pac draft recommendatio

8/7/2019 PAC Draft Recommendatio

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OBSERVATIONS/RECOMMENDATIONS

I INTRODUCTORY

Before the mobi le te lephony was in t roduced in Ind ia there was

hard ly any comm erc ia l va lue of Spect rum, i t w as ra ther prac t ica l ly n i l .

The demand for Spect rum was fe l t in 1994, when in accordance wi th

the Nat ional Telecom Pol icy (NPT-1994), the Telecom Service Sector

was opened up for the pr iva te sector par t ic ipat ion to compl iment the

ef for ts o f the Depar tment o f Te lecomm unicat ions. The l icens ing o f

Ce l lu lar mobi le services w as done in tw o phases. In the f i rst phase

tw o Cel lu lar Mobi le Telephone Service (CMTS) l ic ences w ere aw arded

in November 1994 t o Airc el , Bhart i A i r t e l , Loop Mobi le and Vodafone

in the four metro c i t ies o f De lh i , Mumbai , Ko lk ata and Chennai on a

Beauty Parade bas is . I t means that the pr ice o f Spect rum w as to be

f ixed in such a manner so as to ensure i ts opt imum ut i l i za t ion by

aw ard ing i t t o the user (s ) w ho w ould score the h ighest aga ins t a group

of the ex tant c r i te r ia such as rura l coverage or the fu l f i l lment o f ro l l

ou t obl igat ions. A l though, l i cence fee for the above tw o l icences was

predetermined, Spect rum charges and roya l ty fo r use o f Spect rum

w ere payable separate ly . In the second phase, tw o CMTS l icences

were awarded in December, 1995 to Bhart i , Idea, Rel iance and

Vodafone in 18 Telecom Circ les/Service areas based on a compet i t ive

b idd ing process. The indust ry p leaded that they c ou ld not a t t a in la rge

growth o f bus iness and they were not ab le to ach ieve the expected

returns on the i r huge investments , the Commitment for h igh l icence


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fee cou ld not be honoured. The Government revis i ted the ex t ant

Te lecom Pol icy and thus the New Telecom Pol icy , 1999 was

fo rmu la ted w h ich in ter-a l iast ipu la ted t he ava i labi l i ty o f a f fordab le and

ef fec t ive communicat ions for the c i t izens and open up the te lecom

sector to a greater compet i t ive env i ronment in both urban and rura l

areas provid ing equal opportuni t ies and level p lay ing f ie ld for a l l the

players. One of the most important features of the NTP 1999 was

that the Government would invar iab ly seek the recommendat ions o f

the Telecom Regulatory Author i ty of India (TRAI) on the number and

t im ing o f new l icences before tak ing any dec is ion on the issue of new

l icences in fu ture . Thus, the Government made i t c lear that the ent ry

of more operat ors in a Circ le/Service area w as required to be based on

the TRAI 's recomm endat ions. The concept o f revenue shar ing reg ime

was brought in w i th a v iew to prov id ing re l ie f to the Access Serv ice

Providers i .e. Cel lu lar Mobi le Service Providers, F ixed Service

Providers and Cable Service Providers. The revenue shar ing regime

cont empla ted payment o f one t im e ent ry fee and l icence fee based on

revenue share. In acc ordance w i th i t , the Government a llow ed the

ex is t ing l icensees to migra te f rom the f ixed l icence fee reg ime under

NTP 94 to a revenue shar ing regime under NTP 99. Al l the ex ist i ng

BSOs and CMSPs migrated to the revenue shar ing regimes

w .e.f . 1 August , 1999 acc ord ing to w hich a share o f 15 per cent o f the

Adjusted Gross Revenue (AGR) w as chargeable as l ic ence fee f rom t he

CMSPs and the BSOs. Subsequent ly , the share was modi f ied to the

slabs of 12 per cent , 10 per cent and 8 per cent of the AGR depending

on the s ize o f the C i rc le /Serv ice Area w hich w as fur ther rev ised to 10

per cent , 8 per cent and 6 per cent . Th is revenue share w as payable


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quar ter ly . Apar t from the l icence fee, the Operators w ere a lso

required to pay onet ime non-refundable entry fee before s igning the

new l icenc e agreement . Thus, in acc ordance w i th the prov is ions o f

NTP-99 three t ypes of fees w ere prescr ibed v iz ., (i ) f ixed perc entage of

AGR as annual l i cenc e fee, ( i i ) A f ix ed perc entage of AGR of CMSPs as

annual Spect rum c harge and (i i i ) One t im e entry fee before s igning the

l ic ence agreement . In 1999-2000, MTNL and BSNL w ere aw arded

CMTS l ic ences as the th i rd mobi le operator . In September-Oct ober

2001, 17 new CMTS l icences w ere issued on a com pet i t ive b idd ing

process. The a l lo tment o f Spect rum w as assured under the l icence

and no separate upf ront fee w as charged for Spect rum. In 2003 the

Uni f ied Acc ess Serv ice (UAS) L icens ing regime w as in t roduced w hich

env isaged the prov is ion o f w i re l ine , f ixed and l imi ted m obi le w i re less,

fu l l mobi le w i re less and ce l lu lar mobi le te lephone serv ices under one

l icence on payment o f the prescr ibed ent ry fee. As per the cond i t ion

of the UAS l icense, in i t ia l Spectrum of 4.4 MHz + 4.4 MHz was to be

al lot ted for GSM based systems and a maximum of 2.5 MHz + 2.5 MHz

Spect rum to be a l lo t ted for CDMA based sys tems, on case by case

bas is and sub jec t to avai lab i l i ty . Increment a l Spect rum beyond the

in i t ia l a l lo tment was l inked to be subscr iber base ach ieved by an

operator . Since 2004, the Departm ent have been issuing new Uni f ied

Acc ess Serv ice L icenc es and a l lo t t ing 2G Spect rum on c ont inuous and

First-Come-First served basis. Betw een 2004 and 2007 51 new UAS

l icences were issued a f ter the in t roduct ion o f the UAS l icens ing

regime on 11t h November, 2003. Based on a reference made to the

TRAI in Apr i l 2007 and TRAIs consequent rec omm endat ions of 'no

cap ' on the number o f p layers in a serv ice area and in t roduct ion o f


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dual technology l icenses, the DoT issued 35 dual technology l icenses

and 122 UAS Lic ences in 2007-08. The procedure fo l low ed by DoT for

issue o f these 157 l icences smacked o f ser ious i r regu lar i t ies lead ing

to stagger ing loss to the exc hequer . The Comm it t ee 's deta i led

examinat ion o f th is sub jec t based on ora l depos i t ions by severa l

w i tnesses and scores o f wr i t ten documents obta ined f rom var ious

sources has revealed gross v io lat ion of the establ ished norms, ru les

and procedures, dere l ic t ion o f dut ies on the par t o f

Ministr ies/Departments concerned, scant regard, border ing on

contempt , fo r cons idered suggest ions/op in ions o f the

people /organ izat ion that mat tered e tc . wh ich are h igh l ighted in the

succ eeding paragraphs. The Comm it t ee have a lso tak en stoc k o f the

progress in t he rura l te lephony, broadband c onnect ion, harmfu l e f fec t s

of the EMF rad ia t ion e tc .


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IGNORING THE ADVICE OF THE MINISTRY OF LAW & J USTICE

The Comm it t ee note that c onsequent upon the recomm endat ions

of TRAI in August , 2007 for put t ing `no cap' on t he number of p layers in

a c i rc le /serv ice area, 575 app l ica t ions w ere rece ived for UAS licences

as of t he cut -of f date i .e. 1st Oct ober, 2007. In order to handle such a

heavy rush o f app l ica t ions in a fa ir and equ itab le manner w hich w ould

be lega l ly tenab le , the Mem ber(Technology), DoT w rote a le t ter t o t he

Secret ary , Depar tment o f Lega l Af fa i rs seek ing lega l op in ion f rom the

Attorney General /Sol ic i tor General and suggest ing four a l ternat ives.

The Law Secret ary , op in ing that the issues w ere too broad and had to

be re f ined fur ther , put up a note to the Min is ter o f Law & Just ice for

h is cons idera t ion. The Min is ter , agree ing w i th the Law Secret ary ,

suggested for t he const i t u t ion o f an Empow ered Group o f Min isters t o

cons ider the whole issue. In response, the Min is ter o f Communic at ion

& In format ion Technology in h is le t te r to the Pr ime Min is ter s ta ted

that t he suggest ion o f the Law Min is t ry w as to t a l ly out o f cont ex t . The

Commit tee dep lore the in temperate and indecorous manner in which

the cons idered adv ice o f the Min is t ry o f Law & Just ice to re fer to the

Empowered Group o f Min is ter such an impor tant mat ter l i ke fo l lowing

a fa i r and t ransparent procedure for hand l ing the la rge number o f

app l ica t ion for grant o f UASL was termed as out o f `contex t ' by the

Min is ter o f Comm unicat ion & In format ion Technology. The DoT cou ld

not fu rn ish any cogent ex p lanat ion for se t t ing as ide the adv ice o f Law

Min is ter nor cou ld they furn ish the f i le cont a in ing the sa id dra f t le t te r .


