DoT refutes CAG allegations on ‘undue favours’ to Reliance Jio
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New Delhi: The telecom department has strongly refuted the government auditor’s observation that Mukesh Ambani-controlled Reliance Industries Ltd (RIL) and Nahata family-owned Infotel Broadband Services Pvt. Ltd, a company that was subsequently acquired by RIL, were shown undue favours, resulting in a loss of more than Rs.20,000 crore to the government.
In a 37-page response, the department said the Comptroller and Auditor General (CAG) was challenging the decision-making powers of the government and “seeking to substitute the wisdom and the decisions of the decision making authorities of the relevant time with that of an alternate approach suggested in the draft audit report which need not have been the best approach”.
It has suggested that the “draft audit paras may be dropped and matter closed”.
In a 2 May report, CAG said that the government department failed to see obvious signs that the auction for high-speed Internet spectrum (2300MHz band spectrum) in 2010 was rigged by Infotel.
Infotel paid 5,000 times its Rs.2.5 crore net worth to win spectrum across India. The draft was sent by CAG to the department of telecommunications (DoT) for its response to the allegations.
Infotel bid and paid Rs.12,847.77 crore for 20 megahertz (MHz) of the spectrum in all 22 circles, after paying Rs.252.50 crore as earnest money, and then sold 95% of the company for Rs.4,800 crore to RIL, hours after the auction for wireless broadband licenses concluded.
DoT also said that while RIL may have been a so-called “insider” or an entity acting in concert with Infotel in the wireless broadband auction, there is no evidence that RIL shared information with other bidders in the auction to rig prices.
RIL didn’t respond to phone calls and email seeking comment.
The charge that firms had colluded in the auction to rig prices is far fetched, said Mahesh Uppal, a telecom regulatory expert with Com First (India) Pvt. Ltd.
“I am rarely impressed by DoT, but in this case they are right and the CAG is wrong,” said Uppal. “This was an auction that was open to bidders across the world. Why would they collude to allow a competitor to gain? You can’t collude when interests are different.”
The government auditor has also accused the telecom department of extending undue favours to Reliance Jio Infocomm Ltd by allowing it to offer voice services, using the Internet service provider’s licence it holds, for a paltry sum of Rs.1,658 crore, the same amount that was paid by incumbent telcos in 2001 to offer telecom services when the industry was just emerging.
“Reliance Jio Infocomm appeared to have been accorded an undue advantage of Rs.22,848 crore,” the draft audit report said.
Uppal disputed the auditor’s observation. “From the beginning of the auction itself, it was clear that a successful bidder, with an Internet service provider licence, could offer voice services by acquiring the requisite licence,” he said.
The telecom department said the auction and unified licence implementation process followed were completely transparent and carried out after an extensive consultation process with all stakeholders.
This fact was emphasized by communications and law minister Ravi Shankar Prasad in Parliament on Monday. “Our policy on spectrum sharing, trading and allocation is transparent,” he said in the Lok Sabha.
In its reply, the telecom department has also explained the difference of spectrum in various bands in order to prove the fallacy of the Rs.22,842 crore loss arrived at by CAG. This could also have larger ramifications on the ongoing 2G scam case, being heard by the CBI special court in Delhi.
In an earlier report, CAG said DoT’s allocation of 2G spectrum (1800MHz band spectrum) in 2008 caused a loss of Rs.1.76 trillion. This valuation was calculated using the value ascertained from the 3G spectrum (2,100MHz band spectrum) auctioned in 2010. The government was able to garner bids worth Rs.1.07 trillion in that auction, including more than Rs.32,000 crore for wireless broadband spectrum and around Rs.67,000 crore from 3G spectrum sold at the time. Analysts and experts, however, attribute the high valuation of spectrum in that auction to a hyper-competitive market and relatively stronger balance sheets of the telcos at that time. Since then, the debt of telecom companies has surged to Rs.2 trillion and the spectrum has not brought in the revenue it was expected to.
The telecom department has also rejected the observation of the auditor that the recommendations of the Telecom Regulatory Authority of India were not followed. It said that the companies successful in the auction were allowed to issue fresh equity and many of the other bidders also bid and won spectrum at values far higher than their net worth and that there was no litigation from other winners and losers of the auction.