz) band. Thus, per MHz, the price worked out to be Rs 1,675 crore. Immediately, after the 3G auction, the 4G auction began which fetched Rs 12,847.77 crore for 20 MHz pan-India license in the 2300 MHz (or 2.3 GHz) band. This works out to be Rs 642.39 crore per MHz.
Within hours of completion of 4G auction on 11.06.2010, IBSPL increased the authorised share capital from Rs three crore to Rs 6,000 crore. On 17.06.2010, the company authorized its Board of Directors to allot Rs 475 crore equity share of Rs 10 each to Reliance Industries Ltd (RIL) and 25 crore equity share of Rs 10 to Infotech Digicomm Pvt Ltd (IDPL) aggregating to the equity capital of Rs 5,000 crore. On the same day, the company also decided to change from a private company to Public Limited Company (Infotel Broadband Services Ltd). Thus, the
company within a week of winning the 4G spectrum disposed off 95% shares to RIL while 5% was retained by IDPL. Much later in March 2013, the company was renamed as Reliance Jio Infocomm Pvt Ltd.
CAG has found that the Government did not protect its interest at the time of framing eligibility criteria for the 4G auction. It allowed participation of internet (ISP) licensees without ensuring adequate safeguards in terms of net-worth of the companies participating in the auction. It found that while a UAS licensee or even a new company without a license was allowed to participate in the 4G auction, but
they had to pass through the test of net-worth in order to become eligible, but no such criteria was specified for the existing internet (ISP) licensees participating in 4G auction. CAG observed that this criterion was important even for ISP-A licensees as they had to participate in the bidding where the reserve price was fixed at Rs 1,750 crore per pan-India license for 20 MHz spectrum in 2.3 GHz band.
After the company was taken over Reliance Industries, the government allowed it to provide voice telephony (which was earlier prohibited) without conducting a fresh auction. This was done at the rate of Rs 1,658 crore which was fixed in 2001, and had been struck down by the Supreme Court in the 2G case for causing huge loss to public exchequer. The CAG has now concluded that besides vitiating the
auction process, an undue advantage of Rs 22,842 crore was given to RIL at the cost of exchequer. The relevant part of the CAG’s report is reproduced below: –
It was found that the basis of the decision i.e. payment of entry fee of Rs 1,658 crore by ISP licensee for a permission to Pan India
provision of mobile voice services using BWA spectrum considered by the DoT Committee, Telecom Commission and the MOC&IT, was primarily intended to fill the gap between the eligibility criterion stipulated for participation in the 3G / BWA auction in 2010 as UAS / CMTS licensees had paid entry fee of Rs 1,658 crore while ISP licensees had paid only Rs 30 lakh.
The DoT Committee, Telecom Commission and the Ministry of communication &IT however ignored the fact that the quantum of entry fee i.e. Rs 1,658 crore was basically discovered in 2001 through the bidding for the 4th Cellular licenses. Market conditions since then have changed drastically, and this price needed to be modified to reflect the present value.
Therefore, by permitting ISPs to provide mobile voice service using BWA spectrum won in 2010 auction post-auction, the government has brought ISP licensees with BWA spectrum at par with UAS / CMTS 3G spectrum winners so far as provision of services are concerned –
Voice, Data, etc., and post auction interpretation of such vital nature would appear to be arbitrary, inconsistent and not appropriate.
proportionate prices for 20 MHz block size in 2.1 GHz spectrum band (3G spectrum) and 2.3 GHz spectrum band (BWA spectrum) plus the Net Present Value of the entry fee for UASL at the end of FY 2009-10 (Rs 20,653 crore plus Rs 3,847 crore – Rs 1,658 crore). Besides, the sanctity of the entire auction process has been rendered vitiated due to post auction interpretations and interventions after three years.
It was therefore no surprise that Reliance JioInfocomm was among the first group of companies which applied for UL immediately after introduction of the scheme and obtained the Letter of Intent (LoI).
February 2010, there was no doubt that bidders would have taken informed decision for putting up their bid and the market discovered
price would have been significantly different for 3G and BWA spectrum.
AAP leader and senior lawyer Prashant Bhushan has filed a PIL in the Supreme Court seeking cancellation of Reliance Industries’ telecom license and a through criminal investigation. Supreme Court had issued notice to the government and Reliance on that petition on 9th May 2014.