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I t i s rea l ly surpr is ing and shock ing that the lega l op in ion which

was sought by the Depar tment on i ts own vo l i t ion was re jec ted by i ts

Minist er . Needless to say, by doing so the benef i ts of t he d isc ussion

on impor tant te lecom mat ters in an in ter -min is ter ia l fo rum were

de l ibera te ly s tymied. The Comm it t ee are o f the cons idered op in ion

that seek ing lega l op in ion to hand le the la rge number o f app l ica t ions

in a fai r , t ransparent and equ i tab le manner w as a sound and ra t iona l

dec is ion but the manner in which the cons idered adv ice o f the Law

Min is ter , on be ing found unpala tab le , was t urned down, on ly shows the

mala f ide in tent ions o f t he then MOC& IT.

The Commit tee are shocked to note that cont rary to the adv ice

of Min is t ry o f Law & Just ice , the Min is t ry o f Communicat ion &

In format ion Technology had a d i rec t re ference made to the So l ic i to r

General on 7.1.2008 seeking his opin ion on the Press Release w hic h

was la ter issued on 10.01.2008 to which the SG op ined that the

proposed course for issue of LOIs ` is fa i r and reasonable ' and `make

for t ransparenc y ' . What is int r iguing is that the SG gave advic e on a

mat te r fo r wh ich the Min is t r y o f Law & Jus t i ce had adv ised fo r

reference to EGOM. The Law Secret ary, w hi le deposing before the

Commit tee has categor ica l ly s ta ted that seek ing d i rec t op in ion o f the

SG bypass ing the Min ist ry o f Law & Just ice is not in l ine w i th the

rules and proc edures prescr ibed in th is regard. The Att orney General

h imsel f is o f the op inion that t he Min is ter , shou ld not mak e re ferences

to any Law Of ficer d i rec t ly . But i t i s qu i te int r igu ing that t he Ld.

Attorney General , when he was the Sol ic i tor General , has had himsel f

enter ta ined a d i rec t re ference made by the Min is ter o f


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Comm unicat ions & IT . The Comm it t ee, there fore , recomm end that a

ser ious v iew must be tak en in the mat ter . The Comm it t ee a lso

recommend that the adv ice g iven by the Law Min is t ry par t icu lar ly on

impor tant mat ters hav ing wide rang ing impl ica t ions must be taken

wi th the ser iousness that i t deserves and where re jec ted, reasons

must be furn ished to the Law Min is t ry under in t im at ion to t he Cabinet

Secret ar ia t . Fur ther , Min is t ry o f Law & Just ic e need to issue

appropr ia te ins t ruc t ions and procedure so that a l l cases seek ing

advice/opin ion of At torney General /Sol ic i tor General are routed

through the admin is t ra t ive Min is t ry on ly . A ser ious v iew must be

taken aga ins t any dev ia t ion f rom the es tab l ished procedure and

st r ingent ac t ion must be taken aga ins t o f f ic ia ls who v io la te the

prescr ibed procedure.

The Commit tee note that in h is le t te r dated 26th December ,

2007, the Min is ter o f Communicat ions & IT had appr ised the Pr ime

Min is ter that h is d iscuss ion wi th the Externa l Af fa i rs Min is ter and the

Sol ic i to r Genera l had en l ightened h im to take a pre-empt ive and

proact ive decis ion on the issue of UAS l ic ences/2G Spectr um. But a

perusa l o f the then Externa l Af fa i rs Min is ter 's note to the Pr ime

Min is ter revea ls that he has under l ined the respons ib i l i ty o f the

Government to f rame, rev ise and change the po l icy in a t ransparent

manner and then fo l low i t in le t t e r and sp i r i t . He has a lso

categor ica l ly remarked that wh i le keep ing on issu ing new l icences,

the cr i t e r ia for grant o f the l icences may be s t rengthened and put in

pub l ic domain a t the ear lies t . Thus, i t i s ev ident that he d id not g ive

any wrong adv ice to the M/o Communicat ions & IT who in turn


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dis tor ted the fac t s w hi le w r i t ing to the Pr ime Minis ter . Simi lar ly , the

At torney Genera l has c lar i f ied in a wr i t ten note that he has never

verba l ly or in wr i t ing concur red wi th any proposed course as c la imed

by Shr i A. Raja in h is let t er dated 28th Decem ber, 2007. Thus, nei t her

the then Externa l Af fa i rs Min is ter nor the then Sol ic i to r Genera l had

suppor ted the then M/o Communicat ions & IT 's c la im of be ing

en l ightened by them .

The PMO's rep ly that no suggest ion o f t he Law Min is ter to set up

an EGOM was rece ived by them does not conv ince the Commit tee in

v iew of t he fac t t hat the Communicat ion Minis ter h imsel f apprised the

Pr ime Min is ter o f the Law Min is ter 's v iew a longwi th h is own v iew

thereon. I t impl ies that the PMO was very much aware o f the Law

Min is ter 's suggest ions, but the counterv iew of the Communicat ion

Min is ter got over r id ing pre ference to the Law Min is ter 's v iews for

some unknown reasons and thus no e f for t was made by the PMO to

in i t ia te the process o f the const i t u t ion o f the EGOM. The PMO

cer ta in ly e i ther fa i led to see the forebodings or was rendered a mute

spec ta to r .


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NOT CONSULTING THE TELECOM COMMISSION

The Te lecom Commiss ion w as set up by t he Government in 1989

w i th t he ob jec t ive o f fo rmula t ion o f t he po l ic ies o f the DoT for approva l

o f the Government as wel l as to oversee the implementat ion o f the

pol ic ies and preparat ion of annual budget of t he DoT. Unfor t unately ,

an ar t i f i c ia l and convenient d iv is ion has been created by inc lus ion o f

fu l l -t im e and part- t im e mem bers of the Comm ission. The permanent

mem bers o f the Commiss ion inc lud ing the Chai rman are employees o f

the DoT and the presence o f th ree permanent members const i tu tes

the quorum. The o ther members , par t -t im e but permanent Government

servants, are Finance Secretary, Industry Secretary, Secretary IT and

Secret ary , Plann ing Comm iss ion. The Comm it t ee note that as per the

Rules o f Bus iness o f the Te lecom Commiss ion mat ters o f po l icy

re la t ing to te lecommunicat ions and proposa ls for acceptance o f any

ru les and procedures w hich invo lve s ign i ficant dev ia t ions f rom normal

ru les and procedures o f the Government are t o be brought before the

Comm iss ion. But the Comm it t ee are const ra ined to f ind that t he TRAI

recommendat ions o f 2007, wh ich were very c ruc ia l f rom the

perspect ive o f the management o f the Te lecom Sector and Spect rum

Management , w ere never p laced before the Te lecom Commiss ion. The

DoT's rep ly that i t w as d iscussed in the in terna l Te lecom Commiss ion

on 10th Oct ober , 2007 is unacc eptab le in v iew of t he i r own adm iss ion

that t he Resolut ion, Rules of Business and Rules for the Transac t ion of

Bus iness o f the Te lecom Commiss ion do not c onta in any re ference t o

` Internal ' , 'External ' or `Ful l ' Telecom Commission; only the term


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`Telecom Comm ission' f inds a p lace. Thus, i t is est abl ished that t he

preva lent prac t ic e has been deve loped in the DoT as a cam ouf lage t o

take very convenient dec is ions through the permanent in terna l

members o f the DoT and avo id uncomfor tab le dec is ions in the ent i re

Te lecom Comm iss ion w here the part -t im e but independent mem bers ,

par t icu lar ly the Finance Secret ary , w ould be ra is ing ob jec t ions. Th is

fac t has been cor roborated by one o f the former Secretar ies o f the

Depar tment o f Te lecomm unicat ions. The Commit tee s t rong ly

d isapprove such a dub ious prac t ice and impress upon them to

hencefor th d iscard d is t ingu ish ing between the fu l l t ime and par t - t ime

members or fo r that mat ter between in terna l or fu l l Te lecom

Comm iss ion as the Commiss ion is one ent i t y .

The Te lecom Commiss ion was set up for fa i r and independent

work ing o f the DoT but the manner in which the Te lecom Commiss ion

is operated, it has been reduced t o a m ere charade rendering i ts very

in tegr i ty quest ionab le . The Comm it t ee, there fore , recomm end su i tab le

amendments in the Bus iness Rules so that i t i s made mandatory to

re fer a l l mat t ers re la t ing to po l icy and c hange in po l icy or procedure to

the Te lecom Commiss ion by do ing aw ay w i th t he procedure o f in terna l

or ful l comm iss ion for the i r approval . Fur ther , a l l such po l icy or

procedura l changes once approved by the Commiss ion must be

not i f ied a f ter due approva l o f the Cabinet . The Comm it t ee observe

that one o f the convenient methods adopted by the Depar tment to

keep the par t - t ime members a t bay is to put in a c lause in the

Bus iness Rules to conso l idate the quorum wi th the presence o f th ree

fu l l t im e mem bers on ly . The Comm it t ee exhor t the Government to


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rev is i t the Transact ion o f t he Bus iness Rules o f the Comm iss ion wi t h a

v iew to rev is ing the quorum ru le mak ing the presence o f the F inance

Secret ary , or h is author ized representa t ive not be low the rank o f Jo in t

Secretary in the Depar tment o f Economic Af fa i rs , as essent ia l

cond i t ion for const i tu t ing the quorum.


