Friday, May 28, 2010

Who is that, Mr PM? - S Gurumurthy Article

S Gurumurthy

Raja had informed me that he was only implementing the policies that were in place and approved by the TRAI’. This is how the Prime Minister Manmohan Singh defended A Raja, his telecom minister, the prime suspect in the CBI probe into the 2G cell phone licence case. If this were the prime minister’s defence of Raja on May 24, see how offensive was Raja was to the prime minister on October 28, 2009, when the CBI had raided the Department of Telecommunications that was in his ministry leading to demands for his resignation. Asking ‘why should I resign”, Raja said, ‘besides following my predecessors and the solicitor general’s advice, I did it in consultation with the prime minister’. Far from not denying it then or later, on May 24, the prime minister virtually confirms what Raja had said then. Is there any difference between Raja saying he ‘consulted the prime minister’ and the prime minister saying he had ‘discussed the issue with Raja’? So long as Raja had discussed the matter with the prime minister prior to the act it is — and cannot be anything less than — consultation. Raja is right. But is the prime minister right?

The issue in question is whether the price that the government asked and got for the spectrum for 2G cell phone licences issued in the year 2007 is of correct value. Much of the discourse on 2G spectrum fraud is taking place without most of the public knowing what is ‘spectrum’ and what is ‘2G’. So a break here to know what is Spectrum and what is 2G? Take 2G first. 2G is the short form for ‘Second Generation’. All cell phones, now used by vegetable vendors to company executives, are based on 2G technology. There was no 1G (First Generation) technology as such earlier. When the new technology — the cell phone technology that we use now — came in and superseded the existing one, the new one became known as 2G, and so the existing one, as 1G. What is the difference between the two? A simple analogy is: 1G cell phone is similar to Paramount Airways, flying locally and with small capacity planes. The 1G cell phone cannot carry massive calls, nor have roaming to connect to far off places. 2G cell phone is like Air India operating jumbo jets. It can carry a large traffic of calls and directly connect to anywhere in the world. But like all aircraft fly in the air, in both 1G and 2G, all cell phone calls travel through airwaves, that is spectrum. Spectrum is like airwave highway. Even though this highway exists in space, it is attached to the earth. And like the land, which is in short supply, spectrum is also in short supply. So the issue is about its pricing.

2G cell phone technology entered India in 1995, beginning with the metros. Every cell phone licensee, other than those for metros, had paid huge fees by bids to enter the business. In 2001, having missed the bus first, the Reliance group made a backdoor burst into the cell phone business feigning as if it was using cordless phones in the streets, not cell phones! It did so without paying any fee. The NDA government was caught without a rule to stop this anarchy and was forced to negotiate with all to make a fixed licence fee policy, with a revenue sharing model. Then, the total cell phone user population in India was some 36 million. In three years the number topped 75 million. Today, it is over 594 million, with March 2010 alone adding over 20 million.

Now, to the issue of eleven 2G-cell phone licences in 2007. The first point to note is that in 2007, the Indian cell phone business was the fastest growing in the world. It was drawing huge investments into the country. It was at that time that Raja was proposing to issue 11 new licences, including spectrum, for a measly sum of Rs 1,650 crore per licence. This was on the basis of the spectrum value in 2001 when the cell phone user population was about a sixth of the size in 2007. The Telecom Regulatory Authority of India headed by an honest civil servant, Nripendra Misra, had openly come out and said that spectrum value in 2007 would not be less than Rs 6,000-8,000 crore, that is at least four to five times the value at which Raja had proposed to sell. Yet, the minister said the new licences (at 1/5 its value) would be given on ‘first-come-first-served basis’ and the cut off date would be October 1, 2007. Suddenly he turned around and said that the cut off date would end six days earlier, on September 25. The crowd that had gathered at the minister’s office on that day with each one jogging to be the first to get the licences was like the crowd of poor women that normally gathers in our middle level towns to collect the limited number of saris distributed free of cost. But, unlike the free sari crowd, the cell phone licence seeking crowd that included the richest in India, and like the former it went physical, many gate crashed, some in full suits got crushed between gates closing at 5 pm on September 25 with one foot in and one out. The only consolation was that there was no death in the stampede as happens in the free sari events. All this happened to the view of the world. The prime minister, Raja says, was consulted on this model!

Every streetlight in Delhi knew that the difference of Rs 5,000-6,000 crore per licence or Rs 60,000-70,000 crore was shared among different players. Raja did not dole out each licence valued at Rs 8,000 crore for Rs 1,650 crore secretly. He did it in the view of all, including the prime minister. Yes, it was daylight corruption. But Raja was too small to do it all for himself or all by himself. Nevertheless when the CBI was set upon Raja, as it often happens in politics, he was left to defend himself. So he went on the offensive and brought in the prime minister. And see how the prime minister without whose knowledge the CBI could not have got into the act is now defending Raja with tail between his legs. And he flips in 2007, flops in 2009 and flips in 2010 — that is, he okays Raja first, puts the CBI on to Raja next and backs Raja later! He now says what Raja said in 2007, namely that he had acted on TRAI advice. But the TRAI chairman had openly said then that the value of each 2G licence was Rs 6,000-8,000 crore. The prime minister further says that it would have been unfair to ask the new entrants to pay that much more. Does the prime minister know that spectrum to three old players too was doled out at the same discounted rate as the new entrants? Why does the prime minister, who put the CBI after Raja, now back Raja blindly? This prime minister is not, and will never be, a suspect here. And Raja is too small to be the sole beneficiary.

QED: There must be a principal beneficiary more powerful whom the prime minister is duty bound to defend. He must know who that is.

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