Reality Check India

Scam : CPM pushes for investigation

Posted in Uncategorized by realitycheck on December 19, 2008

The PM and former FM still have not come out with a statement about the Rs 55,000 Crore scam.

1. The Rs 60K Crore direct revenue loss to the government : No one is denying this loss. Sure, it can be justified as startup concession. That only means that the loss happened due to the startup concession.

2. The profits made by the private entrepreneurs merely by holding the above paper. No one seems to be denying this either.

The Prime Minister must come out with a statement. Remember, we did not elect the Telecom Ministry, Home Ministry separately. Everyone is part of the UPA.

CPM Press Release

The left really deserves kudos for their exemplary work on exposing this scam. The BJP seems to be reluctantly tagging along. This is their latest press release.

Institute Immediate Probe
While the Minister of Communications continues to mislead the Parliament and the larger public by obfuscating matters, what is more disturbing is the deafening silence on the part of the Prime Minister on this issue. That there has been an enormous loss to the national exchequer due to the arbitrary allocation of 2G licenses is incontrovertible. Responsibility for the huge loss to the national exchequer must be fixed and concrete steps undertaken to recover the amount from the beneficiaries of the scam.

In the light of the material being made public, the CPI (M) demands immediate action on the part of the Prime Minister in this regard. Failure to initiate probe into the matter and fix responsibility, undertake steps to retrieve the lost revenues and review the entire gamut of spectrum allocation policies would make the entire Cabinet complicit with this gigantic scam.

Source : CPI-M Press Web Site


An excellent article by Sunil Jain (“Telecoms black swan“) brings to light some new facts about the scam.

The Reliance Communications’ story is an interesting one. And the company’s explanation for the events is so beyond the realm of normal expectations, it can only be classified as a Black Swan event, to use Nassim Taleb’s classification — an event so rare, it happens once in a millennium.

– – –

Reliance ADA, for the record, has a different explanation for things, an explanation that is also quite worrying. According to Reliance ADA, a very large group of builders (Dynamix Balwas own the Meridien Hotel in Mumbai and the Hyatt in Goa) approached it to say there was a possibility of getting a telecom licence; but since the builders had no telecom experience, it was decided Reliance ADA employees would be directors of Swan, the firm chosen to apply for the spectrum. According to Reliance ADA, since it was in the telecom business and felt it could do business with Swan if it got a licence (Swan could, for instance, rent out its telecom towers), it didn’t mind doing this.

Source : Business Standard


Watch UTVI

I switched TV channels today see if any one was running a story on this giant among scams. CNN-IBN, NDTV, TIMESNOW, none of them even mentioned it. My guess is because the PM and former FMs have been in the loop according to the minister.

UTVI was the only channel which carried a story including an interview with Sitaram Yechury.

This is a great chance for UTVI + Business Standard to shake up the other media houses.


No simple scams please

Posted in Uncategorized by realitycheck on December 19, 2008

Well, it turns out that corruption is no longer a middle class issue. The latest trend is to ‘demand accountability from elected leaders’. What if I told you that the NIA is going to be worthless and that we will have no police reform. Sure, we will make a half hearted attempt. Sure, this attempt at building a brand new institution is worth blogging about, but you would have to ignore the obvious.

A “new” institution like the NIA is nothing but a bunch of humans who will end up running it. The integrity and motivation of these humans will only last until one of them bumps into a scam and is forced to look the other way. There will be a few individuals who are able to ignore obvious scams and continue to be highly motivated. These specimens do exist and they are the ones who keep this ship afloat.

Remember, every scam deposits a bunch of negative energy into the system. There are stake holders in it who may even be the very forces that run these institutions. As scams go, what really matters is the simplicity of the scam and not its size. This is why I prefer complex scams to simple ones. It is dead easy to bump into simple scam and really difficult to ignore it.

Today, there is a trend in favour of simple scams that are easy to understand. Contrast with past scandals like Bofors or Harshad Mehta or Sukh Ram. The alleged spectrum scam takes it to a new level. Stripped of inter deparment politics, it is a simple case of selling government assets for its market price through a middleman instead of directly. If there are political formations who have benefited, they will have a huge advantage at the polls. Why ? Their cash generation and subsequent immunity has been proven yet again. Vote marshals are attracted to such political formations. The end result is that the educated middle class vote the bloggers talk about is devalued by that much. Therefore, demanding accountability is placed out of reach by that much.


We will continue to follow this story. Of course stupid, we are aware it will die soon. The PM and former FM continue to maintain a silence waiting for this outcome. Which they will be rewarded with in due time.


News links :

The Speaker (who refused to resign his post even after expulsion from his party) has refused a JPC probe on the scam.  The left parties checkmated by their own former leader !

The Telenor-Unitech deal is running into rough weather. It turns out that the parent company of Unitech Wireless had huge debts.

RS debate on scam

Posted in Uncategorized by realitycheck on December 18, 2008

Interesting parts reproduced here :

DR. V. MAITREYAN: According to the current estimates, the country has suffered a loss of nearly Rs.1,00,000 crore in this one deal. (Interruptions) To put it in perspective, the six crore population of TamilNadu can be provided rice, now priced at one rupee a kg, free of cost,through ration shops for the next 140 years with this money.(Interruptions)

– – – –

MR. DEPUTY CHAIRMAN: Thirty-six seconds. (Interruptions)

DR. V. MAITREYAN: No, Sir  (Interruptions) Nothing has happened.(Interruptions) I will keep on saying. (Interruptions) From the time the rate was fixed in 2001, till the allocation was made in 2008, spectrum appears to be the only item that has not registered an increase in price for seven full years. Two companies, namely, Swan and Unitech have no experience whatsoever in telecommunication. (Interruptions) A host of other companies are involved and interlinked with these two companies. They are: Swan, Tiger, Parrot and Zebra — all zoological specimens. Nobody knows who are the people behind these mysterious companies.

MR. DEPUTY CHAIRMAN: Your time is over. (Interruptions)

DR. V. MAITREYAN: Unitech is a real estate company, which got the bumper deal without investing anything in telecom infrastructure.

MR. DEPUTY CHAIRMAN: You please go. You are disturbing your own Member. (Interruptions) Nothing goes on record.

DR. V. MAITREYAN: What is this, Sir? (Interruptions)

MR. DEPUTY CHAIRMAN: No. (Interruptions)      It is Zero Hour.It is Zero Hour. (Interruptions) Mr.(Interruptions) No. (Interruptions)Maitreyan. (Interruptions) Please go. (Interruptions) Please go.

DR. V. MAITREYAN: Sir, I want to know whether the mike is switched off or not.

MR. DEPUTY CHAIRMAN:            You see, you have taken three minutes. (Interruptions)

DR. V. MAITREYAN:          No, I will not.     (Interruptions) What is this? (Interruptions) They are disturbing me. (Interruptions)

MR. DEPUTY CHAIRMAN: I have allowed you. In another half a minute you complete it.

DR. V. MAITREYAN: One minute, Sir.

MR. DEPUTY CHAIRMAN: Okay. You complete it. Complete it. If you disturb it, I will not allow that. (Interruptions) No. (Interruptions) You cannot do that.

DR. V. MAITREYAN: It got licence to operate in 22 circles for Rs.1,651 crore within weeks, it sold 60 per cent shares for Rs.6,120 crore to the Norwegian company, Telenor, which is currently a major telecom player in Pakistan and Bangladesh. The Home Ministry has not cleared the Telenor’s deal, as it is operating in Pakistan and Bangladesh.        The Swan Telecom bagged the licence for Rs.1,537 crore for operating in 13 circles. Within weeks, it sold 45 per cent of its shares to Etisalat, the telecom giant in the UAE, for 900 million US dollar. (Interruptions)

MR. DEPUTY CHAIRMAN: Your one minute is over. (Interruptions) One minute is over. Shri Tapan Kumar Sen. (Interruptions) Nothing else will go on record. It is over.

SHRI TAPAN KUMAR SEN (WEST BENGAL): Sir, I stand here to..


MR. DEPUTY CHAIRMAN: That is not going on record. (Interruptions) It is not going on record. (Interruptions) It is not going on record. (Interruptions) Nothing is going on record.          (Interruptions) Nothing is going on record. (Interruptions) I have called Mr. Tapan Kumar Sen. (Interruptions)
Read the full transcript here (a PDF document)

All RS debates are here

Biggest scam in the history of independent India

Posted in Uncategorized by realitycheck on December 17, 2008

Request to bloggers (Mutiny, National Interest, etc)

Please write at least one post about this  ! It is in the “National Interest” to protect the scarcest of national resources. Is it not ?


The title is not mine.

Facts that have recently come to light indicate that the telecom spectrum scam is the biggest financial scandal in the history of Independent India, involving an amount not less than Rs 50,000 crore and possibly as high as Rs 1,00,000 crore — as much as one-fortieth of the country’s national income. This sum is certainly more than the total amount spent by the Central government in a year on health-care and roughly three-fourths of the fiscal deficit indicated in the Union budget for the current financial year.

Source : ExpressBuzz

Actually, we do not know about all the scams that took place before our Independence. What were the scams in Akbars’ court, or in Lord Curzon’s  time ?

We talked about Swan and Unitech who become overnight dollar billionaire by reselling. Now, we also know of Tata Teleservices who sold 26% to NTT DoCoMo of Japan for 13,000 crore.

This was one of the big mistakes committed by the scamsters. If they had avoided pure “entrepreneurs” like Swan and Unitech and gone with established “entrepreneurs” like Reliance, Bharti, or Tata, it would have been much much harder to arrive at the market value. They have established operations, customers, and employees. The valuations are would have to factor in all of these assets. The media is also less likely to pursue a story against Ambani and Ratan Tata.

The article goes on to describe the chaos at Sanchar Bhavan,

On January 10, at 2.45 pm, the DoT posted an announcement on its website saying letters of intent would be issued between 3.30 pm and 4.30 pm and that application fees (worth over a thousand crore rupees in many cases) would have to be paid immediately by demand draft with supporting documentation. Licences with spectrum were given to those who deposited their fees first by even a fraction of a second. In the mad melee, well-heeled CEOs were manhandled by hired bouncers and DoT staffers were bashed up before the cops turned up, late as usual.