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ARBITRARY CHAN GES IN T HE CUT-OFF DATE

The Commit tee note that in August , 2007 TRAI had

recomm ended that t here be `no cap ' on the number o f l i cences in any

serv ice area and the recommendat ion was accepted by the

Government in October, 2007. But, c i rcumvent ing the TRAI

recommendat ion and bypass ing i ts own dec is ion o f the acceptance o f

the rec omm endat ion, the DoT capr ic ious ly for no va l id reasons, put an

ar t i f i c ia l c ap on the number o f l i cenc es to be issued through i ts Press

Release dated 24th Septem ber, 2007. The Depart ment reasoned that

a t the t ime o f re ference to TRAI in Apr i l , 2007, on ly 53 app l ica t ions

were pending but a f ter TRAI 's recommendat ion in August , 2007 there

was a sudden spur t in the number o f app l ica t ions and hence the

Depar tment dec ided to s top rece iv ing fur ther app l ica t ions keep ing in

v iew the l ike ly ava i lab il i ty o f Spect rum. The Depar tment 's reason ing is

unacceptab le because TRAI 's August , 2007 recommendat ion was

acc epted by the DoT in Oct ober , 2007 by w hich t im e there must have

been some ind icat ions o f the number o f app l ica t ions that would be

com ing. Moreover , the Author i ty was not consu l ted on the mat t er as

i ts recom mendat ions w ere not cons idered in the ent i re ly nor the issue

was p laced before the Te lecom Commiss ion and a cut -o f f date was

announced. Astoni shingly, nobody in t he DoT even thought of i t as is

cor roborated f rom the fac t that no mater ia l on record was ava i lab le

w i th the Depar tment to show any in i t ia t ive in th is regard. What is

worse is that the cut -o f f date o f 1s t October , 2007 was advanced to

25th September, 2007 through a Press Release dated 10th January,


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2008 in a dub ious dec is ion taken by the Min is ter on 2nd November ,

2007. Such a dec is ion w as tak en w i thout the approva l o f the fu l l

Te lecom Commiss ion which was scheduled to meet on 9 .1 .2008 but

the meet ing was de l ibera te ly postponed to 15.1 .2008 ant ic ipat ing

ob jec t ions. What is more impor tant is that i t w as so done desp i te the

adv ice o f the Pr ime Min is ter conta ined in h is le t te r dated 2 .11.2007

emphas iz ing a l locat ion o f spect rum and rev is ion o f ent ry fee in a fa i r

and t ransparent manner . The CBI wr i t ten rep l ies show t hat the o f f ice

of Te lecom Min is ter was persona l ly moni tor ing the rece ip t o f

app l ica t ions and on ly a f ter ascer ta in ing the rece ip t o f cer ta in

companies by 24.09.2007, the cut -o f f date was advanced arb i t rar i ly .

The High Court of Delh i in the S.Tel case had ru led that " there cannot

be a change in the ru le a f ter the game has begun" and that the DoT

"cannot be a l lowed to arb i t rar i ly change the cut -o f f date and that too

w i thout any jus t i f iab le reasons" . On th is quest ion w hether th is cut -o f f

date was announced on the bas is o f ava i lab i l i ty o f spect rum, the

former Secretary who has s ince been charge sheeted, admi t ted that

there w as no synchron izat ion and no sc ient i f i c ana lys is nor d id he see

any f i le regarding ava i lab i l i ty o f spect rum . Upon the scru t iny of

w r i t t en and ora l evidence and the perusa l o f the f ind ings o f the OMC,

the CBI and the judgment of the High Court of Delh i and the refusal of

the Supreme Cour t on appeal by the DoT to in ter fere w i th t he orders

of the H igh Cour t ho lding the advancem ent o f the cut -of f date as

arb i t rary and un jus t i f iab le , the Commit tee re f ra in f rom mak ing any

fur ther comm ent . Now that the CBI is invest igat ing the case under the

Supreme Cour t 's moni tor ing, the Commit tee be l ieve that the

invest igat ing agency w i l l tak e the case to i ts log ica l conc lus ion. In


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the meant ime, the Commit tee urge upon the Depar tment to des is t

i tse l f f rom any gross i r regu lar i ty in any fu ture a l lo tment o f

l i cence/spect rum in la rger in teres t .

The Comm it t ee are per turbed to note t he audac ious rep ly o f the

Depar tment that ne i ther the cut -o f f date o f 1 .10.2007 was pre-poned

nor were the app l ica t ions for grant o f UAS l icences which were

rece ived a f ter 25.09.2007 re jec t ed. The fac t remains that 343

appl icat ions, received between 26.09.2007 and 1.10.2007, are st i l l

pend ing wi th the Depar tment and app l ica t ions rece ived on ly upto

25.09.2007 w ere consi dered for grant of UAS l ic ence. The Depart ment

there fore owe an exp lanat ion for the i r mis lead ing s ta tem ent .

From the wr i t ten rep ly furn ished to the Commit tee, i t i s found

that the then MOC&IT on 2nd November , 2007 approved the

advancement o f the cut -o f f date to 25th September , 2007 on the

ground o f avai lab i l i ty o f on ly 15MHz of Spect rum but w h i le rep lying to

the Pr ime Min is ter on the same day, he c la imed that there was

60-65MHz Spectr um st i l l avai lable for the 2G serv ices. When the

Depar tment was asked to exp la in the pos i t ion , they in formed that

there was a typograph ica l er ror in the mater ia l fu rn ished to

Comm it t ee. The Comm it t ee find the p lea o f typograph ica l er ror se lf -

cont rad ic tory in v iew of the ava i labi l i ty o f Spect rum as ind icated in the

le t ter dated 02.11.2007 o f Min is t ry o f Communicat ions & In format ion

Technology to the Pr ime Minister and t herefore untenable. The DoT

therefore , must f ix respons ib i l i ty fo r such cont rad ic tory in format ion

furn ished to the Commit t ee.


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Another g lar ing d iscrepancy has been not iced in the

Depar tment 's not ing vis-a-vis the Communicat ion Min is ter 's le t te r to

the Pr ime Min is ter . The Comm it t ee f ind that f i le not ing o f the

Depar tment d id not anyw here ment ion the ava i lab i l i ty o f the Spect rum

in the 900 MHz band whereas the Min is ter 's le t te r to the Pr ime

Min is ter ca t egor ica l ly ind icat ed the ava i lab i l i ty o f 60 to 65 MHz of 900

band spect rum . Clar i fy ing the pos i t ion , the Depar tment submi t t ed

that i t was expected that Defence would re lease 60 to 65 MHz of

Spect rum in the 900 band. In the cont ex t o f S. Te l 's case, the

Depar tment have in formed the Commit tee that the company 's

cond i t iona l o f fer d id not mer i t any cons idera t ion s ince i t was in

respect o f Spect rum in the 900 MHz band which was not ava i lab le .

Thus, i t i s ev ident that w hen the Min is ter w rote to t he Pr ime Min is ter ,

Spect rum in 900 MHz band w as not ava i lab le and jus t in ant ic ipat ion o f

vacat ion o f Spect rum by Defence, he had the temer i t y to mis lead the

Pr ime Min ister . The Comm it t ee cast igate the dub ious ro le played by

the o f f icers conc erned in the Depar tment and the Min is ter w ho mis led

the Pr ime Min is ter on such impor tant m at t ers o f al locat ion o f the scare

natura l resource. The Comm it t ee, there fore , recomm end s t r ingent

pun i t ive ac t ion aga ins t a l l those respons ib le for fu rn ish ing wrong

in format ion to Par l iament , suppress ing fac ts and de l ibera te ly

mis lead ing the Pr ime Minis ter . The Comm it t ee a lso be appr ised o f the

measures s ince ins t i t u ted to prevent such recur rences.


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OVERRULING THE VIEWS AND CONCERNS OF THE MINISTRY OF

FINANCE

The Committee note that one of the Terms of References (ToR) of the

Group of Ministers (GoM) constituted on 10 September, 2003 was to recommend

how to ensure release of adequate Spectrum needed for the growth of the

telecom sector. While discussing this aspect on 30 October, 2003 the GoM

decided that 'the Department of Telecommunications and the Ministry of Finance

would discuss and finalise Spectrum pricing formula, which will include incentive

for efficient use of Spectrum as well as disincentive for sub-optimal usages'.

While the GoM of 2006 was constituted, the Planning Commission had suggested

on six ToRs which inter-alia included suggestion for a Spectrum Pricing Policy

and related matters. But the original ToRs were revised and Spectrum Pricing

Policy did not find a place in the revised ToRs. In this context, the Committee

find that the then Telecom Minister wrote to the Prime Minister requesting him to

delete the Spectrum pricing issue from the ToRs of the GoM. The Committee are

startled to observe the manner in which the then Minister of Communication &

Information Technology succeeded in getting revised the terms of reference of

the GoM issued by the Cabinet Secretariat under the orders of PMO on 27th

November, 2006 excluding the matter of spectrum pricing from the purview of

Ministry of Finance and leaving it solely to the Deptt. of Telecommunications to

decide. In the considered view of the Committee such a decision overriding the

Cabinet decision of October 2003 ultimately facilitated the successor MoC&IT's

dubious decision leading to the 2G Scam. The Committee are shocked that, as

required under the transaction of Business Rules, modification in the Cabinet

decision of Oct. 2003 was never brought before the Cabinet even for ex-post-facto

approval. The DoT owes explanation for such a gross dereliction of duty. The

Cabinet Secretary and the PMO knew about these developments but did not take

corrective action.

