Wednesday, September 14, 2011

2G spectrum scam

The 2G spectrum scam in India involved the issue of 1232 licenses by the ruling Congress-led UPA alliance of the 2G spectrum to 85 companies including many new telecom companies with little or no experience in the telecom sector at a price set in the year 2001.
The scam involved allegations regarding
  • the under pricing of the 2G spectrum by the Department of Telecommunications which resulted in a heavy loss to the exchequer, and
  • the illegal manipulation of the spectrum allocation process to favour select companies
The issue came to light after the auction of airwaves for 3G services which amounted to INR67,719 crore (US$15.1 billion) to the exchequer. A report submitted by the Comptroller and Auditor General based on the money collected from 3G licenses estimated that the loss to the exchequer due to under pricing of the 2G spectrum was INR176,379 crore (US$39.33 billion).
The scam came to public notice when the Supreme Court of India took Subramaniam Swamy's complaints on record [With Case type:Writ Petition (Civil),Case No:10, Year:2011].

Civil Servants, Politicians and Corporations Involved in scam

All the accused have been booked under sections 120(B) (criminal conspiracy), 468 (Forgery for purpose of cheating), 471 (using as genuine a forged document or electronic record), 420 (cheating and dishonestly inducing delivery of property) and 109 (abetment if the act abetted is committed in consequence, and where no express provision is made for its punishment) of the Indian Penal Code. Read More..

Politicians, Ministers and Parliamentarians involved

  • Andimuthu Raja, Union Cabinet Minister for Communications and Information Technology : The Comptroller and Auditor General holds Raja personally responsible for the sale of 2G spectrum at 2001 rates in 2008, resulting in the previously mentioned loss of up to Rs. 1.76 lakh crores (US$40 billion) to the national exchequer. In August, 2010, evidence was submitted by the Comptroller and Auditor General (CAG) showing that Raja had personally signed and approved the majority of the questionable allocations.
  • M. K. Kanimozhi, Member of Rajya Sabha : On April 25, 2011 Kanimozhi was named as a co-conspirator in the supplementary chargesheet filed by the Central Bureau of Investigation (CBI) in connection with the 2G spectrum case. The chargesheet submitted before the Supreme Court establishes how Rs 200 crore connected with the scam traveled from a partnership firm of businessman Shahid Balwa of Swan Telecom to the Karunanidhi family-owned Kalaignar TV. She has been charged with section 7 and 11 of the Prevention of Corruption Act. The sections deal with acceptance of alleged gratification. Read More..

Bureaucrats involved

  • Siddhartha Behura, Civil Servant (IAS officer of 1973 batch UP cadre) : He was the Telecom secretary who served in the DOT at the time of the 2G allocation.
  • Pradip Baijal, Civil Servant (IAS officer of 1966 batch MP cadre) : He is alleged to have recommended policies that favored certain Telecom companies when he was heading the TRAI. Post retirement, Baijal joined Noesis, a consulting firm. Raja has made references to Baijal's decisions in 2003 as the basis for his decisions in 2008; something which has been attacked by Arun Shourie and several media pundits. The houses and offices of the bureaucrat were visited by the Central Bureau of Investigation in December 2010 as part of their investigations.However, Baijal is expected to get a clean chit in this issue.
  • R K Chandolia, Civil Servant (IES officer of 1984 batch cadre) : He was private secretary of Raja during UPA-I when the licences were awarded. When Raja became the Telecom Minister once again in UPA-II, Chandolia had been promoted to the Joint Secretary rank. Raja re-designated him Economic Adviser, that gave him the charge of all important policy-related work. Chandolia interacted with all the licensees. It is said that it was Chandolia who, from DDG-access services A K Srivastava's room, had handed out letters of intent to representatives of various companies. Read More..

Corporations involved

  • Allianz Infra
  • Aircel
  • Dishnet Wireless
  • Loop Mobile
  • Sistema Shyam Mobile (MTS) – Sistema Mobile Russia
  • Reliance Communications
  • S Tel
  • Swan Telecom
  • Tata Tele Services
  • Unitech Group
  • Videocon Telecommunications Limited
  • Vodafone Essar
  • Virgin Mobile India
  • Air tel

 Corporate personalities involved

  • Anil Ambani - Reliance Group (ADAG) -
  • Ratan Tata
  • Shahid Balwa - Swan Telecom (now Etisalat DB)
  • Vinod Goenka - Swan Telecom (now Etisalat DB)
  • Venugopal Dhoot - Videocon Group
  • Prashant Ruia - Essar Group
  • Sanjay Chandra, Managing Director of Unitech Ltd and Unitech Wireless
All of them have either been questioned by the CBI or are prospective suspects in the scam. Read More..

