Tuesday, January 11, 2011

2G Scam and Sibal’s Defence

It has become fashionable to hold political establishment for all that is bad in this country. Unfortunately, such a position is not far away from truth. Does that mean we should hold politicians in contempt at all times? Can we say all their words are uttered only with the intention of cheating the general public and the nation?

I do not agree with such extreme view. Politicians of our country reflect the general affinity prevalent among our countrymen to make money at any cost, even if it amounts to corrupt means. It is in this light I want to look at the statement of Mr Kapil Sibal, on the CAG report on 2 G Scam.

Mr Sibal was given the charge of telecommunications Ministry on the resignation of Mr Raja. The immediate provocation for Mr Raja’s resignation was the severe indictment of his Ministry by the CAG and the leaking of infamous Radia tapes, though there was already an FIR and an ongoing investigation against the alleged irregularities in the allotment of licenses and spectrum.

Mr Sibal, immediately after his appointment had entrusted, to a one man committee of a retired Supreme Court Judge, to inquire into the procedural aspects of the allotment and any violations thereof. This inquiry is apart from the CBI inquiry under the supervision of Supreme Court, dealing with criminality, if any, relating to the allocation.

Demand for JPC and Logjam in Parliament

As we all know, the opposition in Parliament had demanded a Joint Parliamentary Committee (JPC) to inquire into various allegations relating what is called by them as the mother of all scams. Government had consistently rejected the need for a JPC, both Govt and opposition being adamant in their respective stands leading to blocking of all the businesses in the winter session of the Parliament. I am not going into the merits and demerits of either party’s stand. Suffice to say that neither the Minister who resigned nor the Minister who received the charge of the Ministry had any opportunity in the Parliament to answer any of the allegations, including that were part of CAG report.

CAG Report

The CAG report is not gospel truth. It is another report by the auditors though it is on a higher pedestal since the CAG has Constitutional status in our system. However, is the CAG report binding on the Government? No is the answer. CAG report is examined by a Committee of the Parliament, called Public Accounts Committee (PAC), and its findings are placed before the Parliament.

Only after the PAC examines the CAG report and gives its findings, the Government becomes answerable to the Parliament, on the matters under consideration. Usually, it is therefore, the PAC that is seized of the matter. However, in the matter of 2G, the political battles were already on. Opposition has been using CAG report (even though PAC is yet to examine it) to question the credibility of the Government outside the Parliament.

Minister Reacts

There is no debate in the Parliament where Government can answer to the allegations levelled by the Opposition. Media is dissecting the allegations on a daily basis. The credibility of the Government and the Prime Minister is being sullied continuously. What the concerned Minister is supposed to do at this juncture? Keep mum in the name of propriety since PAC is examining the CAG report? Or place the facts before the public?

I believe the Minister had a duty to place the facts before the public, in defence of his government. Mr Sibal only did that duty! Opposition cannot claim that they can raise all sort of allegations based on a CAG report, deny a chance to the Government to defend their actions, by blocking all Parliament debates on the subject, and then blame the Government for commenting in the public. Not long ago, we have heard opposition spokespersons asking as to why Prime Minister is not defending himself before the Nation.

CAG Findings and Minister’s Defence

Mr Sibal during his press conference has not challenged the constitutional mandate of CAG to inquire into the subject matter or to report on the same. In fact, he had categorically stated this position during his speech. What he questioned was the finding of the CAG that there was a loss of Rs 1,76,000 Crores. If he agree with the finding of the CAG that there was a loss of such a colossal loss to the exchequer doesn’t he, as the Minister, a duty to ensure recovery of the same? So, it was imperative for him to study the finding of the CAG and state reasons if any, for not attempting the recovery of the lost amount. Let us see the logic of this argument.

Spectrum is a scarce natural resourse and a very valuable one for the telecom industry. Government has a choice to put a value for the spectrum and sell it at that rate, or to auction it to the highest bidder. Government had subsequently opted for the auction route for allocating 3G spectrum.

Ministry under A Raja, while allocating spectrum and new licenses to the telecom companies in 2008, did not follow the auction route. Nor did it try to find the market value of the spectrum at that point in time. It decided to allocate spectrum as a part of all new licences. While doing so, it followed the existing system that was being adopted by the successive governments, including three separate telecom Ministers under the NDA governments.

Logic Behind Free Allocation

Telecom, especially mobile phone service, had received an important position among the emerging technologies from successive governments. In the hind sight, we can also claim that availability of relatively very cheap mobile phone services was one of the most important tools for the inclusive development. This technology, unlike many others, could attract a large customer base all across the country. The service is available at the nook and corner of the country and to most people irrespective of their economic status, as the service become very affordable.

The affordability of the mobile services was a direct result of the policy adopted by Government of India where it was decided to make spectrum available to all new entrants, by making the same available almost free of cost, as a part of the license itself. As the 10th Five year plan document (prepared by NDA) suggests that not revenue but the affordability of the service to the people at large should be the consideration while allocating the spectrum.

Is it right for the government to allocate a scarce natural resource at such a low price? Spectrum is not the only resource that the government makes available at subsidised costs. How about fuel? Why should government be subsidising diesel or petrol? Can’t it charge the market price and then give that money directly to the poor? Well, these are matters open for discussion. However, we cannot deny the right of a Government to decide the policy under which they want to utilise the natural resources; more so when the policy has been proved very useful to the public at large. If we take the logic of CAG to the extreme, we will have to blame the government for causing presumptive loss as nothing stops the government from charging us a fee for letting us breathe oxygen or drink water, as these resources are also scarce and valuable.

The high level of presumptive loss estimated by CAG is questionable for following reasons:

1. It does not quantify the loss, if any, incurred by the government during allocations made in the past under the same system. We cannot have different yardsticks for different times.

2. It does not take into account the social cost/ benefit of cheap spectrum. Doesn’t affordability of mobile services to poor of this country have any economic value?

3. It does not take into account the revenue share that is to be received by government from the service providers. The more people use mobile telephony, more the revenue for telecom companies, and more the revenue share for government.

4. CAG uses the price of 3G spectrum as the bench mark for arriving at the loss in 2G spectrum. It does not consider the fact that 3G spectrum is used for advanced value added services that can be charged at higher revenue than the basic telephony.

5. 3G spectrum auction took place almost after a gap of two years after the allocation of 2G spectrum. How can we hold that the 2G would have fetched a similar rate at that point in time?

6. Can CAG challenge the right of a government to adopt any specific policy on the ground that it has caused a presumptive loss?

Issue of criminality

What I said above, or what Mr Sibal said, should not be construed as a defence against corruption. It can be reasonably assumed, from the available information at this stage, that there were irregular and/or criminal proceedings adopted by Mr Raja while allocating the licenses to new entrants. He seems to have arbitrarily selected the allotters through dubious means. These aspects are under investigation, including that by CBI under the supervision of Supreme Court, and we will have to wait for the results. As far as I could see, Mr Sibal has not challenged these investigations. On the contrary, he seems to have admitted that there were irregularities in matters relating to procedures.


Merely because there were procedural irregularities, including criminality, in the allocation of spectrum, it cannot be held that the same has caused a loss to the exchequer. The culpability of Mr Raja for any wrong doings does not change, irrespective of the level of monetary loss caused by his improper actions.

However, it is the duty of a Minister to present the case of the government before the public, when its credibility is being sullied by opposition and media on a day to day basis. He cannot be expected to keep quiet merely on the basis of some ‘presumptive propriety’ that is only applicable to government and not others.