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2G spectrum scam

From Wikipedia, the free encyclopedia

The 2G spectrum scam involved allegations of

underpricing of 2G spectrum Telecom Ministry of India, resulting in loss to the


exchequer and
illegal manipulation of the spectrum allocation process to favour a few select
companies

According to a report submitted by the Comptroller and Auditor General based on


money collected from 3G licenses, the loss to the exchequer due to underpricing of 2G
spectrum was 176,379 crore (US$39.16 billion).

The issuing of the 2G licenses occurred in 2008, but the scam came to public notice
when the Supreme Court of India took Subramaniam Swamy's complaints on record
[With Case type:Writ Petition (Civil),Case No:10, Year:2011].[1]

Contents
1 Civil Servants, Politicians and Corporations Involved in scam
1.1 Politicans, Ministers and Parlimentarians involved
1.2 Bureaucrats involved
1.3 Corporations involved
1.4 Corporate personalities involved
1.5 Media persons and lobbyists involved
2 Petitioners to 2g scam
3 Loss to Exchequer
4 Relationship between media and government
4.1 Ratan Tata petitions over leak
5 Response to scam
6 Arrests and Chargesheets
7 P.A.C. (Public Accounts Committee)
8 Impact on stock markets
9 See also
10 References
11 External links
Civil Servants, Politicians and Corporations Involved
in scam
All the accused have been booked under sections 120(B) (criminal conspiracy), 468
(Forgery for purpose of cheating), 471 (using as genuine a forged document or
electronic record), 420 (cheating and dishonestly inducing delivery of property) and
109 (abetment if the act abetted is committed in consequence, and where no express
provision is made for its punishment) of the Indian Penal Code.[2]

Politicans, Ministers and Parlimentarians involved

Name of the Occupation


Person and Allegation and Charges
involved Designation
The Controller and Auditor General holds
Raja personally responsible for the sale of 2G
spectrum at 2001 rates in 2008, resulting the
previously mentioned loss of up to Rs. 1.76
Union Cabinet lakh crores (US$40 billion) to the national
Minister for exchequer.
A. Raja Communications
and Information [3] In August, 2010, evidence was submitted
Technology by the Controller and Auditor General (CAG)
showing that Raja had personally signed and
approved the majority of the questionable
allocations.[4]

On April 25, 2011 Kanimozhi was named as


a co-conspirator in the supplementary
chargesheet filed by the Central Bureau of
Investigation (CBI) in connection with the 2G
spectrum case. The chargesheet, which was
submitted before the Supreme Court
establishes how Rs 200 crore connected with
Kanimozhi Member of the scam traveled from a partnership firm of
Karunanidhi Rajya Sabha businessman Shahid Balwa of Swan Telecom
to the Karunanidhi family-owned Kalaignar
TV.[2] She has been charged with section 7
and 11 of the Prevention of Corruption
Act. The sections deal with acceptance of
alleged gratification.[5]

Bureaucrats involved

Name of Occupation
the Person and Allegation and Charges
involved Designation
Civil
Servant
Siddhartha (IAS officer He was the Telecom secretary who served in the
Behura of 1973 DOT at the time of the 2G allocation.
batch UP
cadre)
He was the Secretary of the Department of
Civil
Telecommunications. On September 7, 2010 he
Servant
was appointed as the Chief Vigilance
P. J. (IAS officer
Commissioner. Thomas later stepped down after
Thomas of 1973
the Supreme Court questioned his track record as a
batch Kerala
civil servant in the wake of investigations into the
cadre).
2G spectrum allocation scam.
He is alleged to have recommended policies that
favored certain Telecom companies when he was
Civil heading the TRAI. Post retirement, Baijal joined
Servant Noesis, a consulting firm.[6][7] Raja has made
Pradip (IAS officer references to Baijal's decisions in 2003 as the basis
Baijal of 1966 for his decisions in 2008; something which has
batch MP been attacked by Arun Shourie and several media
cadre). pundits. The houses and offices of the bureaucrat
were recently raided by the Central Bureau of
Investigation as part of their investigations.[8]
He was private secretary of Raja during UPA-I
when the licences were awarded. When Raja
became the Telecom Minister once again in UPA-
Civil II, Chandolia had been promoted to the Joint
Servant Secretary rank. Raja re-designated him Economic
RK (IES officer Adviser, that gave him the charge of all important
Chandolia of 1984 policy-related work. Chandolia interacted with all
batch the licensees. It is said that it was Chandolia who,
cadre). from DDG-access services A K Srivastava's room,
had handed out letters of intent to representatives of
various companies.[9]
Corporations involved
Unitech Group a real estate company entering the telecom industry with its 2G
bid; sold 60% of its company stake at huge profit to Telenor after buying
licensing (Including land values properties for towers)[10]
Swan Telecom sold 45% of its company stake at huge profit to Emirates
Telecommunications Corporation (Etisalat) after buying licensing[10]
Loop Mobile
Videocon Telecommunications Limited
S Tel
Reliance Communications
Sistema Shyam Mobile (MTS) – Sistema Mobile Russia
Vodafone Essar
Dishnet Wireless
Allianz Infra[11]