The article has a predictable conclusion:

By the time these reports come out and court judgments are delivered, the next general elections would either be imminent or over. Therefore, the question that remains is whether or not Raja will be held accountable for his actions while he remains a minister in the Union government. Your guess would be as good as mine.

Source : Express Buzz

This is where we drop the ball.

See, in India we do not conduct elections separately for the Telecom Ministry, Home Minstry, or Health Ministry. They are all part of the Congress led UPA coalition. It is another matter if this happened on the sly without the knowledge of the Congress party. That is not the case. It happened with the full endorsement of the PM and FM.

The minister has claimed he followed existing rules while allotting spectrum, and that his decisions have been endorsed by the Prime Minister and finance minister.

There is a deafening silence from both the PM and former FM on this.

The only solution is to scrap all licenses and re-auction them.

Now, cancellation of licenses may lead to a “Get Shorty” scenario. So be it. Indian entrepreneurs are used to it. They are big boys.

CPM for JPC to probe scam

Posted in Uncategorized by realitycheck on December 15, 2008

Finally, one party raises its voice in Parliament about the scam. The wheeling dealing BJP does not seem to be doing its job as the main opposition party. Unfortunately, neither the media, nor the ‘middle-class’ bloggers will take it up because this been linked to the Prime Minister and P.Chidambaram, both who are above criticism.

To hell with 55,000 Crores cash money !! (I am not kidding, this is CASH the government could have got today, but has gone to Aravind-Adiga-White-Tiger-style-entrepreneurs)

CPI(M) Parliamentary Party leader Basudeb Acharia alleged Monday that “scarce” spectrum was allocated at the “fraction” of the market value leading to a loss of Rs 60,000 to the exchequer.

“The Ministry of Communications has adopted a completely inexplicable criteria of ‘first-come-first-served’ basis on license fee rates of 2001,” he said.

“This was allegedly to keep the costs low for consumers,” Acharia said but charged that the terms and conditions of license were not implemented.

The CPI leader alleged that those who got the spectrum licenses, have sold their shares at “huge profits.”

The spectrum allocation has “led to a huge scandal… It is an open scandal because of which there has been a loss to the exchequer… This is one of the biggest scams of the country,” Acharia said.

He demanded that there should be an investigation to ascertain how the allotment was done.

“A House Committee should be constituted to find out who was responsible and how the scandal took place. The Parliamentary Committee should go into the biggest scam of the time,” Acharia said.

Source :  Wire

You said it Mr Acharya, “the biggest scam of the time”.

If this trend continues, you may have to address me “Comrade” !

Scam robs poor street children

Posted in Uncategorized by realitycheck on December 14, 2008

Sorry for the attention grabbing title. 

Maybe, the problem is that this scam has not been explained in the media in simple language.  Lets try it.

Q 1 : What is the 2G spectrum ?  It is a range of radio frequencies that can be used for a variety of mobile services including cell phones.

Q 2 : Why are you making this big noise about it ? Not everything is perfect in India.  We can always make sure that next time we avoid these mistakes.  Sorry, there is no “neksht time”.  The spectrum is a really scarce resource. Think about it as selling exclusive rights to using alphabets, there are only 26 of them.

Q 3 :What about the interconnections of TRAI, DOT, COAI ?  What about this Tehelka article claiming the TRAI boss is also responsible ? Do not fall for the trap and start analyzing the inter department politics. You will get confused and lose interest. The point is all these departments represent the government. All of them are responsible. Keep focus on the scam.

The scam itself

1. Announce a first-come-first-served basis for selecting the winners among those who have something called a Letter of Intent (roughly like a challan). A mad scramble happens outside the Sanchar Bhavan office much like what you might see in Virudhunagar bus stand during Pongal.

2. One of the big winners of the scramble is Swan Telecom. It wins the so called Universal license (UASL) in 13 circles including Delhi. This is because their peon was the fastest to get to the counter at Sanchar Bhawan and get the paper stamped. Datacom is another big winner, getting 19 circles. Unitech, the realty firm wins 13 circles.

3.  In total – the Indian government (UPA led by the Congress Party) sold 120 licenses to 9 winning applicants  for around Rs 9,000 Cr (around USD 1.9B).  This is the grand total the poor children of this country got as a result of selling a national resource.

4. The main question, rather the only question is : Is Rs 9,000 Cr the correct valuation of this ? Whether we had an auction or internet-voting or first-come-first-served or entrance exam is irrelevant.  The only way to nail this is to see what the market pays for it. Luckily for us the market spoke quickly and the winners were too greedy to wait for the dust to settle. Read on.

5. Swan paid Rs 1,537 Crores for its licenses. Remember this is a company whose website we cannot locate.  In just a couple of months, this company sells 49% of itself to UAE telecom giant Etisalat for USD $1.2 Billion. Swan has no towers, no equipment, no operations, no subscribers. Just a shell with an approval. This is good because we can clearly put a valuation on the spectrum because the company is worth nothing without it. The value that Etisalat placed on the Swan Assets + Swan Spectrum  = USD $2.4 Billion or Rs 12,000 Cr.

6. Unitech paid Rs 1,651 Crores for its spectrum in 13 circles. With a plain face, within just a couple of months,  they sell 60% stake to Telenor for Rs 6,120 Cr.  Like Swan, Unitech Wireless have no assets to value other than the approval papers they hold. So the value of the spectrum that Telenor paid was Rs 6,120 Cr / 0.6 = Rs 10,200 Crore.

7. The total money made available to the hungry child at the traffic light was Rs 9,000 Cr. Just two companies Swan and Unitech each have made more than that in just a couple of months.

8. Do the maths. This places the total value of all 120 licenses at Rs 65,000 Cr.  The government lost Rs 65,000 – Rs 9,000 = Rs 56,000 Cr straight!

9. Two overnight dollar billionaires were created with money that belongs to the dalits and the oppressed and the poor of this country.

10. The funny thing about this is : if Reliance or Tata or Infosys had won the licenses instead of Swan and Unitech and then turned around and sold it to say AT&T, no one would have batted an eyelid. It would be much harder to value.

11. Another funny thing is the focus on A. Raja. He has kept the PM in the loop. This has been sanctioned at the PM level. Manmohan Singh and Dream Budgeteer P. Chidambaram must answer questions instead of raising new ones.

12.  The BJP is silent as expected. Thanks are due to the left once again for forcing a debate on this issue.

14.  This is what the government has to say in court when asked why it robbed hungry street children.

“If the spectrum was to be auctioned to the highest bidder for an upfront payment, such a bidder would pass on the cost to the customer or would go bankrupt. The cost of running the services can become so high that nobody would be really interested in applying for licence,” the government said.

Source : The Hindu

Yes, but Telenor and Etisalat have paid market price for it. Wont they pass it on to the customers ? The question is why did the money go to middlemen instead of the government which I am sure has ambitious programmes for hungry street children.


Crony capitalism at its very best.

Next : The government lame defence


I urge Indians who are openly plotting Star Wars style ‘surgical strikes’ and of American style ‘shock and awe’ to first hold on to their own knickers.

Subramanian Swamy – dismissed petition to include P. Chidambram in 2G criminal case – Judgment copy

Posted in by realitycheck on August 24, 2012




SPECIAL LEAVE PETITION (Crl.) No.1688 of  2012


I.A. No. 34 of 2012


CIVIL APPEAL No. 10660 of 2010

Subramanian Swamy      ?                                 Petitioner/


A. Raja                              ?                Respondent



1.    Common questions arise for consideration in both  these  applications,
hence they are being disposed of by a common  order.   SLP  (Crl.)  1688  of
2012 arises out of an order dated 04.02.2012 in  CC  No.01(A)/11  passed  by
the Special Judge, CBI (04) (2G Spectrum Cases), New Delhi.  I.A. No. 34  of
2012 has been filed by the appellants in Civil  Appeal  No.  10660  of  2010
claiming almost identical reliefs.

2.    Dr. Subramanian Swamy, the petitioner in special leave petition  filed
a criminal  complaint  on  15.12.2010  before  the  Special  Judge,  CBI  of
Central/Delhi to set in motion the provisions of  Prevention  of  Corruption
Act (for short  ‘the  PC  Act’)  against  A.  Raja,  the  then  minister  of
Telecommunications and to appoint him as a prosecutor under Section 5(3)  of
the PC Act.  The complaint was numbered as CC No.1 of 2010 and was heard  on
several occasions.  The case was later transferred  to  the  Special  Judge,
CBI (04)(2G Spectrum Cases), New Delhi.  CBI, after investigation,  filed  a
charge sheet in that complaint on 2.4.2011 regarding commission of  offences
during 2007-2009 punishable under Sections 120B, 420, 468, 471 IPC and  also
punishable under Section 13(2) read with Section 13(1)(d)  of  the  PC  Act,
against A. Raja and others.  Special  Judge  took  cognizance  on  2.4.2011.
CBI’s further investigation disclosed  that  the  monetary  involvement  was
much more and charge  was  laid.   Special  Judge  took  cognizance  of  the
aforesaid charge sheet on 25.4.2011.  Both the charge  sheets  were  clubbed
together vide order dated 22.10.2011 under Section 120B read  with  Sections
409, 420, 468 and 471 IPC and day to day trial began from  11.11.2011.   Dr.
Subramanian Swamy’s complaint case No.CC 01/2011 was also taken on file  and
renumbered as CC.No.1(A)/2011.

