CURRENT AFFAIRS----2G SCAM

What is the spectrum scam? •2G licenses issued to private telecom players at throwaway prices in 2008. •CAG: Spectrum scam has cost the government Rs. 1.76 lakh crore. •CAG: Rules and procedures flouted while issuing licenses.

The 2G spectrum scam involved allegations of • under pricing of 2G spectrum Telecom Ministry of , resulting in loss to the exchequer and • illegal manipulation of the spectrum allocation process to favour a few select companies • According to a report submitted by the Comptroller and Auditor General based on money collected from 3G licenses, the loss to the exchequer due to under pricing of 2G spectrum was 176,379 crore (US$39.16 billion).

Why 2G Spectrum scam occurs in India?

We know that in the democratic country like India, the Prime minister has all power regarding the management of cabinet ministers but recently, the Indian prime minister Sardar has been involved in the 2G spectrum scam because has not acted on the removal of the telecom minister A.Raja and the main reason which has come to notice is that, home minster of India has send the letter to the regarding the 2G license distribution in which he has explained that should be provided with the revenue share as a part of the premium profit in turns of license distribution but Prime minister has not been responded to the letter and after few days this act spread publically and questions are to be putted from Sardar Manmohan Singh about this act, he explained that he was helpless because of the coalition government but I do not think that was correct reason given by the prime minister against this 2G spectrum scam.

The another reason is the involvement of Kanimozhi, Member of Parliament and daughter of DMK head Karunanidhi, the Kanimozhi has taken the help of DMK head karunanidhi( chief minister of Tamil Nadu) in favour of A. Raja( Minister of communication and Information technology) in the distribution of 2G wireless spectrum license in the year 2008 even though it is illegal to distribute licenses without any premium profit for government and all had break all the rules and regulations meant for cabinet ministry, it is great example of how politics work in India and it shows that it is only same caste, culture and sex that matters most for them. Moreover, the welfare of people of India is always neglected by this ministers because their first consideration is to fill their own profit first and then looking for welfare for people of India.

In the year 2003, when the BJP government is there in India then the Arun Shourie who was the telecom minister during that point of time has introduced a controversial neutral services license in which some mobile operators are allowed to paid lower license fees for the wireless technology and this law enforces some mobile operating companies to get the license at the cheaper rates at that point of time and A. Raja uses the same approach for the distribution of so many licenses to its known companies and reported that this all companies are following the neutral services agreement but when all these companies are invested later by the Income tax department then government come to know that A. Raja has illegally distributed licenses to various companies.

INDIVIDUALS INVOLVED IN THE SCAM

All the accused have been booked under sections 120(B) (criminal conspiracy), 468 (Forgery for purpose of cheating), 471 (using as genuine a forged document or electronic record), 420 (cheating and dishonestly inducing delivery of property) and 109 (abetment if the act abetted is committed in consequence, and where no express provision is made for its punishment) of the Indian Penal Code

The people involved in the scam are as follows:

Politicans, Ministers and Parlimentarians involved

1) A .Raja : He is the Union Cabinet Minister for Communications and Information Technology. The allegations against him are : The Controller and Auditor General holds Raja personally responsible for the sale of 2G spectrum at 2001 rates in 2008, resulting the previously mentioned loss of up to Rs. 1.76 lakh crores (US$40 billion) to the national exchequer. In August, 2010, evidence was submitted by the Controller and Auditor General (CAG) showing that Raja had personally signed and approved the majority of the questionable allocations. 2) Kanimozhi Karunanidhi :He is the Member of Rajya Sabha.

The allegations against him are : On April 25, 2011 Kanimozhi was named as a co-conspirator in the supplementary charge sheet filed by the Central Bureau of Investigation (CBI) in connection with the . The charge sheet, which was submitted before the Supreme Court establishes how Rs 200 crore connected with the scam traveled from a partnership firm of businessman Shahid Balwa of Swan Telecom to the Karunanidhi family- owned Kalaignar TV.She has been charged with section 7 and 11 of the Prevention of Corruption Act. The sections deal with acceptance of alleged gratification.

