2G scam: A Paper Hammer Strikes Again

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Ashish Khetan accesses a new note by former Finance Secretary D Subbarao on the telecom scam which can only add to Home Minister P Chidambaram’s troubles

Covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam
Click to see the covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam

Covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam
Click to see the covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam

Covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam
Click to see the covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam

Covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam
Click to see the covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam

Covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam
Click to see the covering letter and freshly leaked note prepared by former Finance Secretary D Subbarao over the 2G scam

 

More trouble seems to be brewing up for the Centre in the 2G saga. A note prepared by the former Finance Secretary D Subbarao in July 2008 has now surfaced making both the Central Bureau of Investigation’s (CBI) and the Centre’s resolute defence of its beleaguered Home Minister P Chidambaram in the 2G spectrum allocation scam even more difficult in several respects.

More trouble seems to be brewing up for the Centre in the 2G saga. A note prepared by the former Finance Secretary D Subbarao in July 2008 has now surfaced making both the Central Bureau of Investigation’s (CBI) and the Centre’s resolute defence of its beleaguered Home Minister P Chidambaram in the 2G spectrum allocation scam even more difficult in several respects.

A new, leaked note says that both the PM and then-Finance Minister P Chidambaram had concurred with formed Telecom Minister A Raja’s decision of allotting spectrum at the rates determined in 2001, when the telecom industry was in a nascent stage
A new, leaked note says that both the PM and then-Finance Minister P Chidambaram had concurred with formed Telecom Minister A Raja’s decision of allotting spectrum at the rates determined in 2001, when the telecom industry was in a nascent stage

One of the main justifications given by the CBI to the Supreme Court while opposing Janata Party President Subramaniam Swamy’s plea for investigating Chidambaram’s alleged role in facilitating the scam was that the damage was already caused by the issue of letters of intent (LOIs) on 10 January, 2008, by the then-Telecom Minister A Raja and after that Chidambaram—who was then Finance Minister—could not have pressed for rescinding the LOIs as the government was already bound by contractual obligations.

“It may not be correct to state that after receiving the amount of Rs 1,600 crore for each licence, and fulfilling the other conditions in the LoIs, the licences would still be open to cancellation,” the CBI contended in a written submission made before the Supreme Court on 14 October three days after the court reserved its order on Swamy’s plea for a CBI probe into Chidambaram’s alleged complicity in allowed the sale of 2G spectrum at dirt cheap rates. The court has still not passed an order and it continues to be reserved.

However, the freshly leaked note, dated 4 July 2008, states that “it is legally and administratively tenable to impose a two-part tariff for spectrum: a fixed, one-time ‘upfront’ spectrum price for allowing allottees to use a public resource for private profit; and a recurring spectrum usage charge whereby the government shares the profits accruing to the operator”.

In a way, the note implies that even in July 2008, which was over six months after the issuing of LOIs and three months after the signing of license agreements, the Finance Ministry still believed that it was both legally and administratively possible to charge an increased price for the 2G spectrum.

The reason for not charging an increased price, the note further says, was because of “historical legacy reasons”. “However, due to historical legacy reasons, spectrum allocation up to 6.2 MHz for GSM (5 MHz for CDMA) shall not be charged both from new and existing operators,” says paragraph 5 on page 2 of the note. This September, a 12-page secret Office Memorandum sent by the Finance Ministry to the Prime Minister’s Office in March 2011 had been released by the PMO to a RTI activist leading to a political storm over the alleged role of Chidambaram in the 2G scam. The note had cited several occasions on which if Chidambaram could have prevented the licence allocation process.

This fresh note now is going to embarrass the government further. Particularly damning is the fact that the rationale given by the government in this note for not charging an increased spectrum price was not public interest, which is now cited ad infinitum by it to defend its policy decision of spectrum allocation at cheap rates. But far from mentioning terms like increase affordability or teledensity, or level-playing field as the stated objectives, the note quite bizarrely mentions the term “historical reasons” which too has not been defined or spelt out as the reason for not charging a market-determined entry fee.

Subbarao’s note was prepared for the purpose of discussions between Raja, Chidambaram and Prime Minister Manmohan Singh in a meeting which took place on the same date on which the document was prepared, July 2008. In a covering letter dated 6 July, 2008, Subbarao further mentioned, “The issues contained in the attached note, dated 4 July, 2008, were discussed with the PM by the FM and the Minister (Telecom) on 4 July, 2008. Secretary (DoT) and I were present. All the issues have been agreed to as mentioned in the note.”

Therefore, the note says that both Singh and Chidambaram had concurred with Raja’s decision of allotting spectrum at the rates determined in 2001, when the telecom industry was in a nascent stage. There is no mention of any discussion on auction or a market-determined price in the note, which had set out the agenda for the high-powered meeting between the three.

Many would argue that the note further makes it clear that the defence of contractual obligations put up by the Centre as a reason for not revoking the LoIs or licenses is merely an afterthought—because if there was any such deliberation of finding ways of correcting Raja’s hasty issuance of LOIs or licenses, the note would have certainly mentioned it.

Notably, Chidambaram’s stated position till 9 January, 2008, a day before Raja issued the LOIs, was to either auction the 2G spectrum or index it to the market-determined price. But on 15 January, 2008, Chidambaram wrote to the PM recommending that Raja’s 10 January decision to issue LoIs should be treated as a closed chapter—but all the 150 odd licences were signed and issued only between 27 February and 7 March, 2008.

There is no stated justification for Chidambaram’s sudden U-turn on the file. Nor has Chidambaram till date publicly issued any statement to justify his position. The only statements opposing the cancellation of LOIs that find mention in the official 2G files have been actually made by the DoT. On 8 February, 2008, then-Secretary DoT Sidhartha Behura had written to the Finance Ministry saying that initial allocation of spectrum of 4.4 Mhz was part of the license agreement and if it was priced, it would not only disturb the level-playing field, but LoI holders who had already paid the entry fee would go for litigation.

However, there is nothing in the file which suggests that Chidambaram seriously dwelt upon the statements made by DoT or that he referred the matter to the Law Ministry for opinion. The leaked note, in fact, shows that the only agenda of the 4 July meeting was to determine the price mechanism for spectrum allocation beyond 6.2 MHz, for which market-driven methodology was approved by the PM, Raja as well as Chidambaram.

Interestingly, it’s also not clear that how the start-up spectrum of 4.4 MHz (which was not priced) was enhanced to 6.2 MHz giving an additional advantage of 1. 8 MHz to new licencees.

Ashish Khetan is Editor, Investigations with Tehelka. 
ashish.khetan@tehelka.com

 

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