New Delhi: In a severe indictment, not only did the Comptroller and Auditor General of India (CAG) accuse the government of regulatory failure in telecom, it also levelled charges against a host of operators such as Swan Telecom, Unitech Wireless Ltd, STel Pvt. Ltd and Reliance Communications Ltd (RCom) for violating the spirit of the telecom policy.

In what could potentially be a political setback for the Congress-led United Progressive Alliance (UPA), the Supreme Court on Tuesday ticked off Prime Minister Manmohan Singh for his inaction on corruption allegations against former telecom minister A. Raja.

The apex court was referring to the letter to the PM from Janata Party leader Subramanian Swamy where he sought sanction to have Raja indicted over corruption charges; the PM responded after 16 months without taking a stand.

The CAG report, which exposed a range of grave irregularities in the issue of licence and allocation of second generation (2G) spectrum as well as implementation of the unified access service licence (UASL) regime, was tabled in Parliament on Tuesday, two days after Raja, accused of corruption in the spectrum allotment, resigned.

CAG raised questions about the “intention" of Reliance Telecom Ltd (RTL) and the control it exercises in Swan Telecom Pvt. Ltd, which got 13 licences. The CAG report highlighted that Swan misrepresented information about its share capital to be eligible to bid. It also “submitted false certificate from company secretary regarding paid-up capital", the report says.

CAG, which is a constitutional body that reports to Parliament, estimated that the allocation of 2G spectrum has caused a presumptive loss of up to 1.76 trillion to the public exchequer. This was premised on three factors: the difference between the bid offer by STel and the actual sale price; rates based on the recently concluded third generation (3G) auctions, and the price at which Swan and Unitech, which also got spectrum in 2008, sold equity.

STel, on 27 December 2007, wrote to the Prime Minister offering to pay an additional revenue share of 13,752 crore over a period of 10 years for a pan-India licence over 6.2 MHz GSM spectrum. Using this benchmark, CAG computed that the presumptive loss to the exchequer would be 65,909 crore.

The CAG report indicted the department of telecommunications (DoT) on various charges, including ignoring the Prime Minister’s suggestion of adopting a “fair and transparent method of auction", the advice of the ministry of law and justice to bring the issue under the consideration of an empowered group of ministers, and the views and concerns of the finance ministry to review the pricing determined in 2001.

“The high-powered telecom commission was not even consulted at the time of grant of 122 UAS licences in 2008," the report points out, adding that DoT’s own “first come, first served" policy made arbitrary changes in cut-off dates and issued licences to ineligible applicants.

CAG rejected DoT’s argument that RTL’s share in Swan Telecom is not in violation of the rule because preferential share capital is not taken as a part of equity share capital and termed it as “evasive". It said Swan Telecom won the 2G licence on the “strength of RTL (314.7 crore), with the contribution of major shareholder (Tigers Traders Pvt. Ltd) being 1 lakh in their application on 2 March 2007".

To prove RTL’s role in Swan Telecom, CAG noted that the email ID of the corporate as well registered office of the company was shown as in its 2 March application.

CAG claimed that the total stake of RTL in Swan worked out to 10.71% of the total equity worth 110 crore. This, according to it, “raises doubts about the intention of RTL and the control it would exercise in a new company incorporated barely a few months ago". It then added that this violated the “intent and spirit" behind the UAS guidelines.

An RCom spokesperson rejected the charges. “Our group had no shareholding in Swan Telecom (now known as Etisalat DB Telecom India Pvt. Ltd) at the time of grant of licence to them or any time thereafter, and that issue is accordingly not relevant to our company. Reliance Communications has always been in full compliance with all applicable laws, rules and regulations, and there has been no violation of our licence conditions at any stage on account of cross-holdings in excess of 10%," the spokesperson said.

A spokesman for Swan Telecom declined to comment.

Further, CAG also noted that nine operators held spectrum licences beyond the contracted limit. This included Aircel Ltd, Bharti Airtel Ltd, BPL (Mumbai), Bharat Sanchar Nigam Ltd, Idea Cellular Ltd, Mahanagar Telecom Nigam Ltd (Delhi and Mumbai), RCom, Spice (Punjab) and Vodafone Essar Ltd, resulting in a presumptive loss of 36,993 crore to the exchequer.

Raja continued to insist he had followed “the telecom policy of 1999, the recommendations of Telecom and Regulatory Authority of India and vision contemplated by the government."

“If there have been any procedural lapses... let it be problem at all... Let the law take its own course," the Dravida Munnetra Kazhagam leader told reporters outside Parliament House.

Meanwhile, the stalemate in Parliament over the Opposition demand for a joint parliamentary committee (JPC) inquiry into the corruption allegations against the UPA leaders, including the 2G spectrum allocation irregularities, continued for the fourth day on Tuesday. A lunch meeting of all party leaders convened by finance minister Pranab Mukherjee failed to break the logjam with the main opposition Bharatiya Janata Party-led National Democratic Alliance along with the All-India Anna Dravida Munnetra Kazhagam, the Telugu Desam Party and the Samajwadi Party not willing to relent.

Mukherjee said the Opposition’s demand would be “discussed within the government and within the party".

Shauvik Ghosh also contributed to this story.