Corporate personalities involved

Anil Ambani - Reliance Group (ADAG)[12] -


Shahid Balwa - DB Realty and Etisalat DB Telecom(formerly Swan Telecom)
Vinod Goenka - Dynamix Group
Venugopal Dhoot - Videocon Group
Prashant Ruia - Essar Group
Ratan Naval Tata - Tata Group

All of them have either been questioned by the CBI or are prospective suspects in the
scam.

Media persons and lobbyists involved


Nira Radia, a former airline entrepreneur turned corporate lobbyist whose
conversations with politicians and corporate entities were recorded by the
government authorities. The contents were later leaked by unknown parties
creating the Nira Radia tapes controversy
Barkha Dutt, an NDTV journalist alleged to have lobbied for A. Raja's
appointment as minister.[citation needed]
Vir Sanghvi, a Hindustan Times editor alleged to have edited articles to reduce
blame in the Nira Radia tapes.[citation needed]

Petitioners to 2g scam
Subramaniam Swamy, activist lawyer and politician, whose letters to the Prime
Minister demanding action and affidavits and cases in the Supreme Court
brought the issue into the public limelight.
Paranjoy Guha Thakurta, a journalist who was one among the very first to write
on the irregularities in the awarding of 2G spectrum allocation by the Telecom
Ministry. He is also one of the petitioners in the 2G PIL currently being heard in
the Supreme court.[13]
Prashant Bhushan, on behalf of the Centre for Public Interest Litigation.
Anil Kumar, on behalf of the civil society organisationTelecom Watchdog
Others:Several eminent people like former chief election commissioners J.M.
Lyngdoh, T.S. Krishnamurthy and N. Gopalaswami and former central vigilance
commissioner (CVC) P. Shankar are also petitioners in the suits filed by civil
society groups.[11]

Loss to Exchequer
The Comptroller and Auditor General of India used three different methods to assess
the presumptive loss to the exchequer resulting from not auctioning 2G spectrum.[14]

The first method was based on the fact that S Tel, one of the licensees, explicitly
offered to pay significantly higher license fees for the spectrum. Based on the fees
offered by S Tel, the CAG estimated the loss to the exchequer at
67,364 crore (US$14.95 billion)

The second method was based on the price discovered by the 3G auction in 2010. The
CAG reasoned that since 2G is really 2.75G (EDGE), its price should be comparable
to that of 3G licenses. Based on this method, the CAG estimated the loss to the
exchequer to be 176,000 crore (US$39.07 billion)

The third method was based on the fact that some of the licensees received FDI in the
form of equity, shortly after the spectrum allocation. The CAG reasoned that this
equity infusion was entirely due to the value of the allocated spectrum; this can be
construed as re-sale of the spectrum by the licensee, and hence was a valid basis for
assessing loss to the exchequer. Based on this method, the CAG estimated the loss to
the exchequer to be anywhere between 57,666 crore (US$12.8 billion) (based on
Etisalat's investment in Swan Telecom) and 69,626 crore (US$15.46 billion) (based
on Telenor's investment in Unitech).

