2G Spectrum Scam – Allocation of spectrum or loot of spectrum?

2G Spectrum Scam Allocation of spectrum or loot of spectrum

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2G Spectrum allocation scam of Rs. 170,000 Cr. (Rs. 1.7 trillion) in the Indian Telecom industry is considered as one of the largest scam in recent times. In 2008, Mr. A K Raja, who was telecom minister at that time, took the decision to allot the 2G licenses to new entrants in the telecom industry.

The licences were allotted on the basis of "First come First serve Method" rather than through the process of auction as stipulated under the national telecom policy 1999. The ministry had also reduced the cut off time form October 1, 2007, to September 25, 2007 without consulting and informing other related ministries, even though when it is mandatory to have approval from the cabinet committee (economic affairs) in such important decisions. The Telecom Ministry informed those companies whom they wanted to allot license about the cut off date in advance while others were not informed and they were not able to arrange money in such a short span of time.

At the time of scam, the Indian telecom industry was growing exponentially. The subscriber base had grown from 10 million subscribers in 2002 to 250 million in 2007, due to low tariffs and falling prices of handset. The wireless subscriber base had grown from 52.22 million in 2005 to 165.11 million in 2007 which further grew to 391.76 million in 2009. The growing demand of the wireless connections caught the attention of the companies who wanted to enter telecom sector. The companies who were allotted the 2G licenses did not have any experience in the telecom sector or the technology and thus sold their stake to foreign telecom companies at high prices. The 2G spectrum was allotted in 2008 at a price level of 2001. The 2G spectrum allocations resulted in a loss of approx. Rs. 170,000 Cr. to the exchequer, which is the biggest financial scam in the Indian history.

Out of the 122 new licenses that were given out, 85 licenses were won by companies that did not meet the eligibility criteria. Some companies who did not have any telecom infrastructure, network, subscribers, knowledge or proven track record in the telecom business also got 2G licenses. Swan was awarded the license for Rs. 1537 crore to operate in 13 circles, while Unitech got the licenses for Rs. 1651 Cr. to operate in 22 cities and within short span of time both the companies sold their stake to foreign companies at Rs.9400 Cr. and Rs. 11,620 Cr respectively.

Few days back, the Comptroller and Auditor General of India held Mr. A Raja as personally responsible for the scam. In his report, CAG informed the parliament that telecom minister ignored the advice of 2G allocation from PMO and other related ministries such as law and finance, and took the decisions to allot the 2G spectrum at throw away prices.

Till now Government has not taken any action against Mr Raja. It seems that it has turned a blind eye to the fact that the scam of Rs. 170000 cr. which is approximately 3% of India's GDP would have helped in the development of country or could have helped in reducing our deficits. The reason for this is the compulsions of coalition politics. As of now, the coalition partner of Congress, DMK is not willing to agree for the sacking of A.Raja as telecom minister.

For the companies who have already been allotted licenses in the 2G scam such as Swan telecom, Unitech and Tata teleservices, no decision has yet been taken by the government. There are high chances that licenses of the companies like Swan and Unitech, who did not clear eligibility criteria at the time of 2G allotment, might be cancelled

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