3.    Dr. Subramanian Swamy, the petitioner,  herein,  while  he  was  being
examined under Section 200, Code of Criminal Procedure in  CC  No.  01(A)/11
had deposed on 17.12.2011 as well as on 07.01.2012 that  Shri  A  Raja,  the
first accused, could not have alone committed the offences  alleged  against
him, but for the active connivance of Shri P. Chidambaram, the then  Finance
Minister.  So far as the various charges  were  concerned,  it  was  alleged
that both Shri A. Raja and Shri P. Chidambaram  were  jointly  and  severely
responsible.  Reference was also made to documents including Ext. CW 1/1  to
CW 1/28 with an emphasis that all those acts were  done  by  the  accused  –
Shri A Raja in connivance, collusion and consent of Shri P. Chidambaram  and
hence Shri P. Chidambaram was also guilty  of  commission  of  the  offences
under the P.C. Act  for  which  Shri  A.  Raja  was  already  facing  trial.
Further, it was also pointed out that Shri P. Chidambaram  was  also  guilty
of breach of trust on the question of national security for  not  disclosing
that Etisalat and Telenor were black-listed by the Home Ministry.   Further,
it was pointed out that there was enough incriminating materials  on  record
for carrying out the investigation  against  Shri  P.  Chidambaram  and  for
making him an accused in the case.  Further, it was also alleged  that  Shri
P. Chidambaram had played a vital role in the subversion of the  process  of
issuance of Letter of Intent (for short ‘LOI’), Unified Access Service  (for
short ‘UAS’) Licences and  allocation  of  spectrum  in  the  year  2007-08.
Further, it was also alleged that Shri P. Chidambaram was also complicit  in
fixing the price of the spectrum licence at 2001 level  and  permitting  two
companies, which received the licence that is Swan  Tele  Communication  (P)
Ltd. (for short ‘Swan’) and Unitech (T.N.) Ltd. (for  short  ‘Unitech’)  and
to dilute their shares even before roll-out of their services.

4.    Learned Special Judge,  after  referring  to  the  various  documents,
produced found no substance  in  the  allegations  raised  against  Shri  P.
Chidambaram and found that  he had no role in the subversion of the  process
of issuance of the LOI, UAS Licences and allocation of spectrum in the  year
2007-08.  Learned Judge concluded that there was no evidence on record  that
he was acting in pursuant to the criminal conspiracy, while being  party  to
the two  decisions  regarding  non-revision  of  the  spectrum  pricing  and
dilution of equity by the two companies.  Consequently, the prayer made  for
carrying out the investigation against Shri P. Chidambaram and to  make  him
an accused was rejected vide  order  dated  04.02.2012,  against  which  SLP
(Crl.) No. 1688 of 2012 has been filed.

5.      Dr. Swamy appeared in person and elaborately referred to Annexure P-
1 Final Report dated 03.04.2011 submitted by CBI before  the  Special  Judge
especially Para E, charge dealing with “Cheating  the  Government  Exchequer
by Non- Revision of Entry Fee”.  Reference was also made to the  summary  of
his  arguments  raised  before  the   Special   Judge   for   carrying   out
investigation against Shri P. Chidambaram and to array him as an accused  in
the pending criminal case.  Reference was also made  to  the  meetings  that
Shri P. Chidambaram  had  with  Shri  A.  Raja  on  30.01.2008,  29.05.2008,
12.06.2008 and later with the Prime Minister  on  04.07.2008  and  submitted
that in those meetings both of them conspired together for a  common  object
and purpose in fixing the pricing of spectrum at the  year  2001  level  and
permitting  distribution  equally  by  two  companies  Swan   and   Unitech.
Further, it was also pointed out that Shri P. Chidambaram was  fully  aware,
at least, on 09.01.2008 as to what  Shri  A  Raja  was  planning  to  do  on
10.01.2008.  Referring  to  several  documents  placed  on  record,  it  was
pointed out that in fact Shri  P.  Chidambaram  did  not  pay  heed  to  the
opinions expressed by the officials  of  his  own  Ministry  and  abeted  to
commit various illegal acts.

6.    Dr. Swamy referred to various ingredients of Section 13(1)(d)(iii)  of
PC Act and pointed out that a bare reading of the above mentioned  provision
shows that mens rea or criminal intent was not an  essential  ingredient  of
that Section.  Reference was made to the judgment of this Court reported  in
Indo China Steam Navigation Co. v. Jasjeet Singh [1964(6)  SCR  594],  State
of Maharashtra v. Hans George [1965 (1) SCR 123] and R.S. Joshi,  Sales  Tax
Officer, Gujarat and Others v. Ajit Mills Ltd. and  Another  [1977  (4)  SCC
98] and submitted  the  ratio  of  above  judgments  indicate  that  certain
criminal offences imposing punishment  of  incarceration  need  not  require
mens rea instead strict liability as enumerated in the statute itself.   Dr.
Swamy pointed  out  that  the  above  mentioned  statutory  provision  would
indicate that the emphasis is  on  “obtains”  and  “public  interest”.   Dr.
Subramanian Swamy submitted that the  learned  trial  judge  had  failed  to
notice  those  vital  aspects  and  has  wrongly  rejected  the  prayer  for
conducting investigation against Shri P. Chidambaram and to array him as  an

7.    Shri Prashant Bhushan, learned counsel appearing  for  the  applicants
in I.A. No. 34 of 2012 has indicated the necessity of conducting a  thorough
investigation by the CBI into the role of the then Finance Minister Shri  P.
Chidambaram in the matter of fixing the spectrum pricing  and  allowing  the
sale of equity by Swan and Unitech.  Learned counsel  pointed  out  that  in
that process, Shri  P. Chidambaram had over-ruled the officers  of  his  own
Ministry who  favoured  auction  /  market-based  pricing  of  spectrum  and
instead allowed various companies to make  windfall  profits.   Further,  it
was also stated that he had allowed the above-mentioned  companies  to  sell
off their shares without charging any Government’s share of its  premium  on
account of spectrum valuation and without enforcing his own  agreement  with
the then Telecom Minister.

8.     Learned  counsel  made  specific  reference  to  para  2.1.2(3)   and
submitted that the Group of Ministers (GoMs)  had  in  their  recommendation
dated 30.10.2003 stated  that  the  Department  of  Telecom  (DoT)  and  the
Ministry of Finance  (MoF)  would  discuss  and  finalise  spectrum  pricing
formula which would include incentive for efficient use of spectrum as  well
as disincentive for suboptimal usages.  Learned  counsel  pointed  out  that
the above recommendation would clearly  indicate  that  MoF  officials  were
fully  aware  that  unless  such  ‘concurrence’  based  on  discussion   and
finalization of spectrum pricing formula between the DoT  and  the  MoF  had
been established, the DoT could not have  moved  ahead  and  spectrum  could
have been allocated at 2001 rates in the year 2007-08.

9.    Learned counsel also referred  to  the  “Position  Paper  on  Spectrum
Policy”  prepared  by  the  Department  of  Economic  Affairs  (revised   on
03.01.2008)  which  was  forwarded  along   with   covering   letter   dated
09.01.2008.  The Telecom Commission meeting  which  was  to  take  place  on
09.01.2008 was postponed to 15.01.2008.  Further, it was  pointed  out  that
before the scheduled meeting of the Telecom Commission  on  15.01.2008,  DoT
had already issued 122 LOIs for UAS licenses on  10.01.2008  and  that  LOIs
were converted into licenses during 27.02.2008 to 7.3.2008 and the  spectrum
allocation was started  from  22.4.2008  and  completed  6.5.2009.   Learned
counsel pointed out that, the then Finance Minister had enough time to  stop
the scam, since the price was not fixed by the DoT and MoF as authorized  by
the GoMs (2003).

10.   Further, it was also stated that before the Telecom  Commission  could
meet, then Finance minister made a note on 15.01.2008 to the Prime  Minister
of India pointing out that the note did not deal with the need, if  any,  to
revise entry fee or the rate of revenue share, and also indicated  the  said
note dealt with spectrum charges for 2G  spectrum.   Further,  it  was  also
stated by Shri Prashant Bhushan that then Finance Minister and Shri  A  Raja
had met on 30.01.2008  to  discuss  the  issue  of  licensing  and  spectrum
pricing.  In that meeting, then Finance Minister had announced the issue  of
revising entry fee of 122 LOIs already issued by DoT and that they were  not
seeking to revisit the current regimes for entry fee or for revenue share.

11.   Shri Bhushan also referred to the  approach  paper  by  Department  of
Telecom Commission, which  was  forwarded  by  the  Secretary,  DoT  to  the
Finance Secretary, MoF, which would indicate that the officials  of  Finance
Ministry were keen to stop the allocation of spectrum of 4.4  MHz  and  were
suggesting the allocation of spectrum by way of auction.

12.   Learned counsel also referred to the sequel note to the Department  of
Economic Affairs dated 11.02.2008 which according to  the  learned  counsel,
would indicate that the MoF had  deferred  from  the  position  of  DoT  and
stated that  there  was  no  contractual  obligation  to  allot  a  start-up
spectrum of 4.4 MHz to every licencee free  of  cost  and  that  the  entire
range of the spectrum allotted should be priced and that the issue of  level
playing field could be addressed by charging  the  price  even  on  existing
operators.  Learned counsel pointed out that in spite  of  objection  raised
by the officials of Ministry, the Finance Minister acted in connivance  with
Shri A Raja and Shri A Raja went ahead and issued 122 licences  which  could
have been prevented by Shri P. Chidambaram, had he stood with the  views  of
his officials.

13.   Learned counsel also referred to note dated  07.04.2008  sent  by  the
Finance Secretary after discussion with the Finance Minister wherein it  was
noticed that DoT was agreeable for pricing of spectrum beyond  4.4  MHz  but
wanted that to be deferred till auction  of  3G  and  WIMax  was  completed.
Reference was also made by the learned counsel to the note dated  03.04.2008
of the Additional Secretary (EA) and pointed out that then Finance  Minister
had agreed that spectrum usage charge should  be  increased  reflecting  the
scarcity value of spectrum as indicated  in  their  note  dated  11.02.2008.
Further, the note also indicated  the  Finance  Minister’s  view  that  they
should insist, in principle, on pricing spectrum  beyond  4.4  MHz  although
details could be worked out after the auction of 3G spectrum.

14.   Shri Prashant Bhushan also referred  to  the  Office  Memorandum,  MoF
dated 8.4.2008 prepared by Shri Govind Mohan, Director which,  according  to
the learned counsel reflected the MoF’s original position  of  11.2.2008  on
the issue of subjecting the entire spectrum to  specific  pricing.   Learned
counsel alleged that the note issued was later  withdrawn  and  the  officer
was reprimanded and a  fresh  Office  Memorandum  was  issued  by  the  same
Director.  Learned counsel compared the  original  Office  Memorandum  dated
08.04.2008 and the new Office Memorandum and  submitted  that  the  original
Office  Memorandum  had  required  the  entire  range  of  spectrum  to   be
specifically priced and the revised Office Memorandum which was prepared  on
9.4. 2008 had presented with a date  of  8.4.2008,  specifically  sought  to
exclude start-up spectrum upto 4.4  MHz  from  being  specifically  charged,
ensuring the entry fee of 2001 that was fixed by the then  Telecom  Minister
in 2008, was not revised.  Shri Bhushan submitted that the  officer  had  to
apologize for his  deeds  and  on  16.04.2008,  the  then  Finance  Minister
accepted the apology of the officer.

