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Spectrum scandal deconstructed

Mahesh Uppal 

The is perhaps more about money and government than people realise. It requires billions to acquire licences and build networks. The government awards licences and radio frequencies, where necessary, and collects massive fees for these and other regulatory charges. The large market size means that, despite rapidly falling prices, big money can be made – and lost – by players involved in creating, deploying or using technology. Thanks to India’s governance challenges – especially with the advent of coalition politics – players, bureaucrats and politicians are frequently up to mischief.

However, as demonstrates in this book, the events after became minister of communications and information technology are marked by a brazenness that seemed absent earlier. Mr Bhandari describes how the Supreme Court came to cancel 122 mobile licences awarded by Mr Raja at a price that should probably have been over five times more than what the buyers paid. He describes how Mr Raja and his ministry’s bureaucrats allowed this.

Mr Bhandari also discusses how the NDA government came to award mobile licences using the so-called first come, first served approach. The rule made at a time when mobile services were struggling, and the demand for spectrum was low, made little sense after the massive expansion of the mobile subscriber base that made spectrum a much-prized resource. Ironically, it was not the application of this dubious rule but its manipulation that enabled Mr Raja to favour specific firms.

The book describes the convoluted route taken to award licences: the allotment was based not on the date of application, but on the date when the applicant completed licensing formalities. Favoured firms could then get ahead of those that applied for licences earlier, by beating them to the counter for paying fees. Thanks to selective leaks and the department setting up multiple queues for a handful of players, favoured firms could deposit bank drafts of over Rs 1,000 crore within minutes of a formal announcement.

The best part of the book is how it unravels the many conflicts of interest that several actors in the saga clearly had. Irrespective of whether wrongdoing is proved or not, there is enough evidence to indicate that Mr Raja and his predecessor, Dayanidhi Maran, were not sufficiently divorced from the parties affected by their decisions. They or people close to them had business dealings with Swan and Aircel. They should have disclosed them and recused themselves in related decisions. They didn’t. Unitech, Swan and Loop were new players, and owners of Swan and Loop had visible links to existing players like Reliance and Essar. Their applications deserved closer scrutiny before licences were awarded. But even existing rules seemed to be sloppily applied, if not plain ignored, to expedite the award of licences. The book discussed the delay during Mr Maran’s regime in awarding spectrum licences to the Sivasankaran-promoted Aircel. Approval allegedly came soon after the owner sold his company to Maxis, which was to later partner Sun TV, which – though, admittedly, not a telecom player – is owned by Mr Maran’s family.

The role of Niira Radia, who ran the corporate communications firm Vaishnavi, highlights new dimensions and ironies. Her clients, the Tatas, considered Mr Raja – who allegedly helped Swan get spectrum for Delhi before the Tatas – better for their business than his predecessor. Mr Bhandari also details how, despite a spate of allegations against Mr Raja and in spite of the prime minister’s reported reservations, his party, the DMK, prevailed to ensure the telecom minister remained unchanged even after the polls in 2009.

Mr Bhandari’s book is lucid and tries hard to be fair. It has much for serious researchers to pursue. His own approach, though, is more journalistic than analytical. He acknowledges that several charges are yet unproven and refers extensively to the defence offered in court by Mr Raja and the accused firms. Besides the sins of the UPA regime, he also highlights questionable decisions that may have caused considerable losses to the exchequer — for instance, when Pramod Mahajan, who was considered close to Reliance, was the NDA’s telecom minister.

A more analytical approach would have helped. Several statements seem pat, and chapters often end abruptly. In describing Mr Raja’s own defence of his actions, Mr Bhandari says (page 31), “This was a policy-level decision and responsibility lay at the door of the policymakers — not with Raja….” But Mr Raja is a policy maker. Instead of initiating change of a licensing policy that no longer stood the test of time, he chose to exploit its weakness to play favourites. Mr Bhandari says little on the Telecom Regulatory Authority of India’s blunder that not auctioning 2G spectrum would somehow help level the field for new players. This was a godsend for Mr Raja.

The book does have some errors. For example, bids for metro licences were invited before the National Telecom Policy was announced in 1994 and not after, as it mentions. Also, the many news clippings in the book from Business Standard do not have captions and the dates in the byline exclude the year!

Inside Story of the 2G scam
Bhupesh Bhandari

BS Books, New Delhi, 2012;
230 pages;
Rs 350

The reviewer is a consultant 

First Published: Thu, November 15 2012. 00:33 IST