Page 1
Through this acknowledgement, we express our sincere gratitude to all those people who have been associated with this assignment and have helped us with it and made it a worthwhile experience.
Firstly we extend our thanks to the various people who have shared their opinions and experiences through which we received the required information crucial for our report.
Finally, we expressed our thanks to professor who gave us this opportunity to learn the subject in practical approach and Mr. Santosh vadhrya who guide us and gave us valuable suggestions regarding this project.
Page 2
NAMES
ROLL NO
JIGAR CHANDRA
03
YASH KHANORE
18
DEEPAK PASI
28
CHINTAN THAKKAR
Page 354
1. EXECUTIVE SUMMARY. 2. INTRODUCTION. What is 2G? What is 2G Scam? 3. WHO IS THE REAL NATWAR? 4. CHARGES ON TELECOM MINISTER. 5. WHO WERE INVOLVED? 6. WHY DID THE 2G SCAM OCCUR UNDER MANMOHAN SINGH’S NOSE ? 7. WINNERS & LOSERS UNDER 2G SCAM. 8. CAG REPORT ON 2G SCAM AND RESIGNATION OF RAJA. 9. FINDINGS AND CONCLUSIONS. 10. BIBLIOGRAPHY.
Page 4
The 2G spectrum scam which is five hundred times bigger than the Bofors scam, involved officials and ministers in the government of India illegally undercharging mobile telephony companies for frequency allocation licenses. According to a report submitted by the Comptroller and Auditor General, the loss to the exchequer was 1.76 lakh crores. Also there is a national security angle where Telenor and Etisalat was allowed to operate in India even after severe objection from the Ministry of Home affairs.
Charges on telecom minister
Cheap telecom license.
No procedure followed.
Favouritism ,corporate encash premium.
Involvement of corporate, media and politicians. Ignorance on the part of prime minister resulting to scam. Winners and losers under 2g scam. CAG report on scam:
Calculation of loss based on 3G auction earlier this year
A rare national asset as Spectrum should have been auctioned
Allocated 2G spectrum to new players at throwaway prices
Cut-off date for license letters advanced arbitrarily by a week
Entire process lacked transparency.
Undertaken in arbitrary and inequitable manner
Rules circumvented to benefit Swan: CAG
Reliance given spectrum ahead of others: CAG
Page 5
2G means: “Second-Generation Wireless Telephone Technology”. 2G is relatively new technology in the field of mobile. 2G is not just a network but a good technology. Primary benefits of 2G networks over their predecessors were :
Phone conversations were digitally encrypted;
2G systems were significantly more efficient on the spectrum allowing for far greater mobile phone penetration levels;
2G introduced data services for mobile, starting with SMS text messages;
Safe for the use, means security level was high;
Environmental conditions was very good for this network & no network shortage was there.
2G licenses issued to private telecom players at throwaway prices in 2008. CAG: Rules and procedures flouted while issuing licenses. The 2G spectrum scandal involved officials in the government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money which the law mandated to be collected is estimated to be 176,645 crore (US$35.33 billion) by Comptroller and Auditor General of India based on 3G auction prices.[1] The issuing of licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department was investigating political lobbyist Nira Radia.
Page 6
O
ne of the companies under the Central Bureau of Investigation (CBI) scanner, which is probing the alleged 2G spectrum scam, has also figured in an earlier complaint to the
Central Vigilance Commission (CVC) filed in February last year. The 2G scam a careful between the telecom ministry, when it was headed by a raja and series of big business houses The CVC received a complaint last year against the Telecom Minister, and the officials of the Telecommunications Ministry who were involved in the decision of giving telecom license to Reliance Communication on 18 October 2007 and to other companies on 10 January 2008 under the first cum first serve policy. The complainant, which details the role of Swan Telecom Ltd, alleged that the licenses were given at a price that was much below the market price. He even alleged that the difference amount was shared between the people involved. Apart from the fact that the telecom licenses were given at lower prices, the most important piece of information that the complainant has revealed is “who owned Swan Telecom and who actually benefited from the sale of those licenses to other companies at a higher market price later.” Meanwhile, the current investigations by the CBI has resulted into allegations of corruption by various political parties. While the Prime Minister has backed the Union Telecom Minister Andimuthu Raja, the BJP has demanded his resignation for his role in the scam, which runs into thousands of crores. Raja, on the other hand, has accused the NDA government of being involved in a Rs 1.76 lakh crore spectrum scam by distributing free spectrum to operators.