15.  Learned counsel also referred to letter dated 21.4. 2008  sent  by  the
then Finance Minister to Shri A Raja and submitted that the  spectrum  issue
“non paper” was silent on the issue of entry fee for start-up  spectrum  for
122 licences already issued and the discussion mainly  concentrated  on  the
charging for spectrum beyond 4.4  MHz.   Reference  was  also  made  to  the
Finance Secretary’s updated note dated 29.04.2008 which,  according  to  the
learned counsel, reflected the same position preferred by MoF.  Both Shri  A
Raja and Shri P. Chidambaram met on 29.05.2008 as  well  as  on  12.06.2008.
Learned counsel  also  pointed  out  that  on  4.7.2008,  the  then  Finance
Minister, Shri A Raja along with Finance Secretary met the  Prime  Minister.
By the time, LOIs were already issued  which  were  converted  to  licences,
allocation of start-up spectrum was  started.   Learned  counsel  also  made
reference to the CAG report and the pointed out the reference made  to  Shri
P. Chidambaram.  Reference was also made to the briefing made by  the  Prime
Minister, to the Media on 16.2.2011 and also the address made by  the  Prime
Minister in Rajya Sabha on 24.2.2011.

16.   Learned counsel also pointed out that there was no  justification,  in
any view, in allotting the start-up spectrum 4.4 MHz to every licensee  free
of cost and submitted that the entire  range  of  spectrum  allotted  should
have been priced.  Learned counsel pointed out that one  price  of  spectrum
between 4.4 MHz and 6.2MHz and different price for spectrum  between  beyond
6.2 MHz would be non-transparent and illegal.  Learned counsel  pointed  out
that in fact the MoF had initially objected  the  above  stand  of  DoT  but
subsequently yielded after the meeting Shri P. Chidambaram had with  Shri  A

17.   Learned counsel pointed  out  all  those  facts  which  would  clearly
indicate that Shri  P.  Chidambaram  the  then  Finance  Minister  was  also
equally responsible.  Non-revision of spectrum price    though  specifically
recommended by the GoMs in the year 2003 would indicate,  according  to  the
counsel, that Shri P. Chidambaram colluded up  with  Shri  A  Raja  in  non-
auctioning of the spectrum and went on for allotment  of  first  come  first
served basis at 2001 rates.  Further, it was also pointed out that  Shri  P.
Chidambaram had not revised  his  position  from  giving  away  4.4  MHz  of
spectrum at 2001 prices and giving away 6.2 MHz of spectrum  at  2001,  thus
causing huge loss to the  exchequer.   Further,  he  was  also  instrumental
along with Shri A. Raja for allowing companies  like  Swan  and  Unitech  to
sell off their  shares  without  charging  any  Government’s  share  of  its
premium.  Counsel therefore prayed for a  direction  of  CBI  to  conduct  a
thorough investigation / further investigation into  the  role  of  Shri  P.
Chidambaram in 2G spectrum scam under the close scrutiny of this court.

18.   We heard Dr. Subramnian Swamy, appearing in person and  Shri  Prashant
Bhushan, learned counsel at length.   Arguments  raised  give  rise  to  the
following questions:
1) Whether Shri P. Chidambaram has  conspired  with  Shri  A  Raja  in
fixing the price of the spectrum at 2001  level  thereby  committed
the offence of criminal misconduct.
2)  Whether Shri P. Chidambaram by corrupt and illegal means  obtained
for himself or for  Shri  Raja  any  valuable  thing  or  pecuniary
3) Whether Shri P. Chidambaram has deliberately  allowed  dilution  of
equity by Swam Telecom Pvt. Ltd. and Unitech Wireless (Tamil  Nadu)
Ltd. at the cost of public exchequer.
4) Whether Shri P. Chidambaram has conspired  with  Shri  A.  Raja  in
fixing one price of spectrum  between  4.4  MHz  and  6.2  MHz  and
another price for spectrum beyond 6.2 MHz for  unlawful  gain,  for
benefiting the licensees.
5) Whether the above mentioned acts fall within the scope  of  Section
13(1)(d)(i) to (ii) of the P.C. Act and the materials on record are
sufficient to conclude so.

19.   Shri P. Chidambaram was the Finance Minister of  the  Union  of  India
from 22.5.2004 to 31.11.2008.  Brief reference to facts prior  to  22.5.2004
has already been made by this Court in its judgment  in  Centre  for  Public
Interest Litigation and Others etc. v. Union of India and  Others  (2012)  3
SCC 1 and hence not repeated, but reference to few  facts  is  necessary  to
appreciate and understand the alleged involvement of Shri P. Chidambaram  in
the 2G Scam

20.   The Telecom Regulatory  Authority  of  India  (for  short  ‘TRAI’),  a
statutory authority constituted under the Telecom  Regulatory  Authority  of
India Act, 1997 (for short “1997 Act”), had made certain recommendations  on
27.10.2003 on UAS Licence for the  allocation  of  spectrum  under  Sections
11(1)(a)(i), (ii), (iv) and (vii) of  the  1997  Act.    Para  7.30  of  the
recommendations  emphasized  the  necessity  of  efficient  utilisation   of
spectrum by all service providers and indicated that it would  make  further
recommendations on efficient  utilisation  of  spectrum,  spectrum  pricing,
availability and spectrum allocation procedure and that the DoT might  issue
spectrum related guidelines based on its recommendations.

21.   A GoMs was constituted on 10.9.2003 with  the  approval  of  the  then
Prime Minister to consider various issues as to how  to  ensure  release  of
adequate spectrum for the telecom sector, including the issues  relating  to
merger and acquisition in the telecom sector and to recommend  how  to  move
forward.   GoMs made detailed recommendations on 30.10.2003.  Para  2.1.2(3)
of the recommendations reads as follows:
“(3)    The Department of Telecom and Ministry  of  Finance  would
discuss and  finalise  spectrum  pricing  formula  which  will  include
incentive for efficient use of spectrum as well as disincentive for sub-
optimal usages.”

Para 2.1.2(4) stated that the allotment of additional  spectrum  would  be
transparent, fair and equitable, avoiding monopolistic situation regarding
spectrum allotment usage.  Para 2.4.6(ii) of the recommendations reads  as
“(ii) The recommendations of TRAI with regard to implementation  of
the Unified Access Licensing Regime for basic and cellular services may
be accepted.”

22.   The recommendations of the GoMs were  accepted  by  the  Council  of
Ministers on 31.10.2003, the meeting of which  was  chaired  by  the  then
Prime  Minister.   The  then  Minister  of  Communications  on  24.11.2003
accepted the recommendations that entry fee for new UAS licensees would be
the entry fee of the fourth cellular  operator  and  where  there  was  no
fourth cellular  operator,  it  would  be  the  entry  fee  fixed  by  the
Government for the basic operator.   A decision was also taken by the then
Minister for Communications for the grant of spectrum licenses  on  first-
come-first served basis.  Shri Dayanidhi Maran  became  the  Minister  for
Telecommunications on 26.5.2004.

23.   TRAI  later  made  comprehensive  recommendations  on  13.5.2005  on
various issues relating to spectrum policy i.e. efficient  utilisation  of
spectrum, spectrum allocation, spectrum  pricing,  spectrum  charging  and
allocation for other terrestrial wireless links.   On 23.2.2006, the Prime
Minister approved the constitution of a GoMs consisting of the Minister of
Defence, Home Affairs, Finance,  Parliamentary  Affairs,  Information  and
Broadcasting and Communications, to look into issues relating to  vacation
of spectrum.  Deputy Chairman, Planning Commission was a special  invitee.
The Terms of Reference of GoMs, inter alia, suggested a spectrum  pricing
policy.  Shri Dayanidhi Maran, the then  Minister  of   Telecommunications
wrote a letter dated 28.2.2006 to the Prime Minister indicating  that  the
terms of reference of the GoMs would impinge upon the work of his Ministry
since wider in scope and requested that they  be  modified  in  accordance
with the draft enclosed along with his letter.  The draft forwarded by the
Minister, however, did not  contain  any  formula  for  spectrum  pricing.
However, on 7.12.2006, the Cabinet Secretary conveyed the approval of  the
Prime Minister to the modified terms of reference which  did  not  contain
any formula for spectrum pricing.

24.   DoT, later, vide  its  letter  dated  13.4.2007  requested  TRAI  to
furnish its recommendations under Section 11(1)(a) of the 1997 Act on  the
issues of limiting the number of access providers in each service area and
for the review of the terms and conditions in the access provider  licence
mentioned in the letter.  Shri Dayanidhi Maran had by the time resigned on
14.5.2007 and Shri A. Raja became the Minister for Telecommunications  on

25.    TRAI  made  its  recommendations  on   28.8.2007.    One   of   the
recommendations made by TRAI was that in future  all  spectrums  excluding
the spectrum in 800, 900 and 1800 MHz  bands  in  2G  services  should  be
auctioned.  Para 2.73 of the recommendations is  of  some  importance  and
hence extracted hereunder:
“2.73.   ………….The Authority in the context of 800, 900  and
1800 MHz is conscious of the legacy i.e. prevailing  practice  and  the
overriding consideration of level playing field. Though the dual charge
in present form does not reflect  the  present  value  of  spectrum  it
needed to be continued for treating  already  specified  bands  for  2G
services i.e. 800, 900 and 1800 MHz. It is in this background that  the
Authority is not recommending the standard options pricing of spectrum,
however, it has elsewhere in the recommendation made a strong case  for
adopting auction procedure in the  allocation  of  all  other  spectrum
bands except 800, 900 and 1800 MHz.”