Shri D.S. Mathur, the former Secretary, DoT while deposing before the

Committee, gave an impression that he was dead against the arbitrary way the

Communication Minister was functioning. But his correspondences with the


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Finance Secretary substantiates that he was defending the Minister throughout.

The explanation that so long he was in the Ministry he had to defend the policies

of the Ministry until he could get the policies changed which he could not and his

finally recusing himself from the scene is example where an officer at the verge of

retirement does not stand up to protect about what he considers wrong. His

claims that he verbally took up the matter with the Cabinet Secretary and the

Principal Secretary does not make any sense. Shri Siddharth Behura, another

former Secretary, DoT although submitted before the Committee that there was

no established procedure in the DoT for process of applications, grant of UAS

licence/2G Spectrum etc. and he opposed the method adopted by the Minister,

yet he himself became a party to the dirty game. Ms. Manju Madhavan, former

Member (Finance), Telecom Commission did not bring to the notice of the

Finance Minister/Secretary the disparaging remarks got from the Minister on the

file for her rational stance and reasonable and apt suggestions. This is another

case where Member (F) also proceeded for retirement. The Committee strongly

feel that this situation if allowed to go unchecked, honest and upright officers will

ultimately became mute and ineffective and the Government therefore should

seriously ponder to remedy the situation.

Thus, it becomes apparent that the senior bureaucrats of the DoT were notallowed to discharge their duties properly and effectively, as required for

transparent governance. Obviously, the role of Cabinet Secretariat and the PMO

remains far from edifying in that they too overlooked the need for compliance

with the decision of the Cabinet. What is intriguing is that when the Cabinet

Secretary wrote to the Finance Secretary in May, 2007 and Secretary DoT for

inclusion of spectrum pricing within the ToR of the GoM consistent with the

decision of the Union Cabinet of October 31, 2003, there was no correspondence

thereafter from the Ministry of Finance with the Cabinet Secretariat. A close

examination of the documents made available to the Committee shows that ToRs

of the GoM were revised on the request of the then MoC & IT and the PMO had

considered all relevant aspects of the matter including the Cabinet decision of

2003, and the term of reference for the GoM as suggested by the Planning

Commission. Strangely, as against the first note initiated in the PMO, the Joint

Secretary recorded a prescient note that the terms of reference as suggested in


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the office note may not be acceptable to the MoC & IT and it would lead to delay

in the commencement of work by the GoM and thus the ToRs were revised as

acceptable to MoC & IT with the specific approval of the Prime Minister. To a

query of the Committee, PMO clarified that not giving effect to Cabinet decision

tantamounts to varying or reversing the Cabinet decision but strangely, they

claimed that they had no record to indicate that the Cabinet decision of 2003 was

not being followed and clarified that a duty was cast on the Department

concerned to give effect to the Cabinet decision. The Cabinet Secretariat has

washed off hands by stating that the responsibility of ensuring compliance with

the directions of the Cabinet or its Committees rests with the Ministry/Department

concerned. What further irks the Committee is the reply of the PMO that there is

no specific requirement for the PMO to enforce Cabinet decisions and nor is this

the general practice. The Committee wonder if it is not the duty of the PMO or the

Cabinet Secretariat to enforce the Cabinet decisions in letter and spirit who else

is entrusted with this responsibility? The Committee are of the firm opinion that

if it was not a requirement earlier on the part of the Cabinet Secretariat and the

PMO to ensure the enforcement of the Cabinet decision, the 2G Spectrum scam

should be an eye opener for them to at least now start the practice and vigorously

monitor the effective compliance to every Cabinet decision.

Further, in the context of the role of the Ministry of Finance when the

former Secretary DEA was asked as to what transpired after the letter of 29 Nov.

2007 written by Secretary DoT to him, he admitted that there was no exchange of

correspondence thereafter but certainly discussions went on. Asked to furnish

documentary evidence, he said that everything was not reduced in writing in the

Govt, though it was professionally inappropriate, but due to pressure of work it

so happened. He further submitted that though things did appear in the papers

about the happenings in the DoT but the DEA was not sure that the licences

would be issued on a particular date. He failed to recall any reference made by

him to the Cabinet Secretariat but admitted he should have briefed the FM. He

also admitted lack of due diligence by the Ministry of Finance in the matter.

The examination of the files of DEA by the Committee disclosed that on

receipt of the last letter dated 29 Nov. 2007 sent by Secretary, DoT to the Finance


19/68

Secretary, a self-contained note was put up by Director (Infrastructure) DEA

marked to JS(OT)/AS(EA). The file was returned without any marking or

signatures as if the whole matter was to be kept at arms length by superior

authorities in the Ministry of Finance though gravity of the occasion warranted

swift and drastic action on their part but instead chose to be a mute spectator.

Another example of callous and irresponsible bureaucratic practice followed by

the DoT and the Ministry of Finance can be well gauged from the fact that the DoT

in its letter dated 15th June, 2007 informed the Ministry of Finance that Spectrum

pricing and charges being dynamic issues, are to be considered from time to time

in consultation with TRAI, but the Ministry of Finance apprised the Committee

that they never received this letter. So, it is apparent that some foul game was

being played in the corridors of these Ministries. The Committee demand an

investigation of this mysterious episode and desire an explanation thereafter to

ascertain which Ministry was at fault.

Thus, taking note of the above sequence of events that preceded the

distortion of the ToRs of the GoM-2006 to remove the Spectrum pricing issue, the

Committee cannot but conclude that this decision was taken with the knowledge

of the DoT, the Ministry of Finance, the Cabinet Secretariat and the PMO. It is true

that not only serious systemic flaws have crept in the governance of theseMinistries/Departments but also the malady is deep rooted.

The Committee are shocked and dismayed to note that the Finance

Minister, in his note dated 15th January, 2008 acknowledged that Spectrum is a

scarce resource and the price of Spectrum should be based on its scarcity value

and efficiency of usage but made a unique and condescending suggestion that

the matter be treated as closed. The Committee believe that ends of

accountability demand that any wrongful loss caused to the Government is madegood and the guilty brought to justice. The Committee view it most unfortunate

that the Finance Minister, the guardian of the public exchequer and entrusted

with the principal task of mobilization of resources for public welfare, instead of

initiating stringent and swift action against all those responsible for the whopping

loss to the exchequer pleaded with the Prime Minister to treat the matter closed.


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FIRST-COME-FIRST-SERVED(FCFS) CRITERION

The Commit tee note that the First-Come-First-Served (FCFS)

bas is for the issue o f L icences and A l locat ion o f Spect rum has been

fo l lowed by the Depar tm ent on the argument t hat t he announced UASL

guide l ines have made i t open for new l icences to be issued on

cont inuous bas is . The Comm it t ee 's scru t iny o f the records revea l that

in the Basic Service L icences guidel ines, there is a reference to FCFS

but nowhere in the UASL guidel ines, the term FCFS has found a

ment ion imply ing thereby i t has no sanct i t y . In fac t , on 24t h November ,

2003, the then Min is ter o f Communicat ions and IT had approved the

Department 's proposal to g ive l icence Spectrum on FCFS basis, but i t

w as not codi f ied in the UASL guidel ines. Thus, there has been no such

legal ly establ ished pr inc ip le as 'FCFS', at best i t can be termed as a

prescr ip t ion to be fo l lowed for grant o f l i cence/Spect rum. Th is

prescr ip t ion was adopted and app l ied incons is tent ly and in dev ia t ion

of the avowed object ive of the NTP-99 for provid ing a level p lay ing

f ie ld to the prospect ive app l icants /p layers . The greates t demer i t o f

the FCFS cr i te r ion is that there is every poss ib i l i ty o f exc lus ion the

best app l icant 's o f fer . And that w as w hat exact ly happened in the

grant of UAS l icenc es in 2007-08. I t w as used as a tool to favour

cer t a in non-ser ious app l icants ignor ing the request o f the ser ious and

establ ished players. The CVC observat ions and t he One Man

Commit tee (OMC) f indings have substant iated th is fact and the CBI

invest igat ion is re in forc ing i t . The Commit tee, there fore , urge upon


21/68

the DoT to rev is i t the FCFS cr i te r ion, adopted by t hem in t he grant o f

l i cence/Spect rum and t ake e f fec t ive measures to ensure that the FCFS

bas is is not misused and abused, shou ld they s t i l l p re fer to cont inue

w i th that bas is a f ter a comprehens ive re look a t i t .