Media persons and lobbyists involved

  • Nira Radia, a former airline entrepreneur turned corporate lobbyist whose conversations with politicians and corporate entities were recorded by the government authorities. The contents were later leaked by unknown parties creating the Nira Radia tapes controversy
  • Barkha Dutt, a journalist who works with NDTV also was involved in the lobbying of ministers in the government, but was not given any coverage or publicity in this matter by her fellow colleagues. Read More...

Politicians, Ministers and Parlimentarians involved

  • Dayanidhi Maran, former Union Cabinet Minister for Textiles : The main allegation revealed by Tehelka magazine and followed up in several other reports, is that Maran forced C Sivasankaran, owner of Aircel, to sell the telecom company to Maran's Malaysia-based friend T Ananda Krishnan in 2006. The reports allege that Maran deliberately delayed issuing spectrum licenses to Aircel's sister concern, Dishnet Wireless, when it was owned by Sivasankaran. He issued the licenses soon after it changed hands to Ananda Krishnan who owns Maxis.
  • P. Chidambaram, current Union Cabinet Minister for Home Affairs : Subramaniam Swamy states that when the 2G Spectrum rate was finalised, P.Chidambaram was the finance minister of India and he had a major role in deciding the spectrum price with A.Raja. Subramaniam alleges that Chidambaram had received kickbacks and undervalued the spectrum cost. Read More...

 Petitioners to 2g scam

  • Subramaniam Swamy, activist lawyer and politician, whose letters to the Prime Minister demanding action and affidavits and cases in the Supreme Court brought the issue into the public limelight.
  • Paranjoy Guha Thakurta, a journalist who was one among the very first to write on the irregularities in the awarding of 2G spectrum allocation by the Telecom Ministry. He is also one of the petitioners in the 2G PIL currently being heard in the Supreme court.
  • Prashant Bhushan, on behalf of the Centre for Public Interest Litigation.
  • Anil Kumar, on behalf of the civil society organization  Telecom Watchdog
  • Others:Several eminent people like former chief election commissioners J.M. Lyngdoh, T.S. Krishnamurthy and N. Gopalaswami and former central vigilance commissioner (CVC) P. Shankar are also petitioners in the suits filed by civil society groups. Read More...

 Loss to Exchequer

The Controller and Auditor General of India used three different methods to assess the presumptive loss to the exchequer resulting from not auctioning 2G spectrum.
The first method was based on the fact that S Tel, one of the licensees, explicitly offered to pay significantly higher license fees for the spectrum. Based on the fees offered by S Tel, the CAG estimated the loss to the exchequer at INR67,364 crore (US$15.02 billion)
The second method was based on the price recovered by the 3G auction in 2010. The CAG reasoned that since 2G is really 2.75G (EDGE), its price should be comparable to that of 3G licenses. Based on this method, the CAG estimated the loss to the exchequer to be INR176,000 crore (US$39.25 billion)
The third method was based on the fact that some of the licensees received FDI in the form of equity, shortly after the spectrum allocation. The CAG reasoned that this equity infusion was entirely due to the value of the allocated spectrum; this can be construed as re-sale of the spectrum by the licensee, and hence was a valid basis for assessing loss to the exchequer. Based on this method, the CAG estimated the loss to the exchequer to be anywhere between INR57,666 crore (US$12.86 billion) (based on Etisalat's investment in Swan Telecom) and INR69,626 crore (US$15.53 billion) (based on Telenor's investment in Unitech).
For its part, the Congress-party led government has publicly defended itself on this count and Kapil Sibal, who replaced A. Raja as the communication minister, has refuted the CAG reasoning. He has also justified his government's decision not to auction 2G spectrum as being in line with the policy guidelines laid down by the 10th Five-Year Plan. Read More...