Page 7
Entry fee for spectrum licenses in 2008 pegged at 2001 prices. Mobile subscriber base had shot up to 350 million in 2008 from 4million in 2001.
Rules changed after the game had begun.
Cut-off date for applications advanced by a week.
Licenses issued on a first-come-first-served basis.
No proper auction process followed, no bids invited.
Raja ignored advice of TRAI, Law Ministry, Finance Ministry.
TRAI had recommended auctioning of spectrum at market rates.
Unitech, Swan Telecom got licenses without any prior telecom experience
Swan Telecom given license even though it did not meet eligibility criteria
Swan got license for Rs. 1537 crore, sold 45% stake to Etisalat for Rs. 4200 crore
Unitech Wireless got license for Rs. 1661 crore, sold 60% stake for Rs. 6200 crore
All nine companies paid DoT only Rs. 10,772 crore for 2G licences
The 77-page report of the CAG tabled in Parliament said due diligence was not followed and even the recommendations of the telecom regulator TRAI were "not followed in spirit".
The report said the "presumptive" loss caused to the exchequer through spectrum allocation to 122 licencees and 35 dual technology licences in 2007-08 was Rs 1,76,645 crore. It pegged the figures on the basis of 3G auction held earlier this year in which the government mopped up over Rs 67,000 crore (Rs 670 billion).
Page 8
Corporations accused: 1. Unitech group. 2. Swan telecom. 3. Loop mobile. 4. Videocon telecom Ltd. 5. S-telecom 6. Reliance communication.
Bureaucrats & media person involved: 1. Siddharth Behura – Former Telecom Secretary. 2. RK Chandolia – Raja's private secretary. 3. Niira Radia, a corporate lobbyist whose conversations with politicians and corporate entities were recorded by the government and leaked creating the Nira Radia tapes controversy. 4. Barkha Dutt, an NDTV journalist alleged to have lobbied for A. Raja's appointment as minister. 5. Vir Sanghvi, a Hindustan Times editor alleged to have edited articles to reduce blame in the Nira Radia tapes.
Politicians & corporate executives accused: 1. A. Raja – the Minister of Communications and Information Technology who sold the licenses. 2. M. K. Kanimozhi – Rajya Sabha MP. 3. Gautam Doshi – Managing Director of Reliance Anil Dhirubhai Ambani Group. 4. Surendra Pipara – senior vice- President of Anil Dhirubhai Ambani Group and Reliance Telecom. 5. Hari Nair – senior vice-president of Anil Dhirubhai Ambani Group. 6. Sanjay Chandra – Managing Director of Unitech Wireless (Tamil Nadu) Ltd. 7. Shahid Balwa – Swan Telecom promoter. 8. Vinod Goenka – Swan Telecom promoter. 9. Sharath Kumar – Managing Director of Kalaignar TV.
Page 9
Amid the growing bewilderment among all sections of the people about the succession of corruption cases tumbling out of the cupboards of the Government, one question remains an enigma, about the 2G spectrum scam. How did the admittedly and inarguably the most honest and humble Prime Minister India has seen, preside over such brazen actions of then Telecom Minister A.Raja? The documents of the letters exchanged between Prime Minister Dr.Manmohan Singh and A.Raja, on the 2G issue, as well as the note of the Law Secretary, between Nov.1 2007 and Jan.3,2008, which we have acquired shows a distinct audacity on the part of Raja. He summarily dismisses the suggestion of then Law Minister H.R.Bharadwaj to form an Empowered Group of Ministers (EGoM), as “totally out of context”. He also brazenly tells the Prime Minister that though time was given for submitting applications till Oct.1, 2007, he will take into consideration applications of only those who have submitted it on or before Sept.25,2007, and gets away with it. However subsequently, as Rajya Sabha MP, Rajeev Chandrashekar in his open letter to Ratan Tata points out, Raja accepts the application of Tata Teleservices, though it is submitted on Oct.22, and ignores 343 other applications and rejects 110 others, and again gets away with it.