Bureaucrats involved:

Siddhartha Behura : He is the Civil Servant(IAS officer of 1973 batch UP cadre).

The allegations against him are : He was the Telecom secretary who served in the DOT at the time of the 2G allocation.

P. J. Thomas : He is the Civil Servant(IAS officer of 1973 batch Kerala cadre)

The allegations against him are : He was the Secretary of the Department of Telecommunications. On September 7, 2010 he was appointed as the Chief Vigilance Commissioner. Thomas later stepped down after the Supreme Court questioned his track record as a civil servant in the wake of investigations into the 2G spectrum allocation scam.

Pradip Baijal : He is Civil Servant(IAS officer of 1966 batch MP cadre).

The allegations against him are : He is alleged to have recommended policies that favored certain Telecom companies when he was heading the TRAI. Post retirement, Baijal joined Noesis, a consulting firm.[6][7] Raja has made references to Baijal's decisions in 2003 as the basis for his decisions in 2008; something which has been attacked by Arun Shourie and several media pundits. The houses and offices of the bureaucrat were recently[when?] raided by the Central Bureau of Investigation as part of their investigations.

R K Chandolia :He is a Civil Servant(IES officer of 1984 batch cadre).:

The allegations against him are : He was private secretary of Raja during UPA-I when the licences were awarded. When Raja became the Telecom Minister once again in UPA-II, Chandolia had been promoted to the Joint Secretary rank. Raja re- designated him Economic Adviser, that gave him the charge of all important policy-related work. Chandolia interacted with all the licensees. It is said that it was Chandolia who, from DDG-access services A K Srivastava's room, had handed out letters of intent to representatives of various companies. Corporations involved

The corporations involved in the scam were: 1) Unitech Group a real estate company entering the telecom industry with its 2G bid; sold 60% of its company stake at huge profit to Telenor after buying licensing (Including land values properties for towers)

2)Swan Telecom sold 45% of its company stake at huge profit to Emirates Telecommunications Corporation () after buying licensing

3)

4) Videocon Telecommunications Limited

5) S Tel

6)

7) Sistema Shyam Mobile (MTS) – Sistema Mobile Russia

8) Vodafone Essar

9) Dishnet Wireless

10) Allianz Infra.

Corporate personalities involved

1) Anil Ambani - Reliance Group (ADAG)

2) Shahid Balwa - DB Realty and Etisalat DB Telecom(formerly Swan Telecom)

3) Vinod Goenka - Dynamix Group

4) Venugopal Dhoot -

5) Prashant Ruia - Essar Group

All of the above have either been questioned by the CBI or are prospective suspects in the scam.

Media persons and lobbyists involved

1) Nira Radia : former airline entrepreneur turned corporate lobbyist whose conversations with politicians and corporate entities were recorded by the government authorities. The contents were later leaked by unknown parties creating the Nira Radia tapes controversy

2) Barkha Dutt :an NDTV journalist alleged to have lobbied for A. Raja's appointment as minister.

3) Vir Sanghvi : a Hindustan Times editor alleged to have edited articles to reduce blame in the Nira Radia tapes.

Petitioners to 2g scam

 Subramaniam Swamy : activist lawyer and politician, whose letters to the Prime Minister demanding action and affidavits and cases in the Supreme Court brought the issue into the public limelight.  Paranjoy Guha Thakurta : a journalist who was one among the very first to write on the irregularities in the awarding of 2G spectrum allocation by the Telecom Ministry. He is also one of the petitioners in the 2G PIL currently being heard in the Supreme court.  Prashant Bhushan : on behalf of the Centre for Public Interest Litigation.  Anil Kumar:on behalf of the civil society organisationTelecom Watchdog  Others :Several eminent people like former chief election commissioners J.M. Lyngdoh, T.S. Krishnamurthy and N. Gopalaswami and former Others central vigilance commissioner (CVC) P. Shankar are also petitioners in the suits filed by civil society groups.

