Mr PM, We Have a Problem

Contrary to what Manmohan Singh says, it seems there was no ‘concurrence’ between the Finance Ministry and Telecom Department on 2G spectrum allocation

Did Prime Minister Manmohan Singh mislead the nation—or was he misled—when he claimed there had been a concurrence of sorts between the Ministry of Finance (MoF) and the Department of Telecommunications (DoT) on allocating second-generation (2G) telecommunications spectrum? The facts speak otherwise.

There was indeed no concurrence on this issue between the MoF, then headed by Palaniappan Chidambaram, and the DoT, then under the control of Andimuthu Raja. The two wings of the Government of India disagreed on the modalities and pricing of spectrum allocation in January 2008 at prices prevailing seven years earlier, that is, 2001.

Nor was the Government’s decision in keeping with the 31 October 2003 decision of the Union Cabinet of the National Democratic Alliance (NDA), or the recommendations of the Telecom Regulatory Authority of India (Trai) as has been claimed by Telecom Minister Kapil Sibal, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia, besides the PM himself.

Manmohan Singh told editors of television channels on 16 February: “… [the issue of publicly auctioning spectrum] was also discussed with the Finance Ministry because in terms of the Cabinet decision of 2003, the pricing and allocation of spectrum was to be settled between the Ministry of Finance and the Telecom department. Initially, of course, the Finance Ministry did ask for a high price of spectrum but after many discussions, the two ministries agreed that as far as 2G is concerned, we have to live with the present system particularly with regard to the amount of spectrum that is built and embedded into a licence agreement. So this is the background [of] why I did not proceed further with this matter of pricing of spectrum, because if the Ministry of Finance and [the depart­ment] of Telecom both agree and they have the obligation of the Cabinet decision of 2003 to decide on the matter and also since Trai is an expert body and Telecom Commission has experts, if all of them are of the same view, I did not feel I was in a position to insist that auctions must be insisted [upon].”

Here’s a chronological look at the facts. The October 2003 Cabinet note cites the recom­mendations of the Group of Ministers (GoM) that the DoT and MoF ‘would discuss and finalize spectrum pricing formula, which will include [an] incentive for efficient use of spectrum as well as [a] disincentive for sub-optimal usages’. It added that the ‘DoT may be authorized to finalize the details of implementation with the approval of the Minister of Communications and Information Technology in this regard including the calculation of the entry fee depending upon the date of payment based on the principles given by TRAI in its recommendations’ (sic).

On 29 May 2007, two weeks after Raja became Telecom Minister, a ‘non-minut­ed, non-paper’ meeting took place between him and Chidambaram on spectrum pricing and allocation. At the time, there were only 53 new applications for spectrum pending with the DoT (as mentioned in the department’s 11 November 2010 affidavit to the Supreme Court). The number jumped to 575 by 1 October, 2007.

Trai recommended on 28 August 2007: ‘In today’s dynamism and unprecedented growth of telecom sector the entry fee [which included the price of spectrum bundled in it] determined then is also not the realistic price for obtaining a licence. Perhaps it needs to be re-assessed through a market mechanism.’ Contrary to what has been claimed by Sibal, Ahluwalia and the PM himself, Trai did not rule out public auctions of spectrum through either an auction or a revision or an indexation based on market valuation.

On 6 June 2007, the then finance secretary D Subbarao (now the Governor of the Reserve Bank of India) wrote to his counterpart in the DoT, DS Mathur, clearly citing a discussion with Chidambaram: ‘This matter has been discussed at the level of the Finance Minister. It is our view that for optimum utilization of spectrum, a sound policy on spectrum pricing is necessary. The methodology to be followed for spectrum pricing would logically follow the vacation of spectrum which is the main task of the GoM. I therefore request you to reconsider the matter and include spectrum pricing in the ToRs for the GoM.’

On 15 June 2007, Mathur wrote back refusing to include spectrum pricing in the ToRs for the GoM, citing discussions with the PM and Maran. On 7 December, the final ToRs were issued and Mathur added that the new Telecom Minister Raja felt they should not be reviewed.

Subbarao wrote another letter on 27 November 2007 questioning the DoT’s decision to fix roughly Rs 1,600 crore as the licence fee for an all-India UAS licence that has been ‘determined as far back as 2001’. Subbarao regretted that ‘proper’ procedures and ‘financial due diligence’ had not been followed by the DoT, nor had the MoF been consulted: ‘I request you to kindly review the matter and revert to us as early as possible… Meanwhile all further actions to implement the above licenses may please be stayed. Will you kindly send us copies of letters of permission given and the date?’

On 29 November, Mathur claimed: “The entry fee was finalized for UAS regime in 2003 based on a decision of the Cabinet. It was decided to keep the entry fee for the UAS licence the same as the entry fee for the fourth cellular operator which was based on the bidding process of 2001. The dual technology licenses were issued based on Trai’s recommendations of August 28, 2007…. ”

The short point: there was no agree­ment between the DoT and the MoF. Could the exchange of letters between Mathur and Subbarao have taken place without Chidambaram’s knowledge and consent? Why did the MoF not push for a Cabinet decision on an issue that had financial implications under the Transaction of Business Rules, which states that the Cabinet has to intervene where are differences of opinion between and among ministries?

On 2 November 2007, the PM himself wrote to Raja: ‘In order that the spectrum use efficiency gets directly linked with the correct pricing of spectrum consider (i) introduction of a transparent method­ology of auction wherever legally and technically feasible, and (ii) revision of entry fee, which is currently bench­marked on the old spectrum auction figures.’

Later that night, Raja replied to the Prime Minister stating that auctions had not been recommended by Trai and that, therefore, he was proceeding with the existing policy.

On 10 January 2008, letters of intent for issuance of 121 UAS licenses and 35 dual technology licences at 2001 prices were issued by the DoT.

Fast forward to 7 August this year. In a televised interview to Karan Thapar on CNN-IBN, Ahluwalia stated, “When two ministers disagree on issues that concern them, it is certainly true that (it) goes to the Cabinet, but when a minister is disagreeing with the ministry concerned on an issue that doesn’t concern the ministry which is disagreeing, then it doesn’t actually go to the Cabinet.” Ahluwalia added: “I don’t think the PM should be behaving as the super minister, supervising everything that his colleague does…to blame the PM is totally misjudg­ing the situation.”

So, did the DoT and MoF really concur on the pricing and modalities of alloca­tion of 2G spectrum? The jury is out on who is being economical with the truth. Ahluwalia? Chidambaram? Or the Prime Minister?

(The author is an independent journalist and educator. He is one of the petitioners who filed the PIL on the 2G scam in the Supreme Court.)

About The Author

Paranjoy Guha Thakurta