Page 10
However, on Dec.26,2007, Raja rejects all concerns, including the Prime Minister’s and in a five page letter containing three pages of annexure, he tells Dr.Manmohan Singh with a tone of finality, “since the file for issue of LOI(Letter of Intent) to all eligible applicants was approved me on Nov.2,2007, it is proposed to implement the decision without further delay and without any departure from existing guidelines”. The tone and tenor of this clear, “I won’t accept any more interference”! Prime Minister, meanwhile was too busy also working out alternative options , if the left parties were to withdraw support.It was very clear that he had already had Samajawadi party in his view to bail him out, though it did come as a surprise later to everyone, when Samajawadi Party did bail out the UPA Government.However, there was no way in which the Prime Minister could not have been aware of the battle going on in the Telecom ministry with the service providers. The media was full of stories of the problems,. Interestingly, on Dec.27, a day after Raja with finality told the Prime Minister that he was going ahead with his policy to allocate spectrum and issue of LOIs, S-Tel one of the companies in the fray offered a huge amount of over Rs.13,000 crore over and above the spectrum charges as revenue sharing.But Prime Minister, in his reply on Jan.3 made no mention of it, and just kept mum. In another interesting development on Dec.13, 2007, at the India Telecom Meet organized by the FICCI, Prime Minister while speaking there, had stated, “The revenue potential to the Government must not be lost sight of. After all, governments across the globe have harnessed substantial revenues while allocating spectrum.” Should not have Prime Minister taken note of all these extra-ordinary happenings in public, with media full of the reports about the controversy? Was he so engrossed in his own nuclear deal battles, which he had made it into a matter of personal prestige and glory, that he ignored what Raja was upto? If only he had taken some time off from his pet project and put brakes on Raja and allowed an EGoM to look into the issue, which he incidentally has set up in dozens during the last six and half years, we would not be discussing the 2G scam today.
Page 11
All older players such as Airtel, Vodafone and Idea get a lot since they are the ones who have been in operation well before 2008. The Supreme Court judgement means those who existed prior to 2008 will be the ones most likely to bid when the auction is held again for the 2G spectrum allotted in the circles where licences have been cancelled. Idea has not done too well in the new circles it had won and hence the loss of nine circles for Idea does not amount to much. Bharti and Vodafone too will most likely bid for maximum circles and increase their reach into most circles. This is like a manna from heaven for them. Jagannadham Thunuguntla, head of research, SMC Investments and Advisors, too feels that players like Bharti Airtel and Idea Cellular with popular brands and strong balance sheets will be clear beneficiaries because they can take advantage of this situation and increase their market share.
Among the 122 licences issued by former Telecom minister A Raja in January 2008 on firstcome first-serve basis, Uninor was alloted 22 pan India licences, Loop 21, Sistema-Shyam 21, Etisalat-DB 15, S Tel 6, Videocon 21, Idea 9 and Tatas 3. Many of them could get involved in prolonged litigation with the government over policy conundrum. Uninor was the first to react. The company said it had followed the government's norms and processes existing at the time of bidding. The fear is the sector may face another round of uncertainty for subscribers and fresh investors. Allegations against the process followed by the government apart, the fact is thousands of crore is at stake in the operations in the licences that have been cancelled. Not all of it belongs to these bidders and they will not be the only ones to suffer. The government of India suffers the loss of RS.1.76 lakh crores. Due to decision given by supreme court on 2g scam leads . BANKS EXPOSURE TO 2G SCAM: Banks Suffers Loss Due To 2g SBI BANK PNB BANK IDBI BANK CORP.BANK INDIAN BANK
Amount In Crore 4500 508 800 146 39
Page 12
The presumptive loss caused to the exchequer through spectrum allocation to 122 licensees and 35 dual technology licenses in 2007-08 was Rs 1,76,645 crore.