IMPACT OF THE 2 G SCAM ON THE INDIAN GOVERNNMENT (Loss to Excheque The Comptroller and Auditor General of India used three different methods to assess the presumptive loss to the exchequer resulting from not auctioning 2G spectrum. The first method was based on the fact that S Tel, one of the licensees, explicitly offered to pay significantly higher license fees for the spectrum. Based on the fees offered by S Tel, the CAG estimated the loss to the exchequer at 67,364 crore (US$14.95 billion) The second method was based on the price discovered by the 3G auction in 2010. The CAG reasoned that since 2G is really 2.75G (EDGE), its price should be comparable to that of 3G licenses. Based on this method, the CAG estimated the loss to the exchequer to be 176,000 crore (US$39.07 billion) The third method was based on the fact that some of the licensees received FDI in the form of equity, shortly after the spectrum allocation. The CAG reasoned that this equity infusion was entirely due to the value of the allocated spectrum; this can be construed as re-sale of the spectrum by the licensee, and hence was a valid basis for assessing loss to the exchequer. Based on this method, the CAG estimated the loss to the exchequer to be anywhere between 57,666 crore (US$12.8 billion) (based on Etisalat's investment in Swan Telecom) and 69,626 crore (US$15.46 billion) (based on Telenor's investment in Unitech). For its part, the Congress-party led government has publicly defended itself on this count and Kapil Sibal, who replaced A. Raja as the communication minister, has refuted the CAG reasoning. He has also justified his government's decision not to auction 2G spectrum as being in line with the policy guidelines laid down by the 10th Five-Year Plan.

Relationship between media and government Media sources such as OPEN and Outlook reported that Barkha Dutt and Vir Sanghvi knew that corporate lobbyist Nira Radia was influencing the decisions of A. Raja. The critics alleged that Dutt and Sanghvi knew about corruption between the government and the media industry, supported this corrupt activity, and suppressed news reporting the discovery of the corruption.

Petitions made by over the 2G scam: The tapes leaked to the public include conversations between Nira Radia and Ratan Tata. Tata petitioned the government to acknowledge his right to privacy and demanded accountability for the leak, with the Minister for Home Affairs, CBI, Indian Income Tax Department, the Department of Telecommunication, and the Department of Information Technology as respondents in the petition. On April 4, 2011 Indian Parliament's Public Accounts Committee (PAC)questioned Tata Sons Chairman Ratan Tata and corporate lobbyist Niira Radia regarding their roles in 2G Scam.

Implications of the 2G scam: In early November 2010 Telecom Minister A Raja resigned. In mid November the comptroller Vinod Rai issued show-cause notices to Unitech, S Tel, Loop Mobile, Datacom (Videocon), and Etisalat to respond to his assertion that all of the 85 licenses granted to these companies did not have the up-front capital required at the time of the application and were in other ways illegal. Some media sources have speculated that these companies will receive large fines but not have their licenses revoked, as they are currently providing some consumer service. In response to the various allegations, the Govt of India has replaced the then incumbent Telecom minister, A. Raja with Kapil Sibal who has taken up this charge in addition to being the Union minister for Human Resources Development.Mr Sibal contends that the "notional" losses quoted are a result of erroneous calculations and insists that the actual losses are nil. The CBI conducted raids on Raja and four other telecom officials - former telecom secretary Siddharth Behura, Raja's personal secretary R K Chandolia, member telecom K Sridhar and DoT deputy director general A K Srivastava on 8 December 2010.