Paras 2.74, 2.75,  2.76,  2.77,  2.78  and  2.79  are  also  relevant  for
determining the various issues which arise for consideration in this  case
and hence given below for ready reference:
“2.74    Some of the existing service providers have  already  been
allocated spectrum beyond 6.2 MHz in GSM and 5 MHz in CDMA as specified
in the license agreements without charging any extra one time  spectrum
charges. The maximum spectrum allocated to a service provider is 10 MHz
so far. However, the spectrum usage  charge  is  being  increased  with
increased allocation of spectrum. The details are available at Table 8.

2.75     The Authority has noted that the allocation beyond 6.2 MHz
for GSM and 5 MHz for  CDMA  at  enhanced  spectrum  usage  charge  has
already been implemented. Different licensees are at  different  levels
of operations in terms  of  the  quantum  of  spectrum.  Imposition  of
additional acquisition fee for the quantum beyond these thresholds  may
not be legally feasible in view of the fact that higher levels of usage
charges have been agreed to and are being collected by the  Government.
Further,  the  Authority  is  conscious  of  the  fact   that   further
penetration of wireless services is to happen in semi-urban  and  rural
areas where affordability of services to the common man is the  key  to
further expansion.

2.76    However, the Authority is of the  view  that  the  approach
needs to be different for allocating and pricing spectrum beyond 10 MHz
in these bands i.e.  800,  900  and  1800  MHz.  In  this  matter,  the
Authority is guided by the need to ensure  sustainable  competition  in
the market keeping in view the fact that there are new  entrants  whose
subscriber acquisition costs will be  far  higher  than  the  incumbent
wireless operators. Further, the  technological  progress  enables  the
operators  to  adopt  a  number  of  technological  solutions   towards
improving the efficiency of the radio spectrum assigned to them. A cost-
benefit analysis of allocating additional spectrum  beyond  10  MHz  to
existing wireless operators and the cost of deploying additional  CAPEX
towards technical improvements in the networks would show that there is
either a need to place a cap on the maximum allocable  spectrum  at  10
MHz or to impose framework of pricing  through  additional  acquisition
fee beyond 10 MHz.

The  Authority  feels  it  appropriate  to  go  in  for  additional
acquisition fee of spectrum instead of placing a cap on the  amount  of
spectrum that can be allocated to any wireless operator. In  any  case,
the Authority is recommending a far stricter norm  of  subscriber  base
for allocation of additional spectrum beyond the initial  allotment  of
spectrum. The additional acquisition fee beyond 10 MHz could be decided
either administratively or through an auction method from  amongst  the
eligible wireless service providers. In this matter, the Authority  has
taken note of submissions of a number of stakeholders  who  have  cited
evidences of the fulfillment of the quality of  service  benchmarks  of
the existing wireless operators at 10 MHz and even below in almost  all
the licensed service areas. Such an approach would also  be  consistent
with the Recommendation of the Authority in keeping the door  open  for
new entrant without putting a limit on the  number  of  access  service

2.77    The Authority in  its  recommendation  on  “Allocation  and
pricing of spectrum for 3G and broadband wireless access services”  had
recommended certain reserve price for 5 MHz of  spectrum  in  different
service areas. The recommended price are as below:

|Service areas                 |Price (Rs. in     |
|                              |million) for 2 MHz|
|                              |x 5 MHz           |
|Mumbai, Delhi and Category A  |800               |
|Chennai, Kolkata and Category |400               |
|B                             |                  |
|Category C                    |150               |

The Authority  recommends  that  any  licensee  who  seeks  to  get
additional spectrum beyond 10 MHz in the existing 2G bands i.e. 800,900
and 1800 MHz after reaching the specified subscriber numbers shall have
to pay a onetime spectrum charge at the above mentioned rate on prorata
basis for allotment of each MHz or part thereof of spectrum  beyond  10
MHz. For one MHz allotment in Mumbai,  Delhi  and  Category  A  service
areas, the service provider will have to pay Rs.  160  million  as  one
time spectrum acquisition charge.

2.78          As far as a new entrant is  concerned,  the  question
arises whether there is any need for change in the pricing  methodology
for allocation of spectrum in the 800, 900 and 1800 MHz  bands. Keeping
in view the objective of growth, affordability, penetration of wireless
services in semi-urban and rural areas, the Authority is not in  favour
of changing the spectrum fee regime for a new entrant. Opportunity  for
equal competition has always been one of the prime  principles  of  the
Authority in suggesting a regulatory framework in telecom services. Any
differential treatment to a new entrant  vis-a-vis  incumbents  in  the
wireless  sector  will  go  against  the  principle  of  level  playing
field. This is specific and restricted to 2G bands only i.e.  800,  900
and 1800 MHz. This approach assumes more significance  particularly  in
the context where subscriber acquisition cost  for  a  new  entrant  is
likely to be much higher than for the incumbent wireless operators.

2.79        In the case of spectrum in bands other than  800,  900
and 1800 MHz i.e. bands that are yet to be  allocated,  the  Authority
examined various possible approaches for pricing and has come  to  the
conclusion that it would be appropriate in future for a  market  based
price discovery systems. In response  to  the  consultation  paper,  a
number  of  stakeholders  have  also  strongly  recommended  that  the
allocation of  spectrum  should  be  immediately  de-linked  from  the
license and the future allocation should  be  based  on  auction.  The
Authority in its recommendation on “Allocation and pricing of spectrum
for 3G and  broadband  wireless  access  services”  has  also  favored
auction  methodology  for  allocation  of  spectrum  for  3G  and  BWA
services. It is therefore recommended  that  in  future  all  spectrum
excluding the spectrum in 800, 900 and 1800 bands should be  auctioned
so as to ensure efficient utilization of this scarce resource. In  the
2G bands (800 MHz/900 MHz/1800 MHz), the  allocation  through  auction
may not be possible as the service providers were  allocated  spectrum
at different times of their license and the amount  of  spectrum  with
them varies from 2X4.4 MHz to 2X10 MHz for GSM  technology  and  2X2.5
MHz to 2X5 MHz in CDMA technology. Therefore, to decide  the  cut  off
after which the spectrum is auctioned  will  be  difficult  and  might
raise the issue of level playing field.”

26.   The Internal Committee of DoT considered the  above  recommendations
made by TRAI and its report was placed before the  Telecom  Commission  on
10.10.2007.  The Finance Secretary and other three  non-permanent  members
were not informed of that meeting, but attended only by the  officials  of
DoT and the report of the Internal Committee was approved by  the  Telecom
Commission.    Shri  A.  Raja  accepted  the  recommendations  of  Telecom
Commission.  Consequently, the recommendations  of  TRAI  dated  28.8.2007
stood approved by the Internal Committee of DoT,  Telecom  Commission  and
DoT.   DoT, it may be noted, did not get in touch  with  the  Ministry  of
Finance to discuss and finalise the spectrum pricing formula which had  to
include incentive for efficient use of spectrum as  well  as  disincentive
for suboptimal usage in terms of the Cabinet decision of 2003.

27.   Above facts would indicate that neither Shri P. Chidambaram nor  the
officials of MoF had any role in the various decisions taken  by  TRAI  on
28.8.2007, decision taken  by  the  Internal  Committee  of  DoT  and  the
decision of the Telecom Commission taken on 10.10.2007.

28.   DoT then  went  ahead  to  process  applications  received  for  UAS
licences.  Between 24.9.2007 and 1.10.2007,  over  300  applications  were
received.   The Member (Technology),  Telecom  Commission  and  ex-officio
Secretary to the Government of India sent a letter dated 26.10.2007 to the
Secretary, Department of  Legal  Affairs,  Ministry  of  Law  and  Justice
seeking the opinion of the Attorney General of India/Solicitor General  of
India  for  dealing  with  those  applications  for  licences.    The  Law
Secretary placed the papers before the Minister  of  Law  and  Justice  on
1.11.2007 who had recommended that the entire issue be  considered  by  an
Empowered GoMs and, in that process, opinion of the  Attorney  General  of
India be obtained.  When the note of the Law Minister  was  placed  before
Shri A. Raja, he recorded a note  on  2.11.2007  calling  for  discussion.
Shri A. Raja, however, on the same day, ordered the issuance  of  LoIs  to
new applicants as per the then existing policy and authorised Shri  R.  K.
Gupta, ADG (AS-1) for signing the LoIs  on  behalf  of  the  President  of
India.  Shri A. Raja had also ordered for  the  issuance  of  LoI  to  the
applicants whose applications had been received up to 25.9.2007  and  also
sent a letter bearing DO No. 20/100/2007-AS-I dated 2.11.2007 to the Prime
Minister and took strong objection to  the  suggestion  made  by  the  Law
Minister by describing his opinion as totally out of context.

29.   The Prime Minister, however, vide his  letter  dated  2.11.2007  had
requested Shri A. Raja to give urgent consideration to the various  issues
raised with a view to ensuring fairness and transparency and requested him
to inform the Prime Minister of the position  before  taking  any  further
action. On the same day, Shri A.Raja sent a reply to  the  Prime  Minister
brushing aside the suggestions made by the  Prime  Minister  pointing  out
that it would be  unfair,  discriminatory,  arbitrary  and  capricious  to
auction the spectrum to new applicants as it would not give them  a  level
playing field.   The relevant portion of Para 3 of Shri A.  Raja’s  letter
is extracted below:
“3. Processing of a large number of  applications  received  for
fresh licenses against the backdrop of inadequate spectrum to cater to
overall demand

The issue of auction of spectrum was considered by the TRAI  and
the Telecom Commission and was not recommended as the existing licence
holders who are already having spectrum upto 10 MHz  per  Circle  have
got it without any spectrum charge. It will be unfair, discriminatory,
arbitrary and capricious to auction the spectrum to new applicants  as
it will not give them level playing field.

I would like to bring it to your notice that DoT  has  earmarked
totally 800 MHz in 900 MHz and 1800 MHz bands for 2G mobile  services.
Out of this, so for a maximum of about 35 to 40  MHz  per  Circle  has
been allotted to different operators  and  being  used  by  them.  The
remaining 60 to 65 MHz, including spectrum likely  to  be  vacated  by
Defence Services, is still available for 2G services.

