Spectrum Sale Cost India $31 Billion: CAG

The government’s auditor believes that India’s federal treasury may have lost as much as US$31 billion in revenue after telecommunication airwaves were sold below market rates two years back.

According to CAG, the Indian government collected only US$2.74 billion from the sale of the 2G wireless spectrum to companies. The airwaves were sold in 2008.

Andimuthu Raja resigned on Nov. 14 as the nation’s telecommunications minister after a year-long investigation into the sale of the wireless spectrum. The Central Bureau of Investigation has been examining the role Raja and the Ministry of Communications had in the pricing of the permits since October last year while the Supreme Court has been hearing public interest petitions on the subject.

According to the report, the auditor calculated the maximum estimated loss based on the prices at which the third-generation airwaves were sold in May. Based on another model, the under-pricing of 2G spectrum led to a loss of $11.84 million.

According to CAG, DoT failed to consider applications on a first come, first serve basis, allowing some applicants to jump the queue. The process by which the department issued the permits, called Universal Access Service, or UAS, licenses, lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner.

As per the report, the department issued 122 new licenses to use 2G spectrum in 2008. 85 of the licenses were given to ineligible recipients. Companies including Unitech Ltd., Tata Teleservices Ltd., Shyam Telelink Ltd., (Sistema Shyam Teleservices Ltd.) and Swan Telecom Ltd.,( Etisalat DB Telecom Pvt.), sold stakes in their wireless ventures at significant premiums to the price they paid for spectrum.

The report further showed that these companies, created barely months ago, deliberately suppressed facts, disclosed incomplete information, submitted fictitious documents and used fraudulent means for getting UAS licenses and thereby access to spectrum. Owners of these licenses, obtained at unbelievably low price, have in turn sold significant stakes in their companies to Indian or foreign companies at high premium.