Arrests and Chargesheets in the 2G scam On February 2, 2011, the CBI arrested former Telecommunications Union Minister A.Raja. The CBI also arrested R.K. Chandolia, Raja's personal aide, and Siddharth Behura, the former Telecom Secretary.[23][24] Both A.Raja and R.K Chandolia are heard in conversation with Niira Radia in the released Radia tapes. On February 8, 2011, the CBI arrested based Dynamix Balwas (DB) group managing director Shahid Usman Balwa in connection with the 2G spectrum allocation scam. The CBI has evidence from the Income Tax department that Shahid Usman Balwa, considered close to A. Raja, was instrumental in channelling the kickbacks allegedly received by the former telecom minister. On March 29, 2011, in , the CBI arrested Asif Balwa (younger brother of the arrested former Managing Director of DB-Etisalat Group, Shahid Balwa) and Rajeev Agarwal for their alleged involvement in money transfer to the Dravida Munnetra Kazhagam's (DMK) Kalaignar TV channel. On April 2, 2011, the CBI filed its first 80,000 page chargesheet in the 2G spectrum scam before a Special Court in Delhi naming nine individuals and three companies. It said the wrongful acts of the accused deprived the government exchequer of possible revenues amounting to INR Rs 30,985 crore (USD $ 6,983,322,233). The accused include the following individuals: 1) A. Raja, arrested former Telecom minister 2) Siddharth Behura, arrested former Telecom Secretary 3) R.K. Chandolia, A. Raja's arrested former personal secretary 4) Shahid Usman Balwa, arrested former Director of Swan Telecom (nowEtisalat DB) 5) Sanjay Chandra, Managing Director of Unitech Ltd and Unitech Wireless 6) Gautam Doshi, Group MD, Reliance Anil Dhirubhai Ambani Group 7) Hari Nair, Senior Vice- President, Reliance Anil Dhirubhai Ambani Group 8) Surendra Pipara, Senior Vice- President, Reliance Anil Dhirubhai Ambani Group and Reliance Telecom Ltd 9) Vinod Goenka, Director, Swan Telecom and Managing Director of DB Realty The three companies named are: 1) Swan Telecom 2) Unitech Wireless 3) Reliance Telecom In the first chargesheet, the CBI had named lobbyist Niira Radia and 124 others as witnesses. On 25 April 2011, in its second chargesheet in the scam, the Central Bureau of Investigation (CBI) named five more accused individuals: 1) Kanimozhi - Rajya Sabha Member of Parliament (DMK) and daughter of Tamil Nadu Chief Minister M Karunanidhi. 2) Sharad Kumar of Kalaignar TV. 3) Karim Morani of Cineyug Films . 4) Asif Balwa of Kusegaon Realty . 5) Rajiv B Agarwal of Kusegaon Realty.

Investigations made in the 2g scam:

The investigations in the 2G scam involved the formation of P.A.C. (Public Accounts Committee)

Public Accounts Committee, a 21-member committee, with chairman as Murli Manmohar Joshi, was formed to investigate, independent of other committees like JPC. The chairman submitted a draft report on 2G scam to Speaker on Saturday 30-04-2011, and insisted that it be tabled in the Parliament. UPA members' claimd that the report had been "rejected", and 11 MPs of same committee(majority out of 21) had "rejected" the report - which was termed as "unconstitutional" by MM Joshi pointing out that such a possibility does not exist till the report is "read" by members and "discussed" para by para. Defending his action of calling witnesses from diverse fields in connection with the 2G scam probe, Joshi said it was the duty of the PAC to "trace and examine the way the money of common man is spent". He alleged that on 28- 04-2011, during the last meeting of the committee, ministers passed on "chits" and called up PAC members to speak and behave in a particular manner; that said trouble started when a decision was taken to call top officials of the PMO, Cabinet Secretary, Attorney General and CBI director for questioning. A minister reportedly commented that the PAC draft report will be thrown in the dustbin, to which the chairman regretted and questioned if Parliament's proposals and then Supreme Court orders would be given the same treatment.

Impact of the 2G scam

Impact on stock markets and Business: The Indian stock market depends on the working of the various industrialist and economist but when the 2G spectrum comes in existence then it causes around Rs 1,76,379 crore loss to government of India and this was the bad news for the telecom companies which has involved in this and finally huge fall is there in the stock market which has directly causes the fall in Indian economy. 1)The first casualty in Stock Markets once Raja was arrested was DB Realty.[30] 20% fall in the stock prices of DB Realty. Sun TV had its shares fall by 10%. 2) Sun TV COO refused the allegations. Swan Telecom Chief Balwa was arrested on Feb 8 and this led to rumours of links with Anil Ambani's Reliance ADAG and it led to 20% fall of his stocks . 3) Its reported that nearly 2 Billion USD was eroded from his stocks 4)Spicejet stocks went down after reports of investigation on Maran's recent takeover of Spicejet .

