CAG report to peg 2G spectrum loss at Rs 26,000-140,000 cr

The report of the Comptroller and Auditor General (CAG) on 2G telecom spectrum pricing, which is being finalised, has pegged the revenue loss to the government as a result of the Department of Telecommunications (DoT) giving out new Unified Access Service Licences at rock-bottom prices from Rs 26,000 crore to Rs 140,000 crore, depending on the formula used.

The CAG has applied four to five different statistical models to arrive at these conclusions, according to sources. One way was to extrapolate the probable amount on the basis of what the government earned through 3G auction. Through this method, the revenue loss to the government has been calculated at Rs 140,000 crore.

The lowest range (Rs 26,000 crore) was arrived at by calculating the rate of inflation to the price paid by operators in 2001 — which was also what the new players paid in 2008. The other methods were to estimate the fair value of the licence by considering existing telecom firms' current earnings, spread of services and current market rates, as well as the rate of inflation.

The report will soon be tabled in Parliament. “The apex auditor has restrained itself from taking a narrow view, as its actions could be subjected to several interpretations,” said a source closely involved in the report.

The DoT has already told the CAG the calculations, based on 3G spectrum, are wrongly calculated. The calculation, it contends, includes the price of 4.4 Mhz of spectrum which actually come bundled with the issue of a telecom licence.

DoT had come under attack after it gave away licences to about half a dozen new operators in January 2008 but at a price determined in 2001 prices, which for a pan-Indian operator meant forking out only around Rs 1,750 crore.

The issue became even more controversial when at least two operators brought in foreign partners (Unitech brought Telenor, which took over majority control and Etisalat became a JV partner to DB Realty), who paid a hefty premium for the companies primarily because of the spectrum. Opposition parties said Raja, by favouring a few, was involved in a scam worth Rs 50,000 crore, the loss for the government exchequer for selling the licences cheap. Raja insisted there was no wrong-doing.