Much to the consternat ion o f the Commit tee, the FCFS bas is as

adopted by the DoT, notwi ths tand ing i ts mer i ts and demer i ts was not

fo l lowed in le t ter and sp i r i t as is ev ident f rom the fac t that

app l ica t ions submi t ted between March, 2006 and 25th September ,

2007 w ere issued LOIs s imul t aneously on 10th January, 2008. In t h is

contex t , the Commit tee f ind that the procedure fo l lowed pr ior to

7.1 .2008 was that the date o f rece ip t o f app l ica t ion in DoT was

reckoned for the purpose o f FCFS which was changed to the date o f

issue of LOI w.e. f . 7.1.2008 in an abrupt and arbi t rary departure f rom

the ext ant pract ic e. Shr i D.S. Mat hur, former Secret ary, DoT submit ted

before the Commit tee that the ex tant po l icy in the a l locat ion o f UAS

l icences/2G Spect rum was not permi t ted to be used proper ly by the

Department . Shr i Siddhartha Behura, former Secret ary, DoT (s ince

charge sheeted) tes t i f ied t hat in t er -se sen ior i ty shou ld be determined

by the date o f app l ica t ion, a cond i t ion which he had inser ted in the

draf t Press Note o f 10.1 .2008 which was de le ted by the Min is ter and

thus overru l ing the Depart ment 's v iew s. Shr i Nr ipendra Misra, the

former Chai rman, TRAI categor ica l ly emphas ized that a l l those who

com ple te t he formal i ty o f t he LOIs w i th in 15 days, shou ld remain in t he

same order as on in the app lica t ion date . But , the Commit tee are

shocked how by dev is ing a capr ic ious and opaque procedure, the

appl ica t ions submi t ted between March 2006 and 25.9 .2007 were

issued the LOIs s imul taneously on a s ingle day on 10 January, 2008


22/68

and asked to fu l f i l the cond i t ions and to co l lec t the same wi th in less

than an hour under the order o f MOC & IT as aga ins t the prescr ibed

per iod o f 15 days under the procedure fo l lowed h i ther t o . Ev ident ly ,

the chosen companies had foreknowledge o f such nove l method wi th

the resu l t they were ab le to fu l f i l the cond i t ions o f PBG, FBG and

Demand Draf ts drawn on dates pr io r to the cut o f f date by the DoT.

The Commit tee dep lore the brazen manner in which the LOIs were

issued desp i te assurance t o the Pr ime Min is ter that the process ing o f

app l i ca t ions wou ld be done in consonance w i th the ex tan t p rac t i ce

and fu l l t ransparency main ta ined in t he DoT.


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ROLE OF MEDIA AND WHISTL EBLOWERS

The Committee note that the brazen irregularities in the allotment of 2G

spectrum and UAS licences were unravelled by some investigative journalists

much before the Radia tapes came into the public domain. A journalist who

played a stellar role in exposing the irregularities, on being asked about the

sources of his information, replied that the information was collected through

the RTIs and from some public-spirited insiders. The publishers of the news

magazines who first published the tapes, testified that they were actuated by

their journalistic duty to reveal the truth and the irrepressible urge of public

interest. The Committee appreciate the exemplary professional job done by thesejournalists who despite the imminent possibility of the serious hazards both

physical and financial undertook the venture they embarked upon. When the

Committee sought the response of a senior journalist about these taped

conversations he candidly deposed that what they did was utterly unprofessional.

He conceded that the journalists do speak to various sources as it is their job

to fathom out and reveal the truth but they ought not get involved in lobbying

for any one and certainly the taped conversations show that they transgressed

the line of propriety - the lakshman rekha. More so, senior journalists as they

were, they knew when they made such a transgression. The Committee value

immensely the freedom of the Press and, therefore, do not wish to suggest any

model code of conduct for the media. The Committee believe that no journalist

who values self-reputation, credibility and treasures the freedom of the media

will ever indulge in an act incompatible with the professional norms of

journalistic conduct. The Committee have unflinching belief and faith in a free,

fearless, bold and credible press and the electronic media as such journalists are

the sine-qua-nonof a vibrant democracy of the people, for the people and by the

people.

The Committees oral examination of various witnesses and the material

evidence on record revealed the singular role played by the whistleblowers in

exposing the irregularities. Undoubtedly, the whistleblowers, driven by the

sense of probity in public affairs, took a calculated risk in help exposing the


24/68

grave irregularities regardless of the perils of the venture they embarked upon.

The witnesses sought the indulgence of the Committee to protect the source of

their information apprehending grave threats to their lives. Mindful of the

apprehension of grave threats to the life and limb of those invisible and self-

effacing but gallant sentinels on the qui vive, the Committee recommend that,

being the willing and self-less benefactors of the nation, the whistleblowers be

extended appropriate and effective statutory protection from harassment,

intimidation, demotion, physical or financial harm etc., as an integral part of

the multi-pronged strategy to bring greater transparency and probity in the

conduct of public affairs.


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Presumpt ive Loss

The Commit tee note w i th pro found concern the nat ion-wide

publ ic shock and ind ignat ion over the gross i r regu lar i t ies in the

a l lo tment o f 2G spect rum and the co lossa l f iduc iary loss caused to t he

publ ic exc hequer . Wel l before the C& AG repor t w as tab led in

Par l iament , in h is pet i t i on to the Supreme Court , Shr i S. Swam y

calc ulat ed a net loss of Rs.97,410.74 cr ore and Shr i B.K. Syngal , a

w el l know n te lec om exper t and former CMD BSNL quant i f ied the

possib le loss betw een Rs.70,000 to Rs.80000 cr ore based on a

mul t ip le o f ind icators . Shr i Si taram Yechury MP, tak ing the 3G

spect rum pr ice dua l tec hno logy l icences and a l lo tment o f exc ess

spect rum as benchm ark , ca lc u la ted the loss to the w hopping order o f

Rs.1,90,000 crore. The C& AG based on a set of paramet ers pegged

the presumpt ive loss at Rs.1,76,645. The CBI calc ulat ed t he loss

roughly betw een Rs.40,000 cr ore t o Rs.50,000 crore based on t he

premise o f the prof i ts made by Sw an and Uni tec h by sa le of equi ty .

The CBI however c lar i f ied that they were concent ra t ing the

invest igat ion on cr im ina l consp i racy and the money t ra i l . The

Commit tee are , however , shocked to note that pend ing the i r

examinat ion o f the C&AG Repor t , the Min is ter o f Communicat ions and

Informat ion Technology addressing a press conference on 17.1.2011

descr ibed the presumpt ive loss ca lcu la ted by the C&AG as u t ter ly

erroneous and embarrassing to the Govt . He desc r ibed the

ca lc u la t ion met hodology adopted by the C& AG w i t hout bas is and a


26/68

ser ious er ror on the par t o f the const i tu t iona l author i ty and charged

that the sensat ion thus c aused a l low ed the Oppos i t ion to spread u t t er

fa lsehood. The Comm it t ee d isapproves the publ ic c r i t i c ism of the

ins t i tu t ion o f the C& AG and Par l iament i tse l f . More so, the f ronta l

a t tack was made by the Min is ter whose Min is t ry and h is predecessor

were under scanner and a t a t ime when the mat te r was under

examinat ion in the PAC, obv ious ly w i th an in tent to c onfuse and create

f issures. I t is surpr is ing that t he Minist ry of F inance responsib le for

macro management o f the economy and mobi l iza t ion o f resources for

deve lopment , has made no assessment o f the loss on the os tens ib le

g round tha t i t is d i ff i cu l t to w ork i t out excep t conced ing tha t

spec t rum is a scarce resource and tha t the spec t rum commands

premium as the market expands. In t r igu ing ly , ne i ther the DoT nor the

TRAI has quant i f i ed the preci se loss. Unfor t unatel y, t he DoT inst ead

of admi t t ing an unconsc ionab le ac t , advanced the p lea that theoret ic a l

exerc ises based on economic model ing are f raught w i th s impl is t ic

assumpt ions and that no met hodology can be suggested by them to

ca lc u la te the loss . The Comm it t ee dep lore such an in t rans igent

a t t i tude o f DoT at tempt ing to defend the indefens ib le even on

h inds ight g iven the f ind ings o f the exper t s engaged by the TRAI , who

found that the va lue o f 2G spect rum is h igher than 3G in rura l

segments , the unexpected ly h igh earn ings f rom 3G revenue and the

wr i t ten adv ice o f the PM for auct ion o f 2G spect rum in a fa i r and

tr ansparent manner. On t he presumpt ive loss of Rs.1.76 cr ore, the

C&AG has h imsel f exp la ined to the Commit tee that the ca lcu la t ion

w as based on ce rta in economet r i c or mathemat ica l methods a f te r

t ry ing d i f fe rent econometr ic models and consu l ta t ion w i th CAs and


27/68

thus t he loss o f revenue to the Government ca lc u la ted on rea l market

s i tuat ions cannot be fau l ted but may be debated. The C&AG has

fur ther exp la ined that accountab i l i ty is f ixed in the Government a f ter

the events are invest igated and drew the a t tent ion o f the Commit tee

to the C& AG repor t wh ic h says the ent i re process o f al locat ion o f 2G

spect rum ra ises ser ious concern about the system of governance in

the DoT whic h need to be thoroughly renew ed and revamped.

