CAG raps govt for telecom losses

According to the report, no one time entry fees was charged from the existing licensees for migration to NTP-99 and only outstanding license fee has been treated as one time entry fee though NTP-99 provides for charging of one time entry fee in addition to license fee. This led to a huge revenue loss to the government which is difficult to be assessed at this stage in the absence of the Telecom Regulatory Authority of India’s (TRAI) guidelines, it observed.

This again is a case of undue benefit to the licensees who have got the benefits admissible under NTP-99 at very early stage of their agreement without having any liability to pay one time entry fee, the report says.

The government, according to the report, gave the offer of migration “in haste without finally deciding the quantum of revenue share chargeable as license fee, without deciding the gross revenue and without finalising modalities of verification of gross revenue and prescribing records to be maintained by each licensee for assessment of government share.”

“This undue haste shown in issuing offers of migration is fraught with the serious risk of frauds and may also lead to demand for more concessions to licensees in future on similar grounds,” the report added.

The government granted the extension in the license period for five to ten years to the existing licensees of cellular and basic services without linking such extension with their performance. Thus, the government lost the option of not granting extension to defaulting licensees after initial period of license for not properly discharging their contractual obligations or failing to provide services/coverage as per terms of agreement.

The CAG report points out that the cellular licensees were also not paying wireless planning and coordination (WPC) license fee and royalty as per government of India orders and dues amounting to Rs 162 crore had mounted against them upto may 1999. No separate WPC licenses were obtained by any cellular licensee, which constituted a serious violation of the Indian Telegraph Act. The WPC charges were also not secured through financial bank guarantees due to defect in the license agreements.

The DOT, according to the report, granted a comprehensive package of concessions and offer of migration to the existing licensees of cellular molbile and basic serices to switch over from fixed license fee regime to revenue sharing regime under the New Telecom Policy -99 by accepting their plea that their projections of market size had gone haywire.

The above presumption was not correct to the extent that subscriber base of cellular licensees in metros was several times higher than their projections and in telecom circles many licensees did not cover the required number of district headquarters as per prescribed schedule. Besides, no detailed study about the financial viability of the projects of basic service was ever conducted.

According to the CAG report, grant of concessions and offer ofmigration to revenue sharing regime to the licensees of basic telephone services was grossly unjustified and premature. The report points ot that the ICICI and Bureau of Industrial Cost and Prices (BICP) reports did not cover projects of basic service licensees. These licenses are in the first or second year of license and have not commissioned services in the circles except for starting services in a few cities.

The government cited BICP and ICICI reports on the financial viability of cellular projects as basis to justify grant of concessions. Since the government had already taken action on these reports by March 1999 by granting concessions and implementing rejecting recommendations, using these reports as basis for extending further major concessions and justifying migration to revenue sharing regime in July 1999 without any fresh studies by any independent agency amounted to grant of double concessions and undue favour to licensees, the report observes.

According to the report, the licensees of cellular mobile and basic telephone services flouted all major financial conditions of the agreement. They did not honour their contractual obligations resulting in mounting of license fee dues to the extent of Rs 3779.45 crore against them as on May 31,1999. The licensees also did not submit full Financial bank guarantee as required under the agreement.

The DOT was in possession of financial bank guarantee of only Rs 158.56 crore against the outstanding dues of Rs 3779.45 crore as on May 1999.

The DOT did not ensure opening of mandatory escrow accounts by the licensees. This helped the licensees to flout license conditions as DOT had no other direct and effective mechanism to make recovery of dues from them, the report says.