Investor sentiment on telecom industry in India The investor sentiment has been negative and telecom stocks will plunge further in India. The analyst advice is to stay away from these stocks and square off positions and book profits while you still can. However the flip side of the argument is that the sector is seeing a lot of growth opportunities and going ahead there will be multiple avenues for the telecom service providers to boost their revenues. The telecom companies are now looking at data services to enhance their market share and voice services will eventually become a matter of complimentary services. The advent of 3G has also considerably lifted investor interests in the stocks and there is a hope that innovative business models and VAS will be the game changers for the telecom stocks.

IMPACT BOTH RELIANCE COMMUNICATIONS AND UNITECH WIRELESS . The companies which are being investigated will face a bit of pressure. The actual outcome of the regulation will have to be seen as to what happens in terms of whether a penalty is imposed or whether spectrum charges are put those are the bigger issues. It basically appears to be an accelerated momentum with regard to how the government and the Supreme Court and CBI are all following this case. While one might have thought this case may carry on for a little longer it seems to be well on course to come to a conclusion this year. Anil Ambani’s Reliance Communication (Rcom) is reaction to the sharp fall in the stock value in the capital market is to blame ‘unscrupulous’ and ‘fraudulent’ rivals.This is pending investigation in 2G telecom Scam where Rcom’s staff were questioned. The role of Rcom is also been looked into relating it to its past links with the Swan or now renamed as Etisalat DB Telecom. The latter is alleged to be proxy Rcom at one time. the apprehension raised were based on the fact the Rcom had 9.9 % stake in Swan at the time it applied for licenses. Hari Nair of Rcom held a position of Swan’s company secretary. Rcom has declined to reveal the present role of the company. The state of Anil Ambani’s telecoms and infrastructure companies is serious. Reliance shares punge at all time low, dropped very significant 14.3 percent on Wednesday, spells doom for the company. It is the steepest one-day fall in 13 months, while Reliance Power sank 9.6 percent. This sell-off was initiated by a report in a television news channel that reported that CAG was seeking information about Ambani’s ADAG companies. This is connected to the 2G telecom scam. The ADAG has asked the stock market and capital markets regulator to investigate Wednesday’s trading. This move remained unconfirmed by various stock exchange. Reports by Juergen Maier, a fund manager for Raiffeisen Capital Management as quoted in Bloomberg says that The company’s balance sheets are not the best and are very difficult to understand and corporate governance is not very strong at the company add that the company had promised a lot but has been unable to deliver on those promises.

Anil Ambani’s ADAG group is under scanner in the 2G scam. That has translated into many trouble for the group. The group saw a plunge of share value in the stock market. It is led by a 19 percent drop in Reliance Infrastructure shares, dragged the benchmark sensex index to a seven-month low on yesterday. ADAG is known for its deep rooted influence in the corporate media, but now they seem to be at the receiving end. They now understand how much things can get wrong when media gangs up against a group. The group puts the blame on “unscrupulous corporate rivals,” hold them responsible for spreading rumours that led to “panicked” sales in the stock market. In the last three weeks the value of his listed companies has plunged 29 percent to $16.8bn. That is serious trend that will cause a lot of worry to the group. Anil Ambani was forthright last month on the issue when he reportedly told the media that he welcomes media scrutiny but at the same time expressed worry that “most of it is based on rumours and sources and nothing is based on facts.” He blamed “vicious and illegal” trading for a one-day stock rout that wiped out $2.6 billion (R18.7bn) in the market value of his six publicly traded companies. Impact on Reliance Telecom and SWAN: The Central Bureau of Investigation’s (CBI) probe of the group’s officials is a sequel of 2G scam expose that after the selective leak of Niira Radia tapped phone conversation and the CAG’s report dubbing is a $ 40 billion dollar scam. The report has also alleged that Swan Telecom, got licence in 2008, was alleged to be as a “front company” for Reliance Telecom when it applied for the licence. Swan Telecom – now called as the Etisalat DB Telecom have allegedly benefited. ADAG official questioned could be related to it. The CBI’s questioning of Reliance officials comes as troubles mount for the group. Imapct on the company Unitech

