On January 10, 2008, A Raja decided to hand out letters of intent for 2G licences to telecom companies on first-come-first-served basis - disregarding rules, precedents set by earlier decisions, and the advice of bureaucrats. Extracts from Bhupesh Bhandari’s new book trace the sequence of events that led to the “mother of all scams”.
Avdesh Kumar Srivastava [then a senior official in the department of telecommunications] was called by DoT Secretary [Siddhartha] Behura to his office on the morning of 10 January 2008. He was handed over a photocopy of the press release as amended by [A] Raja and asked to release it right away. This he did immediately. But not without noting that the last paragraph — in which Behura had said that in case more than one applicant complied with the conditions of the letter of intent at the same time, the inter se seniority would be decided by the date of application — had been deleted. By the time Srivastava reached his desk, there was a bundle of applications on it. He called his staff to study the files and gathered his team to discuss the modalities for handing over the letters of intent. The officers were all gathered around his desk when [Private Secretary to A Raja, R K] Chandolia walked in. Srivastava perhaps sensed that something was amiss because, he said in his testimony [to the Central Bureau of Investigation], ‘this was unprecedented. Generally, Chandolia calls the officers of DoT, if required, to his chamber’. Chandolia intervened to say that the letters of intent had to be distributed on that day itself. When Srivastava and others remonstrated, he said the orders had come from Raja. The bureaucrats could argue only up to a point, after which it was the minister’s call. So, this clinched the matter. Chandolia then suggested that the letters of intent ‘must be issued in a short span of time by opening four counters’. Srivastava said in his testimony, ‘He also suggested the scheme of the counters which he had on a piece of paper in his hand.’
Quite clearly this level of interference was unusual, if not unprecedented. Yet none seemed to object to it, at least on record. But Srivastava and others expressed one last doubt: there wasn’t enough time to inform everybody that the letters of intent would be distributed later that day. Chandolia had a solution: the applicants could be informed over telephone and a press release could be put out to this effect. When Srivastava did not agree, he was asked to come to Behura’s office. There he was told that the letters of intent should be issued the same day, as desired by Raja and conveyed by Chandolia. ‘Behura did not listen to me that it is difficult because all the companies have to be informed and a lot of paperwork has to be completed. Behura told me that the scheme suggested by Chandolia is fully implementable,’ Srivastava said in his statement to CBI. And thus the stage was set for the mayhem that was to follow at 3:30 pm at Sanchar Bhawan.
Srivastava said he did not see the logic in setting up four counters for distribution of the letters of intent. If these had to be handed out simultaneously, 14 counters were required; if these were to be given on the first-come, first-served basis, then only one counter was required. But Chandolia and Behura, according to CBI, had devised how the letters of intent would be distributed to the applicants and asked DoT officers to merely implement the scheme. When some officers objected, Behura said he was ready to give his assent to the scheme on the file. Perhaps they were aware that the procedure may be questioned in the future, so they sought his approval on the file, which he duly signed. The arrangement for the counters and the licensees is shown below. The number in brackets represents priority according to the date of application.
Since Bycell only had to collect the rejection letter, Swan Telecom was effectively number one at the first counter, although it was fifth on the priority list. Similarly, since Parsvnath’s application had been rejected, Unitech Wireless jumped from the twelfth slot to the second at the fourth counter, and its application of 25 September had been a subject of special interest to Chandolia. Moreover, the concerned officials did not stick to the plan and the order that was sought to be maintained was broken with impunity.
CBI alleged that Unitech Wireless and Swan had prior information that this would happen. This was a serious accusation because as it turned out, even the Finance Ministry was not in the loop, despite the huge financial implications. D Subbarao, the then finance secretary, would later tell the Public Accounts Committee in Parliament that even he wasn't fully aware of what was going to happen on that day! The basis for the CBI allegation: the demand drafts of these two applicants were ready well in advance. Swan had got the bank guarantees made for two circles as early as the first half of November 2007. It was subsequently changed to Delhi and Mumbai, ‘in view of the advance knowledge that spectrum was limited in the metros, especially Delhi’. The company had approached Punjab National Bank for a loan as early as October 2007, and had told the bank that the demand drafts would be required at very short notice because these would have to be submitted as soon as the letters of intent were issued. Similarly, Unitech Wireless also had its demand drafts ready by 10 October 2007. It was only through media reports in December 2007 that others realised this could happen and thus began to prepare their bank guarantees. The time of each and every applicant was recorded for every telecom circle. The licence agreement would be signed in the same order of priority. Finally, spectrum would be handed out.