Relationship between media and government

Media sources such as OPEN and Outlook reported that Barkha Dutt and Vir Sanghvi knew that corporate lobbyist Nira Radia was influencing the decisions of A. Raja.The critics alleged that Dutt and Sanghvi knew about corruption between the government and the media industry, supported this corrupt activity, and suppressed news reporting the discovery of the corruption. Read More...
Ratan Tata petitions over leak
The tapes leaked to the public include conversations between Nira Radia and Ratan Tata. Tata petitioned the government to acknowledge his right to privacy and demanded accountability for the leak, with the Minister for Home Affairs, CBI, Indian Income Tax Department, the Department of Telecommunication, and the Department of Information Technology as respondents in the petition.
On April 4, 2011 Indian Parliament's Public Accounts Committee (PAC)questioned Tata Sons Chairman Ratan Tata and corporate lobbyist Niira Radia regarding their roles in 2G Scam. Read More...

Response to scam

In early November 2010 Telecom Minister A Raja resigned.
In mid November the controller Vinod Rai issued show-cause notices to Unitech, S Tel, Loop Mobile, Datacom (Videocon), and Etisalat to respond to his assertion that all of the 85 licenses granted to these companies did not have the up-front capital required at the time of the application and were in other ways illegal. Some media sources have speculated that these companies will receive large fines but not have their licenses revoked, as they are currently providing some consumer service.
In response to the various allegations, the Govt of India has replaced the then incumbent Telecom minister, A. Raja with Kapil Sibal who has taken up this charge in addition to being the Union minister for Human Resources Development.Mr Sibal contends that the "notional" losses quoted are a result of erroneous calculations and insists that the actual losses are nil.
The CBI conducted raids on Raja and four other telecom officials - former telecom secretary Siddharth Behura, Raja's personal secretary R K Chandolia, member telecom K Sridhar and DoT deputy director general A K Srivastava on 8 December 2010.Kanimozhi, DMK MP and Karunanidhi's daughter, was arrested and sent to Tihar jail by a Delhi court which dismissed her bail plea in the 2G spectrum scam, saying there was a possibility of witnesses being influenced considering the "magnitude" of the crime. Read More...

Arrests and Charge-sheets

On February 2, 2011, the Central Board of Direct Taxes arrested former Telecommunications Union Minister Andimuthu Raja. The CBDT also arrested R.K. Chandolia, Raja's personal aide, and Siddharth Behura, the former Telecom Secretary.Both Raja and Chandolia are heard in conversation with Niira Radia in the released Radia tapes.
On February 8, 2011, the CBI arrested Mumbai based Dynamix Balwas (DB) group managing director Shahid Usman Balwa in connection with the 2G spectrum allocation scam. The CBI has evidence from the Income Tax department that Shahid Usman Balwa, considered close to Raja, was instrumental in channeling the kickbacks allegedly received by the former telecom minister.
On March 29, 2011, in Delhi, the CBI arrested Asif Balwa (younger brother of the arrested former Managing Director of DB-Etisalat Group, Shahid Balwa) and Rajeev Agarwal for their alleged involvement in money transfer to the Dravida Munnetra Kazhagam's (DMK) Kalaignar TV channel.
On April 2, 2011, the CBDT filed its first 80,000 page chargesheet in the 2G spectrum scam before a Special Court in Delhi naming nine individuals and three companies. It said the wrongful acts of the accused deprived the government exchequer of possible revenues amounting to INR Rs 30,985 crore (USD $ 6,983,322,233). The accused include the following individuals:
  1. Andimuthu Raja, former Telecom minister
  2. Siddharth Behura, former Telecom Secretary
  3. R.K. Chandolia, Raja's former personal secretary
  4. Shahid Usman Balwa, former Director of Swan Telecom (now Etisalat DB)
  5. Sanjay Chandra, Managing Director of Unitech Ltd and Unitech Wireless
  6. Gautam Doshi, Group MD, Reliance Anil Dhirubhai Ambani Group
  7. Hari Nair, Senior Vice-President, Reliance Anil Dhirubhai Ambani Group
  8. Surendra Pipara, Senior Vice-President, Reliance Anil Dhirubhai Ambani Group and Reliance Telecom Ltd
  9. Vinod Goenka, Director, Swan Telecom (now Etisalat DB)
The three companies named are:
  1. Swan Telecom
  2. Unitech Wireless
  3. Reliance Telecom
In the first chargesheet, the CBI had named lobbyist Niira Radia and 124 others as witnesses.
On 25 April 2011, in its second chargesheet in the scam, the Central Bureau of Investigation (CBI) named five more accused individuals:
  1. Kanimozhi - Rajya Sabha Member of Parliament (DMK) and daughter of Tamil Nadu ex-Chief Minister M Karunanidhi
  2. Sharad Kumar of Kalaignar TV
  3. Karim Morani of Cineyug Films
  4. Asif Balwa of Kusegaon Realty
  5. Rajiv B Agarwal of Kusegaon Realty
On 20 May 2011, Special CBI Judge O P Saini of the Delhi court ordered the arrest of DMK Member of Parliament Kanimozhi and Kalaignar TV Managing Director Sharad Kumar after rejecting their bail pleas in the 2G spectrum case.