The Commit tee fee l that g iv ing dua l techno logy l icence to the

CDMA operators and new UAS l icences in 2007-08 at a pr ice

determined in 2001 was not on ly imprudent but a lso smacks o f a

des ign. Ignor ing the vo luntary o f fer o f a Company to pay much more

than the 2001 pr ice even wi thout auct ion d id not persuade the

Government to rea l ize the t rue market pr ice o f spect rum . Simi lar ly ,

a l lo tment o f add i t iona l Spect rum, beyond the cont rac tua l amount , to

the GSM operators was a t a cost to the exchequer which the

Depar tment themselves have rea l ized and are repor ted ly tak ing

measures to recover i t . Revenue generat ion f rom t he auct ion o f 3G &

BWA Spectrum in 2009 unquest ionably establ ished the t rue value of

Spect rum. Arguments in some quar ters that the 3G pr ice cannot be

compared wi th the 2G pr ice are untenable s imply because two

di f fe rent m eans were adopted for the a l locat ion o f 2G & 3G Spect rum.

In one case, there was no t ransparency and v io la t ion o f es tab l ished

norms, ru les, proc edures, cabi net dec is ions e t a l w as wr i t l a rge the re ,

w hereas in the o ther cases i t w as qu i te t ransparent and in acc ordance

w i th the dec is ions tak en at var ious leve ls . In other w ords, had the

a l locat ion o f 2G Spect rum m ade through a fa i r and t ransparent met hod

l ike auct ion as recommended by the TRAI and a lso adv ised by the


28/68

Pr ime Min is ter , no accusat ion would been ra ised aga ins t a fa i r and

tr ansparent procedure regardless of the revenue real ized. Since t hat

was not done and 2G Spect rum was arb i t rar i ly g iven a t a throwaway

pr ice and 3G auct ion gave revenue f ive t imes more than the base

pr ice , the two are cer ta in ly comparab le and accord ing to the

Commi t tee , max imum loss to the exchequer was on th is coun t .

Therefore , it i s imperat ive and inc umbent upon the Government t o get

ca lc u la ted the exact loss caused to the exchequer ins tead o f wash ing

of f the i r hands on the s impl is t ic p lea that i t i s d i f f i cu l t t o es t imat e the

loss . The Comm it t ee fur ther recomm end that the Government must

evo lve a s tandard, fa i r and t ransparent procedure to avo id pecun iary

loss to the Government and recover the un lawfu l ga ins made by a l l

those respons ib le for the s t agger ing nat iona l loss .


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CLEANSING THE BUREAUCRACY

The Committee note with profound concern that there is no foolproof

system to detect the misdeeds of corrupt elements in the bureaucracy, the

permanent standing machinery of the Government intimately associated with the

formulation and responsible for execution of the diverse plans and

programmes of the State. The Committee are anguished that the accountability

procedures in the Government continue to be defused and weak and it becomes

almost difficult to fix individual responsibility. They consider the very concept of

accountability null and void if nobody knows who is responsible for the acts of

omission and commission in the bureaucratic labyrinths. Another area ofserious worry is, as shown by recent happenings in the DoT, the administrative

powers of postings and transfers which is used as a powerful leverage to

reward pliant officers and to punish or marginalize officers of unimpeccable

integrity who refuse to be privy to wrongdoing or decline to render palatable

advice. It is all the more unfortunate that India, the largest democracy of the

world, is viewed so poorly in terms of global corruption perception index. The

Committee recall approvingly the words of Kautilya who wrote in the 3rd century

BC that it is possible to mark the movement of birds flying high up in the sky but

it is not possible to ascertain the movement of Government servants with a

hidden purpose or like the quantification of water drunk by swimming fish. The

Committee, therefore, recommend that the system of concurrent internal audit

needs to be strengthened and accorded full autonomy with a duty cast on each

Financial Advisor to report all financial irregularities to the Finance Ministry as

well as to the statutory audit. Further, each Department/Ministry must have

CVOs with well defined mandate to maintain unremitting vigil on the internal

functioning of the Department. It also needs to be ensured that the CVOs are

selected in consultation with the CVC after following fair and transparent

procedure to avoid any bias or allegation of favouritism. The Committee hardly

need to reiterate that the anti-corruption laws must be stringent enough to create

the trepidation of law and deter the public servants from wrongdoing, provide

for speedy trial and guarantee that justice is not denied or delayed. The


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Committee also recommend that the entire data regarding cases of corruption

showing the complaints received, cases under enquiry, referred for police

investigation, officers charge sheeted, convicted and not found guilty must be

placed in public domain and also reflected in the consolidated report of the CVC

to be presented to Parliament annually. Recognizing the functions of

constitutional institutions like the C&AG, and premier agencies like the CVC and

the CBI and their vital role and the need for safeguarding their independence and

credibility, a transparent system needs to be evolved for their appointment. The

Committee, therefore, recommend that a panel under the Chairmanship of the

Prime Minister comprising of a judge of the Supreme Court, Home Minister and

Leader of Opposition be formed for appointment of the C&AG, CVC and the

Director CBI. The Committee are saddened to find a discernable but disturbing

pattern in some top civil servants joining private sector including public

relation firms soon after their retirement. The names of some recently retired civil

servants, who held significant positions in the Government and tribunals and

joined certain private public relations firms or business houses, are under

public scanner for their allegedly questionable role in the 2G Spectrum

allocation. In order to break such an unholy nexus and the prospect of any quid-

pro quo, it is essential that all officers of the rank of Secretaries to the

Government of India are debarred from joining any tribunal and non-

governmental company or firm by providing a cooling-disconnect of three years

after retirement. The Committee are of the considered view that such a resolution

of the Government would eliminate the apprehensions expressed in many

quarters about the Government or private sector dangling a lucrative assignment

to a civil servant on the verge of retirement, allegedly for extraneous reason.


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Shor tcom ings in the Implement at ion aspect

The Commit tee s scru t iny revea ls the f l ip - f lop in the

implementat ion o f the UASL reg ime which was approved by the

Cabinet in 2003 based on t he rec omm endat ion of t he TRAI. The

Commit tee note that the UASL reg ime was to be implemented in two

phases, v iz , (a) migrat ion of ex ist ing Basic Service Operators (BSOs)

and Cel lu lar Mobi le Service Operators (CMSO) to the new regime on

payment o f migra t ion fee equal to the fee pa id by the 4 t h Cel lu lar

Operator in t roduced t hrough mul t i s tage b idd ing process in 2001, and

(b) s tar t ing o f the second phase wi th a not iona l ent ry fee for l i cence

and a separate charge for the spect rum. Whi le the f i rs t phase w as

implement ed, the sec ond phase was c onvenient ly and in tent iona l ly, as

subsequent events substant iate, over look ed. In the process, devis ing

an e f f ic ient a l locat ion formula for Spect rum a longwi th an appropr ia te

pr ice remained unach ieved as de l ink ing the pr ice o f Spect rum f rom t he

issue of l icences was given a go bye, d isregarding the Cabinet

dec is ion. The Comm it t ee are deep ly d ist ressed that due to v io la t ion o f

the Cabinet dec is ion and as a consequence o f such de l ibera te

omission, the issue of UAS l icense and al loc at ion of Spect rum in 2007-

08 a t the pr ice d iscovered in 2001 caused a s tagger ing, but whol ly

avoidable, revenue loss. Moreover, consi der ing t he nascent te le

market in 2001 and the geometr ic increase in the te le dens i ty post

2001, i t i s qu i te in t r igu ing that the non- implementat ion o f the second

phase o f the UASL reg ime was not p laced before the Cabinet fo r a


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rev iew. Worse, desp i te the recomm endat ion o f the TRAI in May 2010

and February 2011, de l ink ing o f the pr ice o f Spect rum f rom the

issuanc e of l icenc e is yet to tak e place. The DOTs reasoning of not

implement ing the second phase o f the UASL reg ime on the p lea o f

w a i t ing for TRAI recomm endat ions has miserably fa i led to impress the

Comm it t ee. Simi lar ly , the Depar tment s audac ious rep ly o f not put t ing

the m at t er before the Cabinet , w i t hout ass ign ing any val id reasons for

that , is h ighly deplorab le . The Comm it t ee, there fore , recomm end that

hencefor th non-compl iance to non-ach ievement and

modif icat ion/var iat ion of any decis ion of the Cabinet should invar iably

be put before the Cabinet fo r the i r cons idera t ion, fa i l ing which the

Cabinet Secret ar ia t shou ld take a ser ious note o f i t t o f ix respons ib il i ty

on the de l inquent Min ist r ies /Depar tment s . The Comm it t ee a lso des i re

that the pr ice o f Spect rum be de l inked f rom the issue o f l i cences

wi thout fu r ther de lay and seek exp lanat ions as to why th is impor tant

dec is ion has not been implemented as yet . Fur ther , a s t rong sys tem of

moni tor ing and c ompl iance o f Cabinet dec is ions must be evo lved and

f i rmly put in p lace by rev is i t ing the t ransact ion o f Bus iness Rules in

order to ensure that the Cabinet dec is ions are implemented in le t ter

and sp i r it and no undue advantage is tak en o f the sys tem ic loopholes

by the ravenous f ly by n ight operators c reated as f ront companies by

unscrupu lous e lements .