Calculation of loss based on 3G auction earlier this year
Advice of PM, Law Ministry, Finance Ministry ignored by Raja
A rare national asset as Spectrum should have been auctioned
Allocated 2G spectrum to new players at throwaway prices
Cut-off date for license letters advanced arbitrarily by a week
This went against procedures of government functioning
Entire process lacked transparency
Undertaken in arbitrary and inequitable manner
Rules circumvented to benefit Swan: CAG
Reliance given spectrum ahead of others: CAG
Tata Teleservices among those who got undue benefits: CAG
Idea and Spice not given spectrum on grounds of proposed merger – this was against the rules.
In mid November the comptroller 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 "national" losses quoted are a result of erroneous calculations and insists that the actual losses are nil.
Page 13
The 2G spectrum allocation scam case stands witness to the institutional decline of India. It provides a perfect example of how an immature democracy can fall victim to the forces of populist retribution against the high and mighty. The dubious enquiry being carried out into the spectrum allocation is nothing but a thinly veiled attempt on the part of the powers that appear to be taking action against those projected by our officious media as the villainous embodiments of corporate greed. Is it surprising then, that the niceties of law and the principles of justice are being consigned to the dustbin? Day after day, we have seen and read zealous media reports on how Mr Achary spills the beans on the former telecom minister‟s meetings with his co-accused, such as Kanimozhi, Shahid Balwa, Vinod Goenka and Sanjay Chandra. Point to note is that all the representatives of companies Achary mentioned above as to have met with A.Raja are also 2G/3G beneficiaries. Does it imply then that these companies were also part of the 2g spectrum allocation conspiracy Are we trying to suggest that in a modern democratic state, industrialists are not supposed to meet a minister? A minister is above all a public functionary. It is expected of him to hear the views of a broad spectrum of people about policy matters. There is nothing to suggest that any of the accused in the 2G scam case fall in the above mentioned categories. It is a sheer desperate attempt to read too much into such meetings and try to establish the fact of a conspiracy or wrongdoing merely on this basis.The thrust of Achary‟s testimony in the 2g scam case is to establish the guilt of the accused merely by mutual association. This is nothing but a crude caricature of the tenets of justice, and „guilty by association‟ testimony certainly should not be given weightage in the courts of justice. The court verdict has also affected the stocks of companies whose licenses have been cancelled. While the stocks of Unitech and DB Realty dropped, the older telecom players like Bharti Airtel benefitted. Meanwhile, the Indian telecom regulator said that it will first study the entire judgement before outlining its impact on the customers.
Page 14
http://www.2gscam.in/ http://www.2gscamblog.com/ http://en.wikipedia.org http://en.wikipedia.org/wiki/2G_spectrum_scam http://www.firstpost.com/business/2g-scam-verdict-how-it-hits-companies-banks-it-vendorsand-you-202463.html http://www.firstpost.com/business/banks-in-trouble-after-cancellation-of-2g-licenses201154.html http://www.business-standard.com/india/news/bjp-jumping-to-conclusion2g-scam/450089/ http://timesofindia.indiatimes.com/itslideshow/11726113.cms http://www.webend.in/the-2g-spectrum-scam-full-saga.html http://zeenews.india.com/news/nation/2g-order-won-t-change-govt-s-corruptimage_756640.html DMK blinks, Raja quits - Hindustan Times Singh, Shalini (28 October 2009). "BJP takes on Raja over telecom spectrum scam". Times of India. Retrieved 2009-11-08. "Raja adamant, says won't step down, ready for probe". The Times Of India. November 12, 2010. DMK blinks, Raja quits - Hindustan Times Joseph, Josy (August 30, 2010). "CAG draft report nails Raja role in 2G scam". The Times Of India. 2G spectrum scam collected news and commentary at India Today 2G spectrum scam collected news and commentary at CNN-IBN 2G spectrum scam collected news and commentary at Tehelka
Page 15
Page 16
