Monday, November 15, 2010

CAG report shows how raja and DOT misuse power

In the eye of a political storm, telecom minister A Raja's latest defence against the CAG report has been that he followed existing policy since 2003. However, an examination of the CAG report on the alleged 2G spectrum scam shows that in the process of indicting Raja and arriving at the revenue loss caused by his policies, the CAG minutely examined this claim and dismissed it. 

"DoT deviated from its declared first-come-first-served (FCFS) policy though the MOCIT maintained that it was continuing with the policy of processing applications." 

The CAG has given scathing comments tearing apart Raja's claims that he had followed the procedure and precedents in allocating licences/spectrum followed by his predecessors since November 2003. The issue relates to the very definition of a now controversial FCFS process of allocating spectrum. Raja had shunned auctions in favour of FCFS, which according to the CAG, led to a revenue loss of Rs 1,76,379 crore. 

Contrary to the DoT's claim, it now emerges that the implementation of FCFS since 2003 was done through processing of applications in a chronological order based on the receipt of date of application in each service area. LoIs were issued in the same order to eligible companies and each company had 15 days for payment of entry fees and submission of bank guarantees. Applications for each circle would be processed in this order. CAG however found that DoT switched the definition of FCFS "from date of application to date of compliance of LoI", translating to time of payment. 

This change according to the CAG is not only a deviation from the existing procedure but is in fact "not the accepted principle for FCFS being followed by DoT". The impact of this deviation means that companies who applied even a year in advance could fall back in the queue purely because they could not rush their demand drafts before others. The CAG has also stated that the ministry "issued another press release on the same day (2.45 pm) asking all applicants to assemble at DoT headquarters within 45 minutes (i.e. by 3.30 pm) to collect letters in response to their applications." 

78 out of the 120 applications were able to comply with the LoI - by making payments worth thousands of crores on the same day. CAG while making a serious indictment on the officers of DoT states, "Evidently, these applicants had advance information on the issue of these notifications by DoT which enabled them to take appropriate advance action to draw the DD`s and prepare other relevant documents for complying with the LoI conditions." 

Essentially, the CAG has trashed Raja's claims that he followed procedures that existed since 2003 and shown how rules were bent to benefit companies by giving them advance information to help them jump the queue.