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Cool ing d isconnect a f ter re t i rem ent

The Comm it t ee are saddened to f ind a d isc ernab le but d is turb ing

pat t ern in some top c iv i l servants jo in ing pr iva te sect or inc lud ing

publ ic re lat ion f i rms soon af ter the i r re t i rement . The names o f some

recent ly re t i red c iv i l servants , who he ld s ign i f icant pos i t ions in the

Government and t r ibuna ls and jo ined cer ta in pr iva te pub l ic re la t ions

f i rms or business houses, are under publ ic scanner for their a l legedly

quest ionab le ro le in the 2G Spect rum al locat ion. In order to break

such an unholy nexus and t he prospect of any quid-pro quo, i t is

essent ia l that a l l o f f icers o f the rank o f Secret ar ies to the

Government of India are debarred f rom jo in ing any t r ibunal and non-

governmenta l company or f i rm by prov iding a coo l ing-d isconnect o f

th ree years a f ter ret i rem ent . The Comm it t ee are o f the cons idered

v iew that such a reso lu t ion o f the Government w ould e l iminate the

apprehens ions expressed in many quar ters about the Government or

pr iva te sect or dang l ing a lucra t ive ass ignment to a c iv i l servant on

the verge o f re t i rement , a l legedly for ex t raneous reason.


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Combating the malaise of corruption

The Committee note that the grave irregularities in the allotment of 2G

spectrum and the colossal fiduciary loss triggered deep and spontaneous

outrage both in and outside the Parliament. The spate of popular anguish and

anger against the scourge of corruption and the inordinate delay in prosecuting

the wrongdoers, impelled the Supreme Court to intervene in the matter. The

Committee are pleased that the CBI has since filed the first charge sheet against

the accused for forgery, criminal conspiracy, cheating and on other counts before

the Court of Special Judge, New Delhi. The Committee, however, strongly

believe that the cancer of corruption which is eating into the vitals of our polity

and economy calls for a frontal attack since corruption subverts the rule of law,

erodes institutions, creates feelings of hostile discrimination aggravates

disparities, erodes the moral and ethical values of the society, tarnishes the

image of the nations and worst, undermines the legitimacy of the Government

and the faith of the people in the democratic set up. The Committee, therefore,

are of the considered view that all laws dealing with different aspects of

corruption need a comprehensive relook and a drastic overhaul, with far

greater focus on tackling upstream corruption as it breeds and promotes down

stream corruption. They believe that not only caesars wife but even the

caesars men ought to be above board. The Committee note with profound

dismay the general feeling amongst the corrupt public servants who consider

corruption as low risk and high profit business. Considering the urgent need

for zero tolerance for corruption, the Committee recommend enactment of a

stringent preventive and punitive legislation to (a) provide for calibrated scale of

punishment based on the premise that higher the post, higher the degree of

responsibility and share of punishment. (b) Stop undue interference in the

working of the bureaucracy so that it works without fear or favour and in

accordance with law (c) make provision for fast track adjudication of cases


35/68

against persons occupying high positions and charge sheeted for corruption so

that the guilty are punished without delay and the punishment so inflicted acts

as an effective deterrent and (d) disqualify or render ineligible a person for

public office or high position once convicted for corruption. The Committee hope

that the country-wide deep disgust against corruption would fructify into

creating a strong awareness to create a political and economic system with zero

tolerance for corruption. The Committee also recommend that India, being a

signatory to the UN Convention on Corruption, also ratify the UN convention

against corruption expeditiously and demonstrate to the world community

Indias unequivocal and unwavering commitment to the crusade against

corruption.


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INV ESTIGATI ON OF THE 2G SPECTRUM CASE BY TH E CBI

The Committee's examination of the subject reveals that a source

information about allegations of irregularities in the allocation of 2G spectrum

under the UAS licencing was being processed in the CBI w.e.f. 12.1.2009. On

learning that the CVC was also looking into the matter since January-February,

2008, the CBI decided to await the CVC enquiry report. The CVC on receipt of

specific complaints, started a direct enquiry on 17.6.2009 U/S 8(1) (d) of the CVC

Act 2003 and after completing the inquiry, it sent the inquiry report to the CBI

vide their letter dated 12.10.2009 for further investigation. The CBI accordingly

registered an FIR U/S 120B of the IPC for criminal conspiracy read with section

132 r/w 12(1) (d) of the PC Act for criminal conduct. The FIR was registeredagainst unknown persons though the CBI normally registers a preliminary

enquiry in which they establish who are the persons responsible and then they

lodge an FIR, as admitted by the Director CBI, in evidence. But in the instant

case, as the CVC in their Direct Inquiry Report did not name anyone, the CBI

lodged the FIR against unknown persons expecting them to be in the DoT, private

persons and companies. However, after the investigation took momentum, the

unknown persons have been identified, chargesheeted and some arrested. In

this context, the Committee disapprove of the practice of lodging FIR against

unknown persons in deviation of the normal practice followed by the

investigating agency and suggest that, as far as practicable, the CBI should

identify and name the persons while lodging FIR in order to foster transparency

and inspire public confidence.

The Committee note that the CBI started its raids in October, 2010 after a

year of lodging the FIR i.e. in October, 2009 and arrests were made thereafter.

Clarifying the reasons for delay in investigating the case, the Director CBI

submitted that examination of a lot of records, interrogation of many witnesses

collation of information gleaned, its analysis etc. caused the delay. In a post

evidence information the CBI apprised the Committee that 1,626 documents

running into 1,38,765 pages had already been seized and 115 relied upon

witnesses, as mentioned in the chargesheet filed by the CBI on 2nd April, 2011,

had been interrogated. The Committee appreciate the volume of work the CBI


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has to attend to in the process of its investigation but such a plea cannot be

taken as a valid reason for the inordinate delay on the part of the CBI in

investigating the 2G Spectrum scam. The public perception remains, and quite

justifiably, that the CBI's investigation gained momentum only after the Supreme

Court started directly monitoring the case thereby fueling the apprehension that

the CBI was initially tardy in investigation under undue external pressure. Either

does not augur well for the nation or the credibility of the CBI.

The Committee note that the CBI, the premier investigative agency of the

Union, has been set up under the Delhi Special Police Establishment Act 1946.

Surprisingly, the expression CBI does not occur in the said Act but derives its

nomenclature from a resolution of the M/o Home Affairs dated 1 April, 1963. The

Committee further note that as on 1st March , 2001, as against the sanctioned

strength of officers and staff of 6538, there were 1368 vacancies with the largest

shortage of officers in the executive rank. Apparently, being an organization

which has built a reputation for its professional competence efficiency and

acquired a definite credibility and respect, there is far greater and growing

demand for entrusting complex cases to the CBI for investigation. The

proliferation in the responsibilities of the CBI to continues to place enormous

burden on the badly strained organization. Apart from the shortage of manpowerand resources, there is a strongly felt need for insulating the CBI from any

adverse external influence or pressure. The Committee, therefore, recommend a

comprehensive cadre review of the CBI, preferably an IIM study, so that agency is

fully and well-equipped with necessary material and manpower. The Committee

also recommend that the Delhi Special Police Powers Act may be replaced by a

new and comprehensive legislation namely, the Central Bureau of Investigation

Act with a mandatory provision for appointment of the Director CBI akin to a

modified procedure for appointment of the CVC in order to safeguard the

integrity, autonomy and independence of the CBI. Further, suitable rules may

made under the law so contemplated to provide for broad time schedule for

investigations, filing of charge sheets and follow up of cases with utmost

dispatch and diligence. The Committee would also like the Government to make

six monthly statements in Parliament with regard to the stages of various cases

undertaken by the CBI for investigation charge sheets filed the final outcome


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thereof including the judgments delivered, convictions held and the number of

accused held not guilty.


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GRANT OF LICENCES TO INELIGIBLE COMPANIES

The Committee during its scrutiny of issue of Licenses to ineligible

Companies found that certain Companies which had declared real estate as their

business activity in their main object clause of MoA had been awarded licences;

certain Companies which did not have authorized share capital/paid up capital on

the date of applying for UAS Licenses were given the same; the Department of

Telecommunications (DoT) failed in cross verifying the status of Companies with

the Ministry of Corporate Affairs; there was gross violation of rules & regulations

to favour M/s Swan & Unitech; S-Tel having won cases on the issue ofarbitrariness in cut-off date was forced to withdraw its case in the Supreme Court

owing to DoT raising false Security concerns; and apart from subverting rules &

regulations, in case of M/s Swan, BSNL was made to sign an MoU for providing

intra-circle Roaming Arrangement. An independent expert with vast experience

of Telecom Sector testified before the Committee that 'all pseudo methods' and

'dirty tricks' were used by these companies to get into the telecom market at the

cost of tax payers' money.

2. The Committee found that as many as 85 Licenses out of the 122 new

licenses issued to 13 Companies in 2008 were granted to those Companies which

did not satisfy the eligibility conditions prescribed by the DoT. All 85 Licenses

were given to Companies which did not have the stipulated paid up capital at the

time of application. The Committee found that in order to increase the authorized

share capital Extraordinary General Meetings were held and resolutions passed

to the said effect. The enabling provisions of the Companies Act, 1956 allows

Companies to increase their authorized share capital by way of passing

resolutions through General Body Meetings and also by way of application to the

said effect to the ROC within 30 days or beyond that with a payment of fine. The

Committee disapprove the manner in which these applications were processed

by the DoT though they did not meet the eligibility criteria. The Committee would

like to know the outcome of the showcause notices issued to these ineligible


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companies the responsibility fixed on the officers responsible for the serious

lapses and the steps taken to cancel the licences of all those companies which

were ineligible or furnished fictious information and suppressed material facts.