For its part, the Congress-party led government has publicly defended itself on this
count and Kapil Sibal, who replaced A. Raja as the communication minister, has
refuted the CAG reasoning.[15] He has also justified his government's decision not to
auction 2G spectrum as being in line with the policy guidelines laid down by the 10th
Five-Year Plan.[16][17]

Relationship between media and government


Main article: Nira Radia tapes controversy

Media sources such as OPEN and Outlook reported that Barkha Dutt and Vir Sanghvi
knew that corporate lobbyist Nira Radia was influencing the decisions of A. Raja.[18]
The critics alleged that Dutt and Sanghvi knew about corruption between the
government and the media industry, supported this corrupt activity, and suppressed
news reporting the discovery of the corruption.[18]

Ratan Tata petitions over leak


The tapes leaked to the public include conversations between Nira Radia and Ratan
Tata. Tata petitioned the government to acknowledge his right to privacy and
demanded accountability for the leak, with the Minister for Home Affairs, CBI, Indian
Income Tax Department, the Department of Telecommunication, and the Department
of Information Technology as respondents in the petition.[19]

On April 4, 2011 Indian Parliament's Public Accounts Committee (PAC)questioned


Tata Sons Chairman Ratan Tata and corporate lobbyist Niira Radia regarding their
roles in 2G Scam.[20]

Response to scam
In early November 2010 Telecom Minister A Raja resigned.

In mid November the comptroller Vinod Rai issued show-cause notices to Unitech, S
Tel, Loop Mobile, Datacom (Videocon), and Etisalat to respond to his assertion that all
of the 85 licenses granted to these companies did not have the up-front capital required
at the time of the application and were in other ways illegal.[21] Some media sources
have speculated that these companies will receive large fines but not have their licenses
revoked, as they are currently providing some consumer service.[21]

In response to the various allegations, the Govt of India has replaced the then
incumbent Telecom minister, A. Raja with Kapil Sibal who has taken up this charge in
addition to being the Union minister for Human Resources Development.Mr Sibal
contends that the "notional" losses quoted are a result of erroneous calculations and
insists that the actual losses are nil.[15][16]
The CBI conducted raids on Raja and four other telecom officials - former telecom
secretary Siddharth Behura, Raja's personal secretary R K Chandolia, member telecom
K Sridhar and DoT deputy director general A K Srivastava on 8 December 2010.[22]

Arrests and Chargesheets


On February 2, 2011, the CBI arrested former Telecommunications Union Minister
A.Raja. The CBI also arrested R.K. Chandolia, Raja's personal aide, and Siddharth
Behura, the former Telecom Secretary.[23][24] Both A.Raja and R.K Chandolia are
heard in conversation with Niira Radia in the released Radia tapes.

On February 8, 2011, the CBI arrested Mumbai based Dynamix Balwas (DB) group
managing director Shahid Usman Balwa in connection with the 2G spectrum allocation
scam. The CBI has evidence from the Income Tax department that Shahid Usman
Balwa, considered close to A. Raja, was instrumental in channelling the kickbacks
allegedly received by the former telecom minister.[25]

On March 29, 2011, in Delhi, the CBI arrested Asif Balwa (younger brother of the
arrested former Managing Director of DB-Etisalat Group, Shahid Balwa) and Rajeev
Agarwal for their alleged involvement in money transfer to the Dravida Munnetra
Kazhagam's (DMK) Kalaignar TV channel.[26]

On April 2, 2011, the CBI filed its first 80,000 page chargesheet in the 2G spectrum
scam before a Special Court in Delhi naming nine individuals and three companies. It
said the wrongful acts of the accused deprived the government exchequer of possible
revenues amounting to INR Rs 30,985 crore (USD $ 6,983,322,233). The accused
include the following individuals:[27]

1) A. Raja, arrested former Telecom minister 2) Siddharth Behura, arrested former


Telecom Secretary 3) R.K. Chandolia, A. Raja's arrested former personal secretary 4)
Shahid Usman Balwa, arrested former Director of Swan Telecom (now Etisalat DB) 5)
Sanjay Chandra, Managing Director of Unitech Ltd and Unitech Wireless 6) Gautam
Doshi, Group MD, Reliance Anil Dhirubhai Ambani Group 7) Hari Nair, Senior Vice-
President, Reliance Anil Dhirubhai Ambani Group 8) Surendra Pipara, Senior Vice-
President, Reliance Anil Dhirubhai Ambani Group and Reliance Telecom Ltd 9) Vinod
Goenka, Director, Swan Telecom and Managing Director of DB Realty

The three companies named are: 1) Swan Telecom 2) Unitech Wireless 3) Reliance
Telecom

In the first chargesheet, the CBI had named lobbyist Niira Radia and 124 others as
witnesses.

