CAG's loss estimate ill-conceived, says JPC

The national auditor had assessed financial impact of licences issued at entry fee of Rs 1,658.57 cr, which was discovered in 2001

A Joint Parliamentary Committee (JPC) draft report has said the Comptroller & Auditor General (CAG)’s estimate of a loss of Rs 1.76 lakh crore due to the 2G telecom spectrum scam was “ill-conceived”. It added CAG had assessed the financial impact of the licences issued at the entry fee of Rs 1,658.57 crore, discovered in 2001.

JPC said considering the Telecom Regulatory Authority of India (Trai) had taken a consistent stand against the auction of spectrum and an increase in the entry fee for new companies by way of indexation, the audit couldn’t calculate the loss, actual or presumptive, on account of allocation of licences and spectrum.

It added the government’s broad policy on taxes and regulation in the telecom sector during the period was expected to be “promotional in nature”, with “revenue generation being accorded low priority”.

The report added it was imperative the calculation of the loss to the exchequer through the allocation of licences and spectrum should be viewed in the context of the overall policies laid down for the telecom sector from time to time. Highlighting the key objective of the National Telecom Policy, 1999, it said the “availability of affordable and effective communications for citizens” was at the core of the policy.

CAG’s calculation of the financial impact on the exchequer was based on three indicators and the assumption that any loss ascertained while trying to value the spectrum in hindsight could be ‘presumptive”, the report said. The three indicators were the offer made by S Tel (the presumptive loss comes to Rs 67,364 crore), the value based on prices discovered for 3G spectrum (a loss estimate of Rs 1,76,645 crore) and the sale of equity by Unitech and Swan Telecom (presumptive losses of Rs 69,626 crore and Rs 57,666 crore, respectively).

The report said the presumptive loss figures could have been “more realistic, deriving out of proven facts”.

It added CAG’s contention was telecom operators could draw huge foreign investments even before establishing a foothold in India, solely by acquiring unified access service licences, as well as the spectrum bundled with it.

According to the draft report, 85 of the 122 licences issued to 13 companies in 2008 didn’t satisfy the Department of Telecommunications’ eligibility conditions.

In February 2012, all the 122 licences issued in 2008 were quashed by the Supreme Court.

Revenue for spectrum
Trai, DoT, finance ministry, and the Planning Commission favoured maintaining a reasonable price for spectrum to make telecom services affordable and ensure a level-playing field among service providers using various technologies, the JPC pointed out.