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The Ministry of Finance had raised the red flag in time but all opposition was steamrolled by Raja. The ministry had, in fact, for long demanded a discussion on spectrum pricing, but was stonewalled first by Dayanidhi Maran and then by Raja. Finance Secretary D Subbarao (he subsequently became Governor of the Reserve Bank of India) wrote to Telecom Secretary [D S] Mathur on 22 November 2007 ‘to confirm if proper procedure has been followed with regard to financial diligence’. Two days earlier, Mathur had made a presentation on spectrum policy to Cabinet Secretary K M Chandrasekhar. Subbarao had been present at the meeting and he wrote that it wasn’t clear how ‘the rate of Rs 1,600 crore, determined as far back as in 2001, has been applied for a licence given in 2007 without any indexation, let alone current valuation. Moreover, in view of the financial implications, the Ministry of Finance should have been consulted in the matter before you had finalised the decision.’ He ended the letter with a request for a reply as soon as possible. ‘Meanwhile, all further action to implement the above licences may please be stayed.’ Mathur did not agree with Subbarao and conveyed as much in his reply on 29 November 2007. This, incidentally, was the second time Subbarao had raised the issue with Mathur — he had sent a similar missive on 7 June 2007, to which Mathur had given the same answer.
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Around the same time, another drama was being played out at Sanchar Bhawan. In line with the Ministry of Finance’s view, Manju Madhavan, Member (Finance) at DoT, sought an in-depth analysis of the subject before taking a decision. Mathur concurred. But Raja resisted; he wrote: ‘Officers neither have up-to-date knowledge of the universal licence guidelines nor have bothered to carefully go through the file. These types of continuous confusions observed on the file, whoever be the officer concerned, does not show any legitimacy and integrity but only their vested interest. The matter of entry fee has been deliberated in the department several times in light of the various guidelines issued by the department and recommendations of TRAI [Telecom Regulatory Authority of India], and accordingly the decision was taken that the entry fee need not be revised.’ This was indeed harsh. Raja was clearly in no mood to listen to anybody. ‘The action suggested that Raja was not open to the idea of discussing and deliberating the issues involved at appropriate levels, even when there was high risk of a huge revenue loss to the exchequer,’ the Comptroller and Auditor General of India (CAG) observed.
The Public Accounts Committee summoned Subbarao to explain what had happened after Mathur’s reply of 29 November 2007. ‘Maybe there was no exchange of correspondence, but there were certainly discussions going on between the telecom secretary and me,’ he said. ‘As you know, not everything is on paper or reduced to writing. Maybe there were some note file endorsements but I cannot recall them because the note file is not here.’ When the committee asked whether such important discussions did not merit being recorded, Subbarao said, ‘I agree that leaving communication between two ministries at the oral level is bad professional practice but it happens all the time because of work and other things.’ Besides, Subbarao added that his team had begun preparations for the annual budget of 2008-09. ‘It is not as if I was completely and fully engaged on the issue, but we were talking to them even as there were other commitments on our time.’
What he said next was damning, both to the process being followed and to the involvement of his ministry. ‘Had we known in November (2007) that some event was going to take place on 10 January (2008), we would have been certainly more active. But we did not know.’ When he was told that such knowledge was in the public domain as the newspapers had been reporting on this extensively, Subbarao said, ‘Nobody told me that all this is actually going to lead to the issue of licences on a particular date. We thought that it was still open-ended and there was room for discussion, and that we will not reach the point where we should conclude that discussions had broken down and we must take it to another higher forum. We would have doubled our efforts if we knew that a deadline was approaching.’ He said that not consulting TRAI was a ‘systemic lapse’ on the part of his ministry, and ‘in a way’ due diligence was not carried out.
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D S Mathur’s testimony before the PAC [Public Accounts Committee] was an eye opener; it clearly showed what was really going on inside Sanchar Bhawan. ‘As regards correspondence with the finance secretary, I would like to clarify that whatever I wrote was at that time the position (held by) the department. But we were ourselves not happy with the situation and were therefore making attempts to change the situation, (and) to change the policy. But so long as the policy remained (in place), I had to communicate that policy to the Finance Ministry.’ Asked by the Committee to state if the letters he wrote to the finance secretary were voluntary or was he coerced to take this line, Mathur said, ‘If I am the secretary of a department and if I have a policy before me, so long as I am not able to get that policy changed in the department, I will have to defend that policy. I could not have said that this policy was wrong and asked the Finance Ministry to intervene.’ He could not, Mathur said, have said something to the finance secretary which was not approved by his minister (Raja in this case).
‘We had within the department brought all the matters to the notice of the minister (Raja). Had he agreed, then we would have communicated to the Finance Ministry that we have changed the policy.’
When asked if Raja had been told about the option of auctioning spectrum, Mathur said, ‘The Minister had been requested at least twice by us to reconsider the matter and bring the rates, at which the licences were to be given, up to date.’ The Committee wanted to know from Mathur if he had told Raja that sidetracking the Finance Ministry on the issue would violate the cabinet decision of 2003 (that the matter should be jointly decided by the two ministries). ‘I may not have used these words,’ Mathur said, ‘but I did bring it to the notice of the Minister that we may have to go to the cabinet for that.’ When Raja decided to ignore his advice and have his way, did Mathur bring the matter to the notice of the Cabinet Secretariat or PMO [Prime Minister’s Office]? ‘I submit to you that I brought it to the notice of the cabinet secretary and the principal secretary of the prime minister not once but several times,’ and ‘orally in October to November’, he added.
SPECTRUM GRAB: INSIDE STORY OF THE 2G SCAM
Author: Bhupesh Bhandari
Publisher: BS Books
Price: Rs 350