Therefore, there is enough scope for allotment of  spectrum  to
few new operators even after  meeting  the  requirements  of  existing
operators and licensees. An  increase  in  number  of  operators  will
certainly bring real competition which will lead  to  better  services
and increased teledensity at lower tariff. Waiting  for  spectrum  for
long after getting licence is not unknown to the Industry and even  at
present Aircel, Vodafone, Idea and Dishnet  are  waiting  for  initial
spectrum in some Circles since December 2006.”

30.   Shri P. Chidambaram, it is seen, had no  role  in  the  exchange  of
those communications or the expression of opinions of the decisions  taken
between Shri A. Raja and the Prime Minister’s Office, a situation  created
by Shri A. Raja and the officials of DoT.  Neither Shri P. Chidambaram nor
the officials of the MoF did figure in those communications and hence  the
allegation of involvement of Shri P. Chidambaram in the 2G Scam has to  be
examined in that background.

31.   The Secretary, DoT made a presentation of  the  spectrum  policy  on
20.11.2007 to the Cabinet Secretary. Finance Secretary, Dr. Subbarao,  who
had witnessed the presentation sent  a  letter  dated  22.11.2007  to  the
Secretary, DoT to know whether proper procedure  had  been  followed  with
regard to financial diligence.  The operative portion of the letter  reads
as follows:
“2.   That purpose of  this  letter  is  to  confirm  if  proper
procedure has been followed with regard to  financial  diligence.   In
particular, it is not clear how the rate of Rs.1600 crore,  determined
as far back as in 2001, has been applied for a license given  in  2007
without any indexation, let alone  current  valuation.   Moreover,  in
view of the financial implications, the  Ministry  of  Finance  should
have consulted in the matter before you had finalized the decision.

3.    I request you to kindly review the matter and revert to us
as early as possible with responses to the above  issues.   Meanwhile,
all further action to implement  the  above  licenses  may  please  be
stayed.  Will you also  kindly  send  us  copies  of  the  letters  of
permission given and the date?”

32.   DoT replied to the Finance Secretary  vide  letter  dated  29.11.2007.
the operative portion of the same reads as follows:
“As per Cabinet decision dated 31st October, 2003, accepting the
recommendations of Group of Ministers (GoM) on Telecom matters, headed
by the then Hon’ble Finance Minister, it was inter alia  decided  that
“The recommendations of TRAI with  regard  to  implementation  of  the
Unified Access Licensing Regime for basic and cellular services may be
accepted.   DoT  may  be  authorized  to  finalize  the   details   of
implementation with the approval of the Minister of Communications and
IT in this regard including the calculation of the entry fee depending
on the date of payment based on the principle given  by  TRAI  in  its

33.   DoT also pointed out in that letter that  the  entry  fee  was  also
finalised for UAS regime in 2003 based on the decision of the Cabinet  and
it was decided to keep the entry fee for the UAS license the same  as  the
entry fee of the fourth cellular operator, which was based  on  a  bidding
process in  2001.   Further,  it  was  also  pointed  out  that  the  dual
technology licenses were licenses based on TRAI recommendations of  August
2007 and  that  TRAI  in  its  recommendations  dated  28.8.2007  had  not
recommended any changes in entry fee/ annual  license  fee  and  hence  no
changes were considered in the existing policy.

34.   Shri A. Raja then sent  a  letter  dated  26.12.2007  to  the  Prime
Minister, Paras 1 and 2 of that are extracted below:
“1. Issue of Letter of Intent (LOI): DOT  follows  a  policy  of
First-cum-First Served for granting LOI  to  the  applicants  for  UAS
licence, which means, an application received first will be  processed
first and if found eligible will be granted LOI.

2. Issue of Licence: The First-cum-First Served policy  is  also
applicable for grant of  licence  on  compliance  of  LOI  conditions.
Therefore, any applicant who complies with the conditions of LOI first
will be granted UAS licence first. This issue never arose in the  past
as at one point of time only one application was processed and LOI was
granted and enough time was given to him for compliance of  conditions
of LOI. However, since the Government has adopted a policy of “No Cap”
on number of UAS Licence, a large number of LOI’s are proposed  to  be
issued  simultaneously.  In  these  circumstances,  an  applicant  who
fulfils the conditions of LOI first will  be  granted  licence  first,
although several applicants will be  issued  LOI  simultaneously.  The
same has been concurred by the Solicitor General of India  during  the

DDG (AS), DoT, after a few days, prepared a note incorporating therein  the
changed first-come-first-served policy to which reference was made  in  the
letter addressed to the Prime Minister.

35.   We have no information as to whether the  PMO  had  replied  to  the
letter dated 26.12.2007 sent by A. Raja.  After brushing aside  the  views
expressed by Dr.  D.  Subbarao  in  his  letter  dated  22.11.2007,  views
expressed by the Minister of Law and Justice on 1.11.2007, as well as  the
views expressed by the Prime  Minister  on  2.11.2007,  A.  Raja  and  the
officials of DoT went ahead in implementing the policy of first-come-first-
served basis for the grant of UAS  licenses  for  which  it  is  seen,  no
further objection had been raised by the Prime Minister’s Office.

36.   Telecom Commission meeting was then scheduled to be held on 9.1.2008
to consider two important issues i.e. performance of  telecom  sector  and
pricing of spectrum but the meeting was postponed to 15.1.2008.   But,  on
10.1.2008,  a press release  was  issued  by  DoT  stating  that  TRAI  on
28.8.2007 had not recommended any cap on  the  number  of  access  service
providers in any service area.   Further, it  was  also  stated  that  the
Government had accepted the recommendations  of  TRAI  and  that  DoT  had
decided to issue LoIs to all  the  eligible  applicants  on  the  date  of
application who applied up to 25.9.2007.  Further, it was also  stated  in
the press release that DoT had been implementing a policy  of  first-come-
first-served  for  grant  of  UAS  licences  under  which   initially   an
application  which  was  received  first  would  be  processed  first  and
thereafter if found eligible would  be  granted  LoI  and  then  whosoever
complied with the conditions of LoI first would be granted UAS licence.

37.   Another press release was issued on 10.1.2008 by DoT  requesting  the
applicants to submit  compliance  with  the  terms  of  LoIs.   Soon  after
obtaining the LoI, three  of  the  successful  applicants  offloaded  their
stakes for thousands of crores in the name of infusing equity, the  details
are as under:
“(i) Swan Telecom Capital Pvt. Ltd. (now known  as  Etisalat  DB
Telecom Pvt. Ltd.) which was incorporated on  13.7.2006  and  got  UAS
Licence by paying licence fee of Rs. 1537  crores  offloaded  its  45%
(approximate) equity in favour of Etisalat of UAE  for  over  Rs.3,544

(ii) Unitech which  had  obtained  licence  for  Rs.1651  crores
offloaded its stake 60% equity in favour of Telenor Asia Pte. Ltd.,  a
part of Telenor Group (Norway) in the name of issue  of  fresh  equity
shares for Rs.6120 crores between March, 2009 and February, 2010.

(iii) Tata Tele Services transferred 27.31% of equity worth  Rs.
12,924 crores in favour of NTT DOCOMO.

(iv) Tata Tele Services (Maharashtra) transferred 20.25%  equity
of the value of Rs. 949 crores in favour of NTT DOCOMO.”

38.   Materials made available would not indicate any role  played  by  Shri
P. Chidambaram on the steps taken by Shri A.  Raja  and  DoT,  reference  of
which have  elaborately  been  made  in  the  previous  paragraphs  of  this
judgment.   The views expressed by Dr.  D.  Subbarao  in  his  letter  dated
22.11.2007 were already brushed aside by A. Raja and  DoT  officials  and  a
communication dated 29.11.2007 was already sent to Dr. Subbarao followed  by
a letter to the Prime Minister on 26.12.2007.

39.   MoF then sent a letter on 9.1.2008, following the  letter  of  Dr.  D.
Subbarao dated 22.11.2007  as  well  as  the  reply  received  from  DoT  on
29.11.2007,  which  was  prepared  and  sent  as  instructed  by   Shri   P.
Chidambaram for presentation in the meeting of the Telecom Commission  which
was held on 10.1.2008.   Note referred to the recommendations  of  GoMs  for
discussing and finalizing the spectrum pricing formula by DoT  and  Ministry
of Finance.    Paras  6.3  and  8.4  of  the  note  which  was  prepared  as
instructed by Shri P. Chidambaram  are  relevant  and  hence  are  extracted
“6.3 Given the fact that there are reportedly  over  575  applications
pending with DoT (including 45 new applicants) there is  a  case
for  reviewing  the  entry  fee  fixed  in  2001.   This  is  an
administratively fixed fee.   Therefore  any  change  should  be
governed  by  transparent  and  objective  criteria   applicable
uniformly to all new entrants.

8.4   The most transparent method of allocation of spectrum  would  be
by auction.  However, there  are  two  caveats  to  the  auction

a) The ways in which the existing licensees in GSM and  CDMA  would
be eligible to participate in  the  auction  vis-a-vis  the  new
entrants; and

(b)   The advantages and disadvantages of the method itself.   A
detailed table is placed at Annexure V.”

40.   Shri P. Chidambaram, following the views expressed by the Ministry  of
Finance on 9.1.2008, on his instructions, also sent  a  note  to  the  Prime
Minister on 15.1.2008 on spectrum charges. Noticeably, this letter was  sent
at a time when Finance Secretary’s view was rejected by  Shri  A.  Raja  and
the officers of the DoT and that Shri A. Raja’s views  were  not  overturned
even by the Prime Minister’s Office.  Therefore,  the  allegation  that  the
attempt of Shri P. Chidambaram was to hide the illegalities in the award  of
licences  is  unfounded.   On  the  other  hand,  Shri  P.  Chidambaram  was
advocating the fact  that  the  most  important  method  of  allocating  the
spectrum would  be  through  auction.   Shri  P.  Chidambaram  also  made  a
reference in the note of the recommendations made in the year 2003  by  TRAI
and GoMs and stated that the recommendations note  did  not  deal  with  the
need, if any, to revise entry fee or the rate of revenue  share,  but  dealt
with the spectrum charges for 2G spectrum.   Para 10 of  the  note  sent  by
Shri P. Chidambaram reads as follows:
“10.  Spectrum is a scarce resource.  The price for spectrum should be
based on its  scarcity  value  and  efficiency  of  usage.   The  most
transparent method of allocating spectrum would  be  through  auction.
The method  of  auction  will  face  the  least  legal  challenge,  if
Government is able to provide sufficient information  on  availability
of spectrum, that would minimise the risks  and,  consequently,  fetch
better prices at the auction. The design of the auction should include
a reserve price.”