3. The Committee note that, these Companies had declared real estate as the

business activity in the main object clause of MOA instead of telecom sector as

on the date of application. However, the subsequent resolutions altering the main

object clause of MOA had not been registered as on the date of application. The

Committee found that the UAS guidelines of 14th December, 2005 did not stipulate

that the telecom sector be the declared activity of the Companies applying for

grant of licences. The Committee are of the considered opinion that this major

lacuna in the guidelines helped all and sundry to apply for licences, thus

frustrating the desired intention of the Government of bringing in greater

competition in the telecom sector. Further, the Companies which were granted

licences in turn sold them making huge wind fall gains, what experts described

as the true value of the Spectrum, which were actually to go to the Government

coffers. The Committee, therefore, recommend that the Government make an

assessment of the loss to the public exchequer.

4. When the Committee asked about the measures that were taken by DoT to

make the verification process fair and transparent, the Department submitted

that as a matter of abundant precaution, the DoT had taken an undertaking from

the applicant Company to the effect that licences granted on the basis of

incorrect undertaking given to the DoT, their applications would be cancelled and

necessary action taken under the provisions of the UAS Licence

Guidelines/agreement. When the Committee specifically wanted to know about

the action that was taken/proposed to be taken against the Companies who had

suppressed facts, disclosed incomplete information and submitted fictitious

documents for getting UAS Licences/Spectrum, they were apprised that certain

Companies who had not met eligibility criteria, as pointed out in CAG Reports,

had been issued Show Cause Notices. Further it was stated that the Companies

had submitted their replies and the same were under the examination of the

Department. The Committee would like to know the present status of those cases

and the action taken against such Companies after consulting the Ministry of


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Company Affairs and the Ministry of Law and Justice as also the explanation of

guilty officials and the steps taken to fix responsibility.

5. The Committee in the course of examination of issuance of Licences to

ineligible operators found that 'The Economic Times' dated

9th January, 2008 had published an article titled '6 fail to cross DoTted line' in

which the Companies that were to be awarded Licences had been named. The

article had clearly stated that 'DoT to Issue LOIs to 10 Companies' and naming

them as 'Lucky 10', it stated that Unitech, Datacom, Stel, HFCL Infotel, BPL,

Shyam Tele, Swan Communications, Idea, Tata Tele and Reliance

Communications were those Companies. The article further stated that DoT

would begin issuing the LOIs from Wednesday and try to complete the process

by that weekend. In order to have clarity on the issue that certain Companies

were privy to the information about the time when the LOIs were to be issued, the

Committee cross examined the representatives of M/s Etisalat DB Telecom Pvt.

Ltd. (formerly known as M/s Swan Telecom Pvt. Ltd.) The Committee asked the

representatives as to how on 10th January, 2008, when LOIs were issued and 45

minutes time between 2.45 pm and 3.30 pm was given to fulfil the requirement of

submitting the drafts, a Demand Draft for ` 50 crore drawn on Punjab National

Bank of Mumbai could reach Delhi from Mumbai on the same day. The witness in

their written submission have stated that most of the applicants had deposited

the same on 10th January 2008. Further, regarding the clarification of the DD, it

was stated that the DD was drawn on Punjab National Bank in New Delhi and a

photocopy of the same was annexed. But to the dismay of the Committee they

found that instead of ` 50 crore DD drawn on PNB they were furnished with a

copy of Banker's Cheque dated 9.1.2008 drawn on SBI, New Delhi for ` 203.60

lakhs. The Committee view this very seriously as the concerned Company failedto clarify the correct position with regard to the financial instruments deposited

by the Company with DoT and recommend that the matter be enquired into and

correct and complete information be furnished to the Committee alongwith the

action taken against defaulter companies.


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6. The Committee found that rules were violated in order to accommodate

and favour a few Companies. The licences had been issued to Companies which

had suppressed facts, disclosed incomplete information and submitted fictitious

documents to the DoT and thus used fraudulent means for getting UAS licenses

and spectrum. Owners of these licenses had obtained them at unbelievably low

prices and had in turn sold significant stakes in their companies to the

Indian/foreign companies at high premium within a short period of time. The

premium earned by these new entrants to the telecom sector was nothing but the

true value of the spectrum, which should have normally accrued to the public

exchequer. The Committee, therefore, recommend that all those Companies who

suppressed facts and furnished fictitious documents be sternly dealt with in

accordance with the undertakings taken from them before signing the Licence

agreements and the Committee apprised.

7. The scrutinisation of the Subject further revealed that different decisions

were taken in respect of M/s Loop Telecom Pvt. Ltd. and M/s Swan Telecom Pvt.

Ltd. with regard to alleged violation of the substantial equity clause 8 of UAS

Guidelines. In the case of M/s Loop Telecom Pvt. Ltd. a reference was sent to

Ministry of Corporate Affairs for examination but in case of M/s Swan Telecom

Pvt. Ltd. the Minister had decided that SG's opinion may be sought as he was

representing the DoT in TDSAT and at other Judicial Forums including in the High

Court, Delhi. The SG in his opinion had held that the applicants fulfiled all the

necessary conditions cannot really be faulted". However, when DoT officials

again sought permission to refer the matter to the Ministry of Corporate Affairs

for investigation, the Secretary (T) on 17.04.2009 held the view that 'in view of the

opinion of SG no such reference is required' and the Minister approved the same

on 18.04.2009. The Committee find that the DoT wrongly referred the case to SG

directly without routing the case through Ministry of Law and Justice as required.

The Committee, therefore, come to inescapable but firm conclusion that both the

Ministry of Communications and Information Technology and the SG were

equally responsible for favouring M/s Swan by circumventing the due procedure.

Since the then Secretary, DoT stands chargesheeted, the Committee demand

explanation of the then 'SG' the Law Officer, as to why he prevented the DoT from

referring the matter to Ministry of Corporate Affairs. The Committee also deplore


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the role of the Minister who went out of the way to ensure that certain Companies

which were granted UAS Licences were disqualified or rendered ineligible had the

matter been referred for the opinion of Ministry of Corporate Affairs.

8. Examining the role of DoT in issuing the Licenses and the follow-up actionthe Department was taking once Licenses were granted, the Committee found

that TRAI had sought compliance of licence terms and conditions pertaining to

roll out obligations from all the service providers who had been issued licenses

from December 2006 onwards. TRAI, having analysed the reports submitted by

the licensees, found that while some licensees had complied with the roll out

obligations, there were those who had not complied with the roll out obligations

at all. Most licensees had complied with the roll out obligations but with delay

beyond 52 weeks from the due date of compliance. TRAI quoting clause 35 of the

licence conditions, which provided for imposition of Liquidated

Damages/Cancellation in case of delay/non-compliance of rollout obligations, had

requested DoT to take immediate necessary action. When the Committee asked

why DoT on its own had not taken any action against the defaulting operators,

DoT's reply on the matter was far from convincing. The Committee find that DoT

had grossly failed in its duty of having a watch over the compliance aspect once

the licenses were issued.

9. The Committee note that M/s S Tel challenged the legal validity of the Press

Release dated 10.01.2008 as the Press Release arbitrary advanced the cut-off

date as 25.09.2007 and they were deprived from being granted LOIs for UAS

Licences for 16 circles for which they had applied after 25.09.2007. A single

Judge and later a division bench ruled in S Tel's favour holding the said

advancement of the cut of date as arbitrarily

and illegal. The Hon'ble Supreme

Court on appeal by DoT refused to interfere with the order of the Delhi High

Court. The Committee learnt that the M/s S. Tel decided not to pursue with the

case as they had received a letter regarding the cancellation of the commercial

launch citing security reasons by the DoT. But, on the contrary, the Committee

found that the Company was arm-twisted to withdraw the case despite having

received favourable verdicts from the High Court and upheld by the Supreme

Court. Since the impugned Press Release was quashed by the High Court of


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Delhi being arbitrary and unjustified, the Committee recommend that necessary

logical action be taken to cure the adverse fall out of the arbitrary action leading

to gross discrimination and favouritism.

10. The Committee in the course of examination learnt that BSNL had signed aMemorandum of Understanding with M/s Swan on 13.10.2008 for providing Intra-

Circle Roaming Arrangement to Swan's GSM subscribers in the BSNL's GSM

network. When the Committee wanted to know the circumstances that led to

BSNL permitting a Private Company to share its infrastructure and the amount

that BSNL charged for the purpose, the Committee were apprised that the interest

of BSNL was fully protected. The arrangement was entered into only with M/s

Swan Telecom Ltd., to start with and it was on non-exclusive basis. Further, it

was added that BSNL did not have any free arrangement with M/s Swan but had

well defined charging arrangement like usage charges including 52 paise per

minute (or part thereof) to begin with and to be reviewed accordingly as per the

terms of MOU. On being specifically asked to furnish the payment details

alongwith relevant Annual Gross Revenue (AGR) Statements filed by M/s

Swan/Ms Etisalat, DoT replied that in view of non-implementation, no

pac draft recommendatio

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