Govt moves to contain 2G controversy fallout

Govt moves to contain 2G controversy fallout

New Delhi: India’s new telecom minister Kapil Sibal signalled a comprehensive review of the telecom policy aimed at addressing perception of widespread corruption in the telecom ministry—a move that could resolve the impasse in Parliament, where no business has been done since the ongoing winter session began on 9 November.

Sibal said the ministry would also issue so-called show-cause notices to telcos suspected to have broken rules, including Etisalat DB Telecom Services Pvt. Ltd, Vodafone Essar Ltd, Aircel Ltd and Tata Teleservices Ltd.

Some of these telcos are alleged to have entered the business on favourable terms in early 2008. Others, which entered in 2006, are alleged to have not met their so-called roll-out obligations (a promise on the extent of their operations). The issue relating to the entry of telcos in 2008 has already claimed the head of former telecom minister A. Raja, and is being investigated by the Central Bureau of Investigation (CBI).

“We believe it’s about time we issued notices to those who we believe may have suppressed facts or got any undue advantage," Sibal said, adding that he was not averse to having his department’s investigation monitored by the Supreme Court.

The department of telecommunications (DoT), according to Sibal, will be targeting the errant firms on three grounds: suppressing facts related to changes to MoA (memorandum of association) that allowed them to do business in the telecom sector at the time of application; not obtaining government approval for changes in paid-up capital; and, failing to meet roll-out obligations contained in the licence agreement.

“We have found that many of the companies that applied through self-certification, may have had the special resolution in place, but had not even applied to the RoC. They may have applied later," Sibal said. The Registrar of Companies (RoC) is the regulator of all corporate activity in the country and companies need to make filings to it providing details such as their equity capital and the nature of business. While some of the companies under the department’s scanner may not have had permission to enter the telecom business, others may not have met the criteria for paid-up capital.

“We have sent show-cause notices to 85 such licensees. They will have 60 days to respond after which we will take a decision," he added.

The 85 licensees (out of 122 issued) include all the operators who received telecom licences in January 2008, at the centre of what is referred to as the 2G scam.

Also on the department’s radar are older telcos that have not met their roll-out obligations.

Vodafone, Aircel and Tata Teleservices are among the telcos that could be targeted, said a DoT official, who did not want to be identified.

None of the telcos responded to Mint’s query, emailed late Monday evening, seeking comment.

While some of these telcos will have to pay “liquidated damages" or fines, others could see their licences being cancelled.

“We must ensure that any licensee who has committed to achieve certain conditions achieves them," the telecom minister said.

According to existing regulations, if a telco fails to meet its roll-out obligations within the period prescribed, DoT can charge liquidated damages of Rs5 lakh per week extra per licence area for the first 13 weeks, Rs10 lakh for 13 weeks after that, and Rs20 lakh for 26 weeks after that up to a maximum of Rs7 crore.

Any delay of more than a year could lead to termination of the licence.

Last week, the Telecom Regulatory Authority of India (Trai) sent a letter to DoT asking that at least 69 licences be cancelled and liquidated damages of around Rs700 crore be charged from the telcos concerned.

The Swan issue

Speaking about alleged discrepancies in the holding structure of DB Group-promoted Swan Telecom (now Etisalat DB Telecom Services), Sibal said the matter would be referred to the ministry of corporate affairs.

Etisalat’s India representative didn’t respond to Mint’s query seeking comment.

Last month, the government’s auditor, the Comptroller and Auditor General of India (CAG), submitted a report to the Centre, accusing DoT of causing losses of as much as Rs1.76 trillion to the exchequer, largely from giving licences and spectrum cheap to telcos that entered the business in 2008.

Sibal clarified that the CAG report represents the opinion of the audit body and that his ministry would act on it only after studying the issue thoroughly.