Further, para 13 of the note reads as follows:

“13.  This leaves the question about licensees who hold spectrum  over
and above the start up spectrum.  In  such  cases,  the  past  may  be
treated as a  closed  chapter  and  payments  made  in  the  past  for
additional spectrum (over and above the  start  up  spectrum)  may  be
treated as  the  charges  for  spectrum  for  that  period.   However,
prospectively, licensee should pay for the  additional  spectrum  that
they hold,  over  and  above  the  start-up  spectrum,  at  the  price
discovered in the auction.   This will place old  licensees,  existing
licensee seeking additional spectrum and new licensees on par  so  far
as spectrum charges are concerned.”

Shri P. Chidambaram had indicated his mind in the note  sent  to  the  Prime

41.   Prime Minister’s Office, it is seen, had not taken any  contrary  view
to that of Shri P. Chidambaram and, in any  view,  no  materials  were  also
made available when this  Court  was  dealing  with  the  case  relating  to
cancellation of licences, wherein Union  of  India  was  a  party.  In  such
circumstances, it is difficult to  conclude,  on  the  materials  available,
that P. Chidambaram had conspired with A. Raja in subverting the process  of
issuance of LoI, UAS Licences and allocation of spectrum.

42.   Shri P. Chidambaram met Shri A. Raja on 30.1.2008 for  discussions  on
spectrum charges and one has to  appreciate  the  discussions  held  in  the
light of the facts discussed above.  Meeting was held at a time, it  may  be
noted, when Shri A. Raja and DoT officials had  already  brushed  aside  the
views expressed by Dr. D. Subbarao  in  his  letter  dated  22.11.2007,  the
views expressed by the Department of Economic  Affairs  in  the  note  dated
3.1.2008 and in the absence of any response  from  PMO  on  the  note  dated
15.1.2008  sent  by  Shri  P.  Chidambaram.  Meeting  dated  30.1.2008   and
subsequent meetings Shri P. Chidambaram had with Shri A. Raja on  29.5.2008,
12.6.2008 and with the Prime Minister on 4.7.2008 have to be appreciated  in
the light of the facts already discussed.

43.   Shri  P.  Chidambaram,  it  is  seen   under   the   above-mentioned
circumstances, had taken up the stand in the meeting held on 30.1.2008  that
the Finance Minister  was   not seeking to revisit the current  regimes  for
entry fee or for  revenue  share  and  for  the  regime  for  allocation  of
spectrum, however, it was  urged  that  the  following  aspects  had  to  be
“(i) The rules governing the allocation of  additional  spectrum  and
the charges thereof, including the  charges  to  be  levied  for
existing operators who have more than their entitled spectrum.

(ii)  Rules governing trade  in  spectrum.   In  particular,  how  can
Government get a share of the premium in the trade?

(iii) The estimate of the additional spectrum that  may  be  available
for allocation after taking into account: (a) the entitlement of
entry spectrum of fresh licenses;  (b) the spectrum  that  needs
to be withdrawn from existing operators  who  do  not  have  the
subscriber base corresponding to the spectrum allotted to  them;
and (c) the spectrum that may be released by Defence.

(iv)  We  also  need  to  check  the  current  rules  and  regulations
governing withdrawal of  spectrum  in  the  event  of:  (a)  not
rolling over; (b)  merger  and  acquisition;  (c)  trading  away

Salient points discussed in the meeting held on  30.1.2008  are  given

“2.   Spectrum Usage Charges for Initial allotment  of  spectrum
of 4.4 MHz.

2.1   Secretary (Finance)  was  of  the  opinion  that  auctioning  is
legally possible  for  initial  allotment  of  spectrum  of  4.4  MHz.
Secretary (DoT) explained that auction of spectrum of 4.4  MHz  though
may be legally possible but it would not be practical  proposition  to
auction or fixing a price for 4.4 MHz spectrum due to following:

2.1.1 As per clause 43.5 (i) of UAS License, which provides that:
“initially a cumulative maximum of up to 4.4 MHz  +4.4  MHz  shall  be
allocated in the case of GSM based systems….”

It implies that when a service provider  signs  UAS  License  he
understands that and contractually he  is  eligible  for  initially  a
cumulative maximum of 4.4 MHz subject to availability.

2.1.2        120  LoIs  have  been  issued  and  the   Department   is
contractually obliged to give them start up spectrum of 4.4. MHz under

2.1.3       As auctioning does not assure the operators to get initial
spectrum of 4.4 MHz as per UAS License provision, auctioning  and  the
clause 43.5 (i) of the UASL are contradictory.

2.1.4       If the new entrants get spectrum by auctioning,  they  may
be paying more as compared to the existing players.  Hence (a) auction
will not ensure level playing; (b)  also,  as  the  cost  to  the  new
entrants would be more, they may not  be  able  to  offer  competitive

2.1.5       Also 4.4. MHz is a  part  of  the  license  agreement;  no
spectrum acquisition charge is proposed to be levied.  Even if  it  is
priced, it will also disturb the level playing field and  the  present
LOI holders, who have already paid entry fee, are  likely  to  go  for
litigation.  Initial entry fee for license may  be  construed  as  the
defector price of initial spectrum i.e.  Rs.1650  crore  approximately
for pan-India license.”

Para 3 of the Approach Letter deals with  the  spectrum  usage  charges  for
additional spectrum of 1.8 MHz beyond 4.4. MHz.   The  relevant  portion  of
para 3 is extracted below:

“3.   Spectrum Usage Charges for additional spectrum of 1.8  MHz
beyond 4.4 MHz

The issue of levying price for additional spectrum  of  1.8  MHz
beyond 4.4 MHz including auctioning  was  also  discussed.   Secretary
(Finance) desired to know whether  this  additional  spectrum  can  be
priced / auctioned and if not then why.

3.1   The issue of levying price for additional spectrum of  1.8
MHz would not be practical due to following:

3.1.1       As per clause 43.5(ii) of UAS License which provided
that “Additional spectrum beyond the 4.4 MHz may  also  be  considered
for allocation after ensuring optimal and efficient utilization of the
already allocated spectrum taking into account of all types of traffic
and guidelines / prescribed from time to time.  However 6.2 + 6.2  MHz
in respect of TDMA (GSM) based system shall be allocated  to  any  new
Unified Access Services Licensee”.

3.1.2        It  implies  that  an  operator  is  eligible   for
consideration of additional 1.8 MHz spectrum (making total of 6.2 MHz)
after ensuring  optimal  and  efficient  utilization  of  the  already
allocated spectrum taking  into  account  all  types  of  traffic  and
guidelines / criteria prescribed from time to time.

3.1.3       The matter was internally discussed  with  Solicitor
General, who opined that he  is  defending  the  Government  cases  in
various courts, where one of the  main  contentions  is  that  auction
would lead to reduction of competition and will not help  in  reducing
the tariff and hence it would be against increase of  teledensity  and
affordability.  These being public  interest  concerns,  it  would  be
difficult to change the track at this juncture.

3.1.4       It is, however, proposed to price  the  spectrum  of
1.8 MHz beyond 4.4 MHz upto 6.2 MHz.  The TRAI in its report of August
2007 has recommended that any licensee who  seeks  to  get  additional
spectrum beyond 10 MHz in the existing 2G bands,  i.e.  800,  900  and
1800 MHz after reaching the specified subscriber numbers shall have to
pay a onetime spectrum charge at the below mentioned rates on pro-rata
basis for allotment of each MHz or part thereof of spectrum beyond  10

Para 4 of the Approach Paper deals with the price  of  spectrum  beyond  6.2
MHz.   Relevant portion of para 4 reads as under:
“4.  Price of spectrum beyond 6.2 MHz

The UASL does not explicitly provide any provision  or  spectrum
beyond 6.2 MHz and upto 10  MHz,  however  the  UASL  clause  43.5(iv)
provides that “the Licensor has right to modify and  /  or  amend  the
procedure of allocation of spectrum including quantum of  spectrum  at
any point of time without assigning any reason”.  Hence  the  spectrum
beyond 6.2 MHz should be properly priced keeping in  mind  the  market
value of spectrum.

4.1   Auction Path:

Since we are not auctioning startup spectrum of 4.4 MHz and only
pricing  additional  allocation  of  1.8  MHz  as  explained  earlier,
therefore, we can take 6.2 MHz  as  threshold  for  consideration  for
auction as this also  falls  beyond  the  provisions  of  the  license
agreement.  The following points are brought out:

• 2G GSM Spectrum bands are 890-915 MHz paired  with  935-960
MHz, 1710-1755 MHz paired with 1805-1890 MHz i.e., 2.5  MHz
is available in 900 & 75 MHz band is available in 1900  MHz
band making a total of 100 MHz.  Out of this more  than  37
MHz  stand  allocated  to  the  GSM  service  providers  in
different service areas.  Remaining 63 MHz,  major  portion
of the spectrum in 1800 MHz band is being used by Defence.

• 120 LOIs have been issued and startup  spectrum  is  to  be
allotted to them  as  well  as  for  the  growth;  existing
operators should be given 6.2 MHz, subject to availability.

• After this allotment, hardly any identifiable free spectrum
will be available, which is a pre-requisite for auction.

• At any given time one or two operators will be eligible for
beyond 6.2 MHz based on the  subscribers  linked  criteria.
Hence if an auction is to be  held,  competition  would  be

• Hence auctioning may not be successful in providing optimum
value due to (a) limited availability  of  spectrum  &  (b)
limited competition.

TRAI has also not recommended for auctioning of 2G  spectrum  in
view of the following:

• Service providers  were  allocated  spectrum  at  different
times of their licenses and the  amount  of  spectrum  with
them.   Therefore,  to  decide  the  cut  off  after  which
spectrum is auctioned will be  difficult  and  might  raise
issue of level playing field.