On 25 April 2011, in its second chargesheet in the scam, the Central Bureau of
Investigation (CBI) named five more accused individuals:[28]

1) Kanimozhi - Rajya Sabha Member of Parliament (DMK) and daughter of Tamil


Nadu Chief Minister M Karunanidhi 2) Sharad Kumar of Kalaignar TV 3) Karim
Morani of Cineyug Films 4) Asif Balwa of Kusegaon Realty 5) Rajiv B Agarwal of
Kusegaon Realty

P.A.C. (Public Accounts Committee)


Public Accounts Committee, a 21-member committee, with chairman as Murli
Manmohar Joshi, was formed to investigate, independent of other committees like JPC.
The chairman submitted a draft report on 2G scam to Lok Sabha Speaker on Saturday
30-04-2011, and insisted that it be tabled in the Parliament. UPA members' claimd that
the report had been "rejected", and 11 MPs of same committee(majority out of 21) had
"rejected" the report - which was termed as "unconstitutional" by MM Joshi pointing
out that such a possibility does not exist till the report is "read" by members and
"discussed" para by para. Defending his action of calling witnesses from diverse fields
in connection with the 2G scam probe, Joshi said it was the duty of the PAC to "trace
and examine the way the money of common man is spent". He alleged that on 28-04-
2011, during the last meeting of the committee, ministers passed on "chits" and called
up PAC members to speak and behave in a particular manner; that said trouble started
when a decision was taken to call top officials of the PMO, Cabinet Secretary,
Attorney General and CBI director for questioning. A minister reportedly commented
that the PAC draft report will be thrown in the dustbin, to which the chairman regretted
and questioned if Parliament's proposals and then Supreme Court orders would be
given the same treatment.[29]

Impact on stock markets


The first casualty in Stock Markets once Raja was arrested was DB Realty.[30] 20% fall
in the stock prices of DB Realty. Sun TV had its shares fall by 10%.[31] Sun TV COO
refused the allegations. Swan Telecom Chief Balwa was arrested on Feb 8 [32] and this
led to rumours of links with Anil Ambani's Reliance ADAG and it led to 20% fall of
his stocks . Its reported that nearly 2 Billion USD was eroded from his stocks .[33]
Spicejet stocks went down after reports of investigation on Maran's recent takeover of
Spicejet .[34]
See also
Belekeri port scam - Iron-ore scam as big as this one, worth an estimated
60,000 crore (US$13.32 billion)
2010 housing loan scam in India
Adarsh Housing Society Scam
Commonwealth games scam
Indian political scandals
Corruption Perceptions Index
Rent seeking
Jan Lokpal Bill

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(http://www.indianexpress.com/news/Day-after-DB-Realty-chief-s-arrest--ADAG-scrips-
tank/748266) . Indianexpress.com. 2010-11-05.
http://www.indianexpress.com/news/Day-after-DB-Realty-chief-s-arrest--ADAG-scrips-
tank/748266. Retrieved 2011-02-11.
34. ^ Chowdhury, Anirban. "SpiceJet Denies Maran Buy Under Investigation - WSJ.com"
(http://online.wsj.com/article/SB10001424052748704364004576131651857350630.ht
ml?mod=googlenews_wsj) . Online.wsj.com.
http://online.wsj.com/article/SB10001424052748704364004576131651857350630.ht
ml?mod=googlenews_wsj. Retrieved 2011-02-11.

External links
Tehelka's January 2011 infographic explaining the scam
(http://www.tehelka.com/channels/News/2011/jan/01/images/2GScamLarge.png)
CAG Performance Audit report on the issue of Licenses and allocation of
spectrum (http://cag.gov.in/html/reports/civil/2010-
11_19PA/Telecommunication%20Report.pdf)
Retrieved from "http://en.wikipedia.org/wiki/2G_spectrum_scam"
Categories: Political scandals in India | Radio resource management | Corruption in
India | 2010 in India | Manmohan Singh administration

This page was last modified on 1 May 2011 at 06:17.


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