The opening out of the Telecom sector is indeed a success story.  More investment, better technologies, competition, quality and a complete absence of shortage have been the high points of the success story. An area of concern still is that rural tele-density is hovering around 15% where as the urban tele-density is 88%.

The entry of private players has raised standards of entrepreneurship. However, their capacity to influence decision making in Government, through collateral methods is one disturbing feature. The methodology of spectrum allocation to private players has raised serious doubts with regard to the honesty and fairness of the process.

In 2007, an open licence regime was recommended.  Pursuant to this the Government of India invited applications for telecom licences setting 1st October,2007 as the deadline.   Later, the Government created an artificial date viz. 25.9.2007 as the cut off date.  For some curious reasons, applications received between 26.9.2007 and 1.10.2007 were not considered.  The Delhi High Court by quashing this had adversely commented on the change of rules after the game had commenced. This resulted in inexperienced players coming in who had some idea of the artificial fixation of date, having applied prior to 25.9.2007, and many experienced global players being left out. This was obviously done to favour some.  The policy of selection was based on “First-come first-served” basis.  Nine licences were awarded and the award of licnces entitled each party to a Spectrum license.

The spectrum licence was last allotted in 2003, at an auction determined price of 2001.  This price was Rs. 1650 crores. Obviously, the telecom market has expanded since then.  The economy has grown and the prospect of number of consumers has increased. Even otherwise, calculated on basis of the net present value, there would have to be a fundamental difference in the value of 2001-03 and the values in 2007-08.  The TRAI also suggested that “the entry fee determined  in 2001 is not the realistic price for obtaining the licence. Perhaps it needs to be re-assessed though a market mechanism.” It was further observed that the value would be at least equal to the entry fee in the UAS licences issued earlier.  For some curious reasons, Department of Telecom fixed Rs.1650 crores as the valuefor licences in 2007-08.

Three out of nine awardees of the licences with Spectrum immediately utilized the 74% FDI policy of the Government and found buyers/collaborators from the international market. None of the licencees started the service. Not a single subscriber was added.  All that existed was a shell company along with a spectrum at Rs. 1650 crores.  The valuation of the company overnight enhanced to Dollars 2 billion (approximately) and varying shareholdings were transferred to foreign collaborators/buyers at that value. The difference in the valuation awarded by the Govt. to the private players and the value realized by the private players in each case has been minimum Rs.6000 to Rs.7000 crores.  The nine licencees collectively along with spectrum were thus allotted at an under-valuation which exceeds Rs.60,000 crores.

This is a wrongful loss caused to the Govt. of India and an unfair gain caused to a private party.  The Govt.of India is now depending on the 3G Auctions this year to cover up some part of the fiscal deficit.  If this allocation had been fairly done through auction process, the 6.8 percent fiscal deficit in the current fiscal year could perhaps have been far lesser.

Section 13(1)(d)  of the Prevention of Corruption Act, 1988 provides that if a public servant is said to have committed an offence of criminal misconduct by corrupt or illegal means gets for himself or any other person a valuable thing or a pecuniary advantage, this is punishable upto 7 years or a minimum sentence of one year.  There is no reason why the guilty in this case are not investigated and prosecuted for having conferred a huge pecuniary advantage on private persons while causing wrongful loss to the Govt.of India though this criminal misconduct.