• Penetration of mobile service is to happen  in  semi  urban
and rural areas, where affordability of the services to the
common man is the key for further expansion:

In view of all these factors, auction 2G  spectrum  at  this  juncture
does not appears to be viable solution.”

4.2   Fix Price for spectrum beyond 6.2 MHz

The following two options were considered:
Option 1
For this purpose it may be  desirable  to  index,  the  entry  fee  of
Rs.1650 crores in the year 2003-04 (for initial 4.4 MHz)  i.e.  Rs.375
crore per MHz, for inflation, potential for  growth  of   tele-density
and revenue etc. appropriately.  If we take an inflation of  about  5%
per year for  4  years  upto  2007-08,  which  would  mean  about  20%
compounded inflation till 2007.  Therefore, additional charges can  be
levied at 20% of Rs.375 crores for one MHz  of  spectrum  i.e.  Rs.425
This option is not favoured in view of the low value of spectrum.
Option 2
The service area wise AGR figures per MHz for the years  2003-04,  and
anticipated figure were calculated and is given at Annexure 1.  It may
be seen that there is an increase of about 3-5 times, if  the  figures
of 2007-08 with 2003-04 is compared.
It is for consideration to charge ‘x’ times  of  base  price  of
Rs.375 crore/MHz, where ‘x’ is to be decided.  This will be charged to
existing as well as new entrants.  Those who decide not to pay may  be
asked to surrender the excess spectrum beyond 6.2 MHz.”

Para 6 deals with the Merger and Acquisition (M&A) is also relevant and  the
same reads as under:
6.    Mergers and Acquisition (M&A)

In the context of intra-circle merger and acquisition,  TRAI  in
their report of August 2007 have considered  various  factors,  namely
Definition  of  Market  Assessment  of  Market  Power   criteria   and
Methodology,  Determination  of  minimum  number  of  access   service
providers in a post merger scenario and spectrum  cap  of  the  merged
entity.  The TRAI  Recommendations  had  been  considered  by  Telecom
Commission.  Some of the issues have been referred back  to  TRAI  for
consultation.  In view of very large number  of  new  players,  it  is
expected that consolidation is likely to take place in the industry in

6.1   In view of this, we need to have clear  guidelines  relating  to
M&A.  We also need to consider fees on account of transfer of spectrum
to the merged entity.  In the event of M&A the transfer charge to  the
Government has not been considered by TRAI in their recommendation  of
August 2007.  This is a complex issue requiring detailed  deliberation
and consultation.  Therefore, the issue of quantum of fees  which  the
Government would get on account of transfer  of  spectrum  during  M&A
needs to be referred to TRAI.  Based on the Recommendations of TRAI on
the above issue, DoT will take appropriate decision with  a  specified
time period  and  issue  clear  and  transparent  guidelines  for  M&A
including transfer charges for spectrum.”

44.   The Secretary, DoT then vide  letter  dated  8.2.2008,  forwarded  the
Approach Paper with regard to the meeting held.  Minister  of  Finance  vide
note dated 11.2.2008, acknowledged the note dated  8.2.2008  which  was  the
summary of the four rounds  of  discussion  they  had  and   a  Sequal  note
setting out the then existing position regarding telecom  fees  and  charges
and pricing of spectrum and the issues for decision were high-lighted.

Paras 16 to 18 of the Sequal note read as under:
“Auction of Spectrum

16.   Auctioning spectrum suggests itself is as a clear first  choice.
It has several merits.
i) Best method of discovering price
ii) Is more transparent and provides a level playing field
iii) Promotes competition

17.   However, it will be problematic for  us  to  adopt  the  auction
route at this late stage mainly for ‘historical  legacy’  reasons.   A
number of operators have already been given spectrum free  of  charge.
The spectrum available for auction, therefore, will be  quite  limited
(DoT has not been able to indicate the  precise  quantum  of  spectrum
that will be available  for  allotment).   Efficient  price  discovery
becomes possible only if the supply is large and there are a number of
potential buyers: a thin market has clear limitation in  signalling  a
price.  It may turn out that the ‘discovered price’ is either too  low
or too high.  In its August 2007 report (para 2.79), TRAI too  advised
against auctioning of spectrum on the  ground  that  it  will  trigger
issues of level playing field.

18.   Auction will be  viable  if  we  can  increase  the  quantum  of
spectrum available.  This can be  done  by  withdrawing  the  spectrum
already allotted to existing  operators  and  putting  all  of  it  on
auction.  Both existing and new license  will  then  bid  on  a  clean
slate.  This is evidently an  extreme  measure,  and  has  significant
practical and legal implications.”

On the subject of market based price determination, the MoF in  paras  19  &
20 stated as follows:
“Market Based Price Determination
19.    If  auction  is  ruled  out,  what  are  the  alternatives  for
determining an appropriate market based price for spectrum?

20.   The value of spectrum embedded  in  the  entry  fee  provides  a
possible reference frame for pricing spectrum.  Currently,  4.4MHz  of
spectrum is allotted at the entry level on payment of an entry fee  of
Rs. 1650 crores  for  pan-India  operation.   This  translates  to  an
embedded price of Rs.375 crores/MHz.  This  price  was  discovered  in
2001 and fixed in 2003/04.  Using this reference  frame  price,  there
are two options for determining the current price of spectrum.

On the question of pricing of spectrum beyond 4.4 MHz, the  views  expressed
by the Ministry of Finance in the above letter read as follows:
28.   DoT is of the view that it is not advisable / possible to  price
the start-up allocation of  a  4.4  MHz  on  the  following  argument.
Allocation of 4.4 MHz spectrum is part of the licence Agreement.  This
start-up spectrum was given  free  of  cost  in  the  past.   The  new
entrants who were given licenses in January 2008 paid the entry fee on
the understanding that they would get this start-up spectrum would  be
a breach of this  understanding.   It  will  also  disturb  the  level
playing field between the existing operators and  the  new  licencees.
This may also trigger litigation.

29.   DoT is agreeable to pricing of spectrum beyond 4.4MHz.  However,
they have suggested a differentiated  pricing  regime.   According  to
them, there should one price of spectrum between 4.4 MHz and  6.2  MHz
(1.8 MHz), and another price for spectrum beyond 6.2 MHz.   In  August
2007, TRAI recommended a price for licensees who seek spectrum  beyond
10 MHz.  DoT wants to apply this price for spectrum  between  4.4  MHz
and 6.2 MHz for spectrum beyond 6.2 MHz, DoT is agreeable to using the
price determined as at paragraph 22 above.

30.   Ministry of Finance differs from  the  above  position  of  DoT.
There is no contractual obligation to allot a start-up spectrum of 4.4
MHz to every licensee free of cost.  The entire range of the  spectrum
allotted should be priced.  The issue of level playing  field  can  be
addressed by charging this price even on existing operators.

31.   Moreover, the differentiated pricing suggested by DoT, viz.  One
price for spectrum between 4.4 and 6.2 MHz and a different  price  for
spectrum beyond 6.2 MHz will be clumsy,  non-transparent  and  legally
questionable.  It will be neat and transparent to fix a single circle-
specific price for spectrum across the entire bandwidth.

On Merger  and  Acquisition  (M&A),  the  views  expressed  by  the  Finance
Minister read as follows:

“32.  It is likely that the market will see considerable M&A  activity
over the next few years.   It  should  be  Government’s  endeavour  to
ensure that this consolidation happens in  an  efficient  and  healthy
manner.  One question that arises is whether the Government should get
a premium out of an M&A transaction.   Since  spectrum  has  not  been
auctioned but priced juristically, it is likely that the rent, if any,
involved  in  the  price  of  spectrum  will  form  part  of  the  M&A
transaction which would typically involve a host of other  assets  and
liabilities, is a complex task.  TRAI  is  best  positioned  to  think
through and advise on this issue.  The ToRs  to  TRAI  in  the  regard
should be: (i)  What  should  be  guidelines  for  M&As  between  UASL
operators? (ii) Should Government get a premium out of  M&A  activity?
And (iii) if yes, how can this premium be determined?

45.   Ministry of Finance (Department of Economic Affairs) also  prepared  a
note on 7.4.2008 after discussing the matter with the Minister  of  Finance,
which shows that the Minister of  Finance  had  also  agreed  that  spectrum
usage charges should be increased reflecting the scarcity value of  spectrum
as indicated in Ministry’s note dated 11.2.2008.  On  pricing  of  spectrum,
the Ministry of Finance was of the view that they might insist in  principle
on pricing spectrum (beyond 4.4. MHz) although details could be  worked  out
after the auction of 3G’s spectrum.

46.   Mr. Govind  Mohan,  Director,  Ministry  of  Finance  had  prepared  a
detailed office memorandum on 8.4.2008, wherein after referring to  the  DoT
letter dated 29.1.2008, the following amendments were suggested:
“4.0  Union Cabinet, in its meeting on October  31,  2003  had,  inter
alia, decided that spectrum pricing would need to be decided  mutually
between DoT and MoF so as to provide incentive for  efficient  use  of
spectrum as well  as  disincentive  for  sub-optimal  usage.   In  the
context of this decision, the following amendments are being suggested
in Pricing of Spectrum,  its  allotment  among  Access  providers  and
Spectrum Usage Charges:

1.    Any Allotments of Spectrum to access subscriber  licensees
under UASL regime may henceforth be specifically priced  and
charged for.  The charge may be determined, circle wise,  by
adopting the Entry Fee, fixed for that  circle  in  2003-04,
and  thereafter  inflating  it  by  the  multiplier,   which
represents the growth in aggregate AGR per MHz between 2003-
04 and 2007-08; hence, for a Pan India operator, the  Circle
fee fixed  in  2003-04  (Rs.375  crore  per  MHz)  would  be
inflated by a multiple of 3.5 (which represents  the  growth
in AGR/MHz between 2003-04 and 2007-08)  to  yield  the  new
spectrum price of Rs.1,312 Crore per MHz (approximately);
2.    The price determined as above may be  made  applicable  to
both the new and existing operators;  moreover,  the  entire
range of spectrum allotted may be charged, for both new  and
existing operators; such operators who do not intend to  pay
the new charges may be given the option of surrendering  the
Spectrum allotted to them;………………..”