The news of Enforcement Directorate Shares deciding to attach the properties of companies facing probe in the 2G scam has started showing its impact with of Unitech, DB Realty and Reliance Etisalat DB is a joint venture between Abu Dhabi's Etisalat and the DB Group, parent of DB Realty. Unitech Wireless is a joint venture between Unitech and Norway's Telenor. Communications falling in the range of 4.22-7.54 per cent on BSE amid concerns that Enforcement Directorate might attach properties of the companies involved in 2G scam. Shares of DB Realty too fell by 4.22 per cent to close at Rs 98.85, while Reliance Communications scrip dropped by 5.13 to settle at Rs 99.85. The Enforcement Directorate told the Supreme Court that property worth Rs 2,000 crore each will be attached of two companies which are involved in the 2G spectrum scam during the tenure of former telecom minister A Raja. The status report did not name the companies, but media reports named these companies as Swan Telecom, now known as Etisalat DB and alleged to be a front company of Reliance Communications, and Unitech Wireless. The Big Question: A Raja: a hero or villain?

A Raja has done the greatest service to Indian Telecom industry is its biggest villain now. By issuing 100 new licenses Raja has ensured optimal use of the scarce spectrum space. He has made sure the spread of the telecom revolution to the rural areas by extending the services to the rural hinterland and making the services affordable even to the poorest of poor. This will go a long way in spreading the fruits of developments in the remote parts of the country by connecting them to the mainstream. It is a virtual road that connects rural and poor people growth effort of the country like never before. Here are the figures: 15 million subscribers are added every month since Raja’s 2G scam happened, compared to 9 million before that. In the last one year the rural subscriber base has increased by 71 percent. The rural subscriber base is now one third of the over all. This has been made possible post Raja liberalization of the telecom sector. Who gains out of 2G scam?

This is the first scam where the common man has gained. By issuing more then 100 licenses in the telecom sector, A Raja, has ensured that market has competition. This has lead to the slashing of rates. And this move has also ensured greater penetration of mobile services to the rural hinterland of India at extremely affordable rates. Mobile is no more a luxury in India. The corrupt made money out of it and they should be persecuted for it. But there is a larger design in those who ensured selective leak of the Niira Radia tapes. This liberalization of the telecom spectrum space by allocating it to large number of players has destroyed market oligarchy of the incumbents who have been m ilking telecom sector for more than a decade now. They are like Airtel, Idea, Vodafone, etc. and the two CDMA players: namely Reliance Communications and . The older players had to pay less for the infrastructure. As the spectrum space widens, the new operators will have to pay increasing more for the infrastructure to offer the same quality of services. So by selectively exposing the 2G spectrum scam via calculated leak of Radia tapes, it is alleged that the incumbents are trying to discredit the whole process so that the licenses of new players is cancelled or charges levied so that their operations become unviable, ones and for all.

Final Verdict?? It will be at least a month before the second supplementary chargesheet relating to two corporate groups is filed in the 2G spectrum scam case, although the main chargesheet was placed before the trial court on April 2 followed by an additional one on April 25. The time lag is due to the 2G scam investigating officer expected to lead a team to Mauritius soon to push for information relating to promoters behind Delphi Investment, which bought Reliance Telecom's 9.9% stake in Swan Telecom in December 2007. CBI had sent a letter rogatory to Mauritius seeking cooperation from authorities there to identify promoters and patrons of Delphi Investment. The investigations cannot be completed unless these are verified and letters rogatories pursued to get authentic evidence. The probe team's visit to Mauritius has already been cleared by the government and many more such trips would be necessary in future to collate evidence," he said.

Apart from inquiring about Delphi's promoters and patrons, CBI in its letter rogatory had requested Mauritian authorities for information about the date of incorporation of the company and nature of its business.

On paper, Port Louis-based Delphi is owned by a subsidiary of Mavi Investment Fund Ltd, a private global business company in Mauritius. CBI had informed Mauritian authorities that Reliance Telecom had sold its 9.9% stake in December 2007, within two months of acquiring dual technology licence. Reliance had received in-principle approval of dual technology licence on October 17, 2007. CBI in its charge sheet had alleged that Swan was floated to overcome the rule barring sister companies from applying for spectrum. Finally the fate of the 2g scam will be decided by the joint parliamentary committee report.