The comptroller and auditor general (CAG) has accused the telecom ministry for undervaluing 2G spectrum, sold to new players in 2008, and held that the allotment price was not realistic.
According to the CAG’s latest report, policy failed to address the issue of price-discovery of spectrum… The August 2007 Report of TRAI brought out that entry fee as it existed in 2001 was not a realistic price for obtaining a license in the changed situation, considering the dynamism and growth of telecom sector and it needs to be reassessed through a market mechanism.
The Department of Telecom (DoT) is facing allegations of having distributed new telecom licenses and spectrum (radio waves) at casual prices, causing huge losses to the exchequer.
Nine firms were issued licenses, bundled with start-up 2G spectrum, in January 2008 at US$37.29 million for pan-India operations.
As per the CAG report, the telecom regulator TRAI observed that the value of spectrum was not correctly reflected in the extent pricing model and recommended for de-linking of spectrum from allotment. The report, however, also observed that ….TRAI did not favor any change in 2G spectrum pricing even for new entrants on the grounds that it would affect the principles for level playing field for the new operators.
According to the government auditor, the price at which the spectrum was allotted in 2008 was based on 2001 prices which was quite low and has resulted in a loss to the government exchequer. The statutory auditor also highlighted that first-come, first-serve basis was not followed in its true sense for the allotment of spectrum.
The CAG also alleged that the DoT decided on cut-off dates twice in November 2007, and later changed it in January 2008 that favored select companies.
As per the report, it was noticed that 13 applicants were even ready with demand drafts drawn on dates prior to the notification of cut-off date and some had even managed securing bank guarantees. These benefited applicants had prior information about the documents and high value demand draft; hence they were able to comply with the LOI conditions within a few hours and in as less as 41 minutes in respect of 22 service areas.
According to CAG, the Telecom Ministry ignored the concerns voiced by the Prime Minister’s Office, the Finance Ministry and the Law Ministry and went ahead with 2G spectrum allotment at a price discovered 7 years back.
the report further claimed that the availability of this spectrum has become scarce and the government has to incur huge expenditure for getting it vacated from Defence Authorities by providing alternate media to them.
