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Home / Opinion / Views /  Pay Devas $1.3 bn; close the chapter on Vinod Rai's imagined scams

The wages of sin is death, says the Bible. There is no canonical clarity on the wages of sacrificing contractual integrity in the face of political opportunism and uninformed scam-mongering by a glory-hunting Comptroller and Auditor General of India and a frenzied media bent more on baying for blood than on sifting the grain from the chaff. The International Chamber of Commerce’s arbitration tribunal deems it to be damages worth at least $1.3 billion, in the case of Devas Multimedia, and courts in the US and Canada concur.

The Devas deal goes back to 2005, when Devas Multimedia, a company founded in India with some former bigwigs of India’s space administration and information technology types, entered into a contract with Antrix Corporation, the commercial arm of India Space Research Organisation, for a 12-year lease, in return for $300 million to be paid over the same period, of space on transponders on yet-to-be-launched geostationary satellites GSAT6 and GSAT6A, along with 70 MHz of the S-Band spectrum to be used for communication between the ground and the transponders. The S-Band comprises an electromagnetic spectrum in the range to 2-4 GHz, assigned by the International Telecommunications Union for satellite communications. But spectrum can be repurposed for use as well.

Devas planned to offer high-speed mobile broadband via satellite. Now, it is unlikely that this plan was perfect by today’s standards. Elon Musk’s Starlink satellite broadband service and others of its ilk, such as One Web, in which Bharti is the largest stakeholder, use hundreds and thousands of satellites in low earth orbit, whereas Devas proposed to use geostationary satellites. For a satellite to hold steady over a particular patch of mother earth, it has to be at an altitude of 35,786 km. Low earth orbits are less than 2,000 km above land. The shorter the distance signals have to travel from earth to satellite and back, the lower the latency. Low earth orbital satellite broadband will not suffer the kind of lag that GSAT broadband will have. But, for its time, Devas was out of the world thinking.

In 2010, the Comptroller and Auditor General of India, headed by Vinod Rai, came out with a report alleging notional loss of up to 1,76,000 crore to the exchequer, on account of the spectrum being allocated to telecom operators without an auction. Even before the submission of the report, media leaks had filled the discourse with scam allegations that made any deal in which spectrum was assigned without an auction look toxic. As a matter of political expedience, the UPA government of the day scrapped the deal with Devas.

It is worth bearing in mind that no television channel that uses an Indian communications satellite transponder for broadcast has participated in an auction for use of the transponder and the spectrum associated with it. They pay the fee fixed by Antrix Corporation. In 2005, when Devas struck its deal with Antrix, there were no other claimants for the transponder space on GSAT6 and GSAT6A. Devas struck a deal with Antrix for a fee fixed by mutual agreement. It is entirely conceivable that this was done in good faith, and for a technological feat that was exciting, satellite broadband far more advanced than what Very Small Aperture Terminal technology offered.

Yet, when the 2G scam frenzy hit public life in India, assigning spectrum without an auction looked like a crime. Instead of defending its stand, the government caved in and scrapped the deal with Devas, finding some procedural flaws to boot. It is worth remembering that the actual trial of the 2G scam dismissed the notion of a scam, and acquitted the telecom minister A Raja and all others accused. That is under appeal. After a two-judge bench of the Supreme Court cancelled 121 telecom licences in 2011, on grounds of suspected irregularities, including the assignment of spectrum, a scarce natural resource. without auctions, the government sought a Presidential clarification from a larger, Constitutional bench as to mandatory use of auction, as the sole legitimate method, to allocate natural resources. The court clarified that auctions are not a necessary feature of propriety and that, policy being the executive’s prerogative, it could assign spectrum as required. But by then, the scam narrative had become part of the popular psyche, the government lost the election subsequently.

The scrapping of the Devas deal was not the result of any actual discovery of any scam, but a pre-emptive move by a government that had been unnerved by a CAG’s innovation of ‘notional loss’ on the basis of sweeping assumptions and the public’s uncritical swallowing of this scam narrative. Devas Multimedia sued the government at the international court of arbitration at the ICC. Two further suits were filed under Mauritius and German bilateral investment treaties by shareholders of Devas. India lost all suits, and has been asked to pay Devas compensation and interest adding up to at least $1.3 billion.

India challenged the award of 2015. In 2020, a US court agreed to let Devas shareholders seize properties owned by the government, other than those owned for sovereign purposes, such as embassies and the like, to realise the award. Now a Canadian court has echoed that ruling.

India should pay up and move on, as it has on the Vodafone and Cairn retrospective tax disputes. To let the dispute with Devas drag on is to keep reminding investors how investment in India can sour on the basis of political expedience. We need to remove this weakness, and change the public narrative around it, not keep the controversy alive by forcing some state-owned entity or another keep fighting court orders to seize their property abroad to realise Devas shareholders’ compensation award.

 

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