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CAG Report on 2G Spectrum

|November 20 2010 |Industry News, 3G

Comptroller and Auditor General of India (CAG) submits a report to the Indian government about the estimated loss on 2G Spectrum sale. The loss apparently works out to whopping 1,76,000 Crore rupees ($40 billion)! The Opposition parties, media and the public puts pressure and the Telecom minister A. Raja resigns! This is also touted as the biggest ever scandal in the indian corruption 'industry'! What really happened? What exactly did CAG submit? If you are curious to know more about it, you can grab a copy of CAG Report and read it in detail. The link to read the report is here:


The crux of the issue is this. In January 2008, Department of Telecommunications issued 120 new licences for unified access services on the same day. These licences were issued at price which had been discovered in 2001. Questions are raised on transparency in the allocation process and failure in maximization of revenue generation from the allocation of spectrum (national asset). Also, Ineligible applicants seem to have been granted licences and at a price which appeared far below what has been perceived to be the appropriate market price in 2008.

Even if most of our politicians and ministers are naive on administration and knowledge required to govern the country, every single one of them is smart enough when it comes to 'realize' the money! Telecom Minister A. Raja is no lesser. He would have definitely realized the market value for the spectrum. Instead of conducting a fair auction process, which would have helped Indian government to realize billions of rupees, he creates confusion among applicatants, randomly changes the application dates, decides on his own to whom the licences should be awarded and fixes the entry fee as the same as it was in the last auction (which was in 2001-03)! So, in essence he has channelled the bidding to his personal benefit. Now, instead of companies bidding openly and paying the price to the government, they have decided to bribe telecom minister and the bidding-behind-the-closed doors decides the price! Wow, corruption is taken to new levels! Now, none of the above statement is publicly confirmed. But the common sense of the normal man cannot think of any other possibility!

Just imagine the benefits government would have accrued through the unrealized profit! The financial deficit pressure would have been eased. The government would have passed on the benefits to the common man through various tax incentives and reductions and might have introduced lot of reforms!

The CAG Report have employed multiple methods to calculate the presumptive loss. The following chart clearly illustrates that! The presumptive losses range from Rs. 57,666 crores to Rs. 1,76,645. Quite naturally, the maximum utilization philosophy says the loss to the nation is Rs. 1,76,645 and the benefit to someone's personal coffers is equivalent!


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