The auditor found that a set of spectrum was allocated to a telecom operator in 2015 on the first-cum-first-service (FCFS) basis in contravention to the recommendations of a committee, while 101 applications for microwave (MW) spectrum were pending with the government.
The CAG in its report said the Department of Telecommunications (DoT) constituted a committee in December 2012 to look into the allotment of spectrum in various categories of spectrum users and proposed that the spectrum allotment in microwave band to all the operators should be done through market-related process -- auction.
"However, in contravention of the committee's recommendations, allocation of MW access spectrum has been done on FCFS basis till date as was being done for 2G licence and access spectrum till 2009," the report said.
The Supreme Court in 2012 had struck down FCFS policy in 2G spectrum allocation case of 2008-09 while cancelling 122 telecom permits that were granted spectrum through the process.
Microwave access (MWA) spectrum is allocated to telecom operators for short distances to provide mobile services.
"It was also found that allotment of MWA to access service providers was withheld by DoT since June 2010 and allotment against only one applicant was made in December 2015. There were 101 applications pending till November 2016 for allotment of MWA," CAG said without disclosing the name of the company to which the allocation was made.
According to the CAG's report, the government had an adverse financial impact of around Rs 560 crore due to various instances of spectrum mismanagement by DoT.
In the total loss, the auditor saw maximum high financial impact of Rs 520.79 crore on the government exchequer due to non-withdrawal of spectrum from BSNL which the state-run firm had offered to surrender to avoid one-time spectrum charge.
CAG found that DoT applied old formula collect spectrum charges from microwave access and microwave backhaul spectrums and satellite spectrum allocated for national long distance and international long distance networks instead of revenue share basis which became a rule after the New Telecom Policy 1999 was put in place.
CAG also found that 'Notification of Defence Band and Defence Interest Zone' was approved by the Cabinet on January 21, 2015, and a separate proposal for waiver of spectrum charges payable by the defence department was to be submitted for the approval of the Cabinet.
"However, no such proposal for waiver of Spectrum Charges for Defence Forces has been got approved from the Cabinet till date," the report said.
"The continuing use of spectrum in these bands by Defence results in loss of opportunity cost for the nation as a whole," CAG said.