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Tuesday, July 17, 2018

Spectrum allocations: CVC finds DoT

The Central Vigilance Commission (CVC) has yet again rejected the detailed explanations offered by the Department of Telecommunications...

Written by Ritu Sarin | New Delhi | Published: January 13, 2009 12:02:56 am

The Central Vigilance Commission (CVC) has yet again rejected the detailed explanations offered by the Department of Telecommunications (DoT) on the controversial issue of spectrum allocations.

In its latest missive dated December 18,the CVC has listed its point-by-point objections to the DoT’s response and in a scathing indictment stated,“A conclusion that the allocation of spectrum by DoT has benefited private players at the expense of the public exchequer is inescapable. The new players have unethically sold equity at a high value.”

Confirming the development,Central Vigilance Commissioner Pratyush Sinha told The Indian Express that their latest latter was the “last chance” given to the department to explain their position,since already three to four rounds of communications had been exchanged on the subject.

“All the explanations given by the DoT have been found to be unsatisfactory and unconvincing by us,” the CVC said categorically. “The next step for the Commission will be to see whether there has been any malafide intention or not,and then to fix responsibility.”

The CVC’s December 18th letter,besides rejecting as vague and unconvincing replies of the DoT on 10 queries raised earlier,is unambiguous about the fact that the Government lost major revenue in the 2G spectrum allocation by licensees selling off their equity to foreign companies.

The CVC has now stated,“The scarce spectrum bundled with license at Rs 1,537 crore and Rs 1,651 crore was allotted to Swan Telecom and Unitech Wireless respectively in January 2008. They have offloaded 45% and 60% of their stake to Etisalat and Telenor for Rs 4,100 crore and Rs 6,120 crore respectively (700% rise in 10 months — for no built-up assets while all other asset prices indicate a decline). Since sale of 74% equity in the form of FDI has been permitted,had the Government auctioned the spectrum,the benefit of this sale would have accrued to the Government.”

Significantly,the CVC has also rejected the DoT’s formula for allocating the balance spectrum in the 2G category and opined that the reasons for not auctioning it were,again,“not convincing”.

The DoT has said any differential treatment to a new entrant vis-à-vis incumbents will go against the principle of a level playing filed,a plea the CVC has now rejected.

The DoT has thus been advised that “the entry fee as it exists today,is not the realistic price for obtaining a license which is a result of the price discovered through a market-based mechanism which was applicable for the grant of license to the fourth cellular operator. The entry fee,therefore,needs to be reassessed through a market mechanism”.

Its recommendation: “the Commission would like to reiterate that the Department should follow an auction process for allocation of balance 2G spectrum.”

On the upcoming sale of 3G spectrum too,the CVC has pointed out anomalies in the process being adopted by the DoT. They have pointed out that the DoT was pushing for 3G auctions “too early” since its schedule “does not appear to allow enough time for bid planning,given the regulatory and financial barriers imposed on new entrants,which needs to be reviewed for better participation”.

The DoT has been given a last chance to make final clarifications on previous spectrum sale and been asked to dispatch all guidelines and schedules “to ensure that sufficient time is allowed for holding a meaningful auction in a transparent and equitable manner”. 

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