Second charge sheet filed by CBI has drawn severe criticisms for its inability or lack of intent for nailing the accused.
"Timid and short on detail, the CBI chargesheet serves more as a lesson for students of law and police academies on how not to make a chargesheet.
For starters, the chargesheet goes out of its way to offer a clean chit to the Prime Minister (4 pages), the attorney general (2 pages) and the Tatas (7 pages). It appears the CBI believes its brief is to defend these three as the accused rather than focusing on its real job of detailing criminal conspiracy, delivering evidence on corruption and filing charges, without favour or prejudice, against those in the government and the private sector who cheated the exchequer.
The CBI has further defied the Supreme Court Order of 16.12.2010 which instructed it to investigate spectrum auctions between 2001 and 2006 and the grant of UAS licences. The CBI has walked over that entire period as if nothing happened – ignoring the Justice Shivraj Patil OMC Report and the multiple statements and evidence provided by the government about the illegal issuance of new UAS licences since 2004 in violation of TRAI’s recommendations and the Cabinet decision of 2003. None of the companies that were found ineligible in the CAG Report (85 of them) except Unitech have been chargesheeted. After so long, only Unitech’s 22 applications have been evaluated but not the other 63...The CBI has carefully picked on some junior company officials as the prime accused. "
CBI failed to find any instance of corruption and any evidence for the same. It also took on the role of auditor and recalculated loss figure to 30984.55Cr (without providing details) Read More...

Public Accounts Committee (PAC)

The Public Accounts Committee (PAC), a 21 member committee chaired by Murli Manohar Joshi, investigated the 2G scam independently of the Joint Parliamentary Committee (JPC) and other committees.
Joshi alleged that on April 28, 2011, during the last meeting of the PAC, ministers passed chits (notes) and called on PAC members to speak and behave in a particular manner, but only after a decision to question top officials like the Prime Minister's Office, Cabinet Secretary, Attorney General and Central Bank of India director. A minister reportedly commented that the PAC draft report will be thrown in the dustbin, to which the chairman regretted and questioned if Parliament's proposals and then Supreme Court orders would be given the same treatment. Defending his action of calling witnesses from diverse fields in connection with the 2G scam probe, Joshi said it was the duty of the PAC to "trace and examine the way the money of [the] common man is spent".
On April 30, the chairman submitted a draft report to the Lok Sabha Speaker (Meira Kumar), and insisted that it be tabled in the Parliament. United Progressive Alliance (UPA) members claimed that a majority (11) MPs of the committee had rejected the report. Joshi termed this rejection as unconstitutional, claiming that rejection is impossible until the report is read and discussed by committee members.
On May 2, the speaker reappointed Joshi as the chairman of the PAC (whose term ended on April 30), despite the ongoing controversy regarding the status of the draft report. Soon after, the report was returned by the speaker.
On June 28 the UPA thwarted an attempt by Joshi to present the draft before the PAC. On August 6, Joshi made a fresh attempt to represent the draft. Read More...

Impact on stock markets

The first casualty in Stock Markets once Raja was arrested was DB Realty. 20% fall in the stock prices of DB Realty. Sun TV had its shares fall by 10%. Sun TV COO refused the allegations. Swan Telecom Chief Balwa was arrested on Feb 8 and this led to rumours of links with Anil Ambani's Reliance ADAG and it led to 20% fall of his stocks . Its reported that nearly 2 Billion USD was eroded from his stocks . Spicejet stocks went down after reports of investigation on Maran's recent takeover of Spicejet . Read More...