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Reliance Jio got advantage of Rs 3,367 crore: CAG

No favour received, says company; CAG says Airtel too gained Rs 499 cr, points out non-recovery of Rs 2,117 cr from 8 telcos whose licences were scrapped

BS Reporter  |  New Delhi 

Reliance Jio
Reliance Jio

A report by the Comptroller and Auditor General (CAG) has said the Mukesh Ambani-promoted Reliance Jio Infocomm got undue advantage of Rs 3,367.29 crore after the department of telecommunications (DoT) allowed the company to offer voice services by using broadband wireless access spectrum (BWA).

Reliance Industries in 2010 acquired Infotel Broadband, which had won pan-Indian BWA spectrum in auctions to be used for 4G services.

“Reliance Jio Infocomm Limited (formerly, M/s Infotel)... paid UL entry fee of Rs 15 crore and additional migration fee of Rs 1,658 crore in August 2013. This migration, allowed at prices discovered in 2001, resulted in undue advantage of Rs 3,367.29 crore to M/s Reliance Jio Infocomm,” the CAG said in a report.

In 2013, the DoT allowed migration of ISP (internet service provider) licensees with BWA spectrum to a unified licence, which would enable them to provide mobile voice services using BWA spectrum, on payment of additional fee equal to the difference between the entry fee for a telecom licence and entry fee of a national ISP permit.

“The decision to grant permission to an ISP licensee with BWA spectrum to operate in the voice telephony space also helped the ISP to circumvent the restrictions imposed by their licence at the time of auction, which were known to the ISP at the time of bidding for BWA spectrum. RJIL was the first to take benefit of this scheme,” the CAG said.

According to the BWA auction rules, companies were permitted to use their spectrum to provide services that were allowed under the licence held by them and Infotel Broadband was granted only the ISP licence, which did not allow for voice services.

A spokesperson for Reliance Jio Infocomm said no favour had ever been given to it. “We have always conducted our business as per the prevailing laws and have abided by the rules and regulations prescribed by the Department of Telecom (DoT) and other regulatory authorities. We have acquired spectrum at market prices through open and transparent bidding process, the conditions for which were same for all bidders.”

Further, the DoT rules for procuring the relevant licence for services using BWA spectrum too were the same for all successful bidders, the spokesperson added.

The CAG report said the BWA auction rules suffered from deficiencies like absence of financial parameters in the eligibility criteria for bidders, absence of lock-in-provision, disparity in scope of usage of BWA spectrum amongst others. Also, Infotel had outbid most of the telecom operators, who could have provided voice services in addition to data, in the BWA spectrum auction held in 2010.

The CAG also said the DoT did not raise demands on eight licencees, whose telecom licences were quashed and cancelled by the Supreme Court (SC) but continued operations after February 2, 2012.

The SC said the licensees should pay the reserve price fixed by the government for the purpose of conducting auction in November 2012, leading to non-realisation of Rs 2,117.88 crore from eight telcos — Unitech, Videocon, Idea, Sistema Shyam, STel, Tata Telecom, Loop and Etisalat DB). Further, the DoT did not initiate action to cancel their licences and to withdraw spectrum from those operators who did not bid or did not win in November 2012 despite SC orders, the report said.

The CAG also said the GSM operators had to buy 3G spectrum or had to pay for liberalisation of existing 2G spectrum (1,800 MHz) for providing 3G services on 2G spectrum but the same yardstick was not made applicable to CDMA players — 800 MHz spectrum. This resulted in non-realisation of upfront charges amounting to Rs 9,626 crore from CDMA operators providing EVDO services.

Bharti Airtel got an undue gain of Rs 499 crore because of DoT’s decision to merge the Chennai telecom circle with Tamil Nadu in a hasteful manner in 2005, according to the CAG report. “The merger of Chennai Metro and Tamil Nadu telecom circles without any cost-benefit analysis of the proposal in 2005 for the CMTS/UAS (full-fledged telecom operators) licence resulted in undue benefits to select telecom operators," the CAG said.

When contacted, a Bharti Airtel spokesperson refused to comment on the matter.

The order issued in September 2005 allowed merger of licences and the period of permits was allowed to be fixed as per the date of licence among the two having longer validity. "The issue of extension of the licence was neither examined nor proposed in the note put up for approval of the competent authority on August 12, 2005 by the officials of DoT but later included in the office order issued on September 15, 2005," the CAG said.

The cost-benefit analysis of the proposal for extension of effective date of licence period due to merger of licences had not been done though decision and this had bearing on government revenues due to the extension of the effective date of licence. “The same was effected without levying any additional fee. This resulted in undue benefit to M/s Bharti Airtel to the tune of Rs 499.35 crore whose UAS licence for Chennai SA was extended from November 2014 to September 2021."

The merger was carried out only in state of Tamil Nadu to remove a “so-called anomaly”, ignoring the subscribers of other three major states — Maharashtra, Uttar Pradesh and West Bengal. "As a result, the subscribers of these three states continued to be denied the benefits of the merger. There was nothing on the file to show as to why the proposal for merger of Chennai Metro and Tamil Nadu circles only was being put up," the CAG said.

First Published: Sat, May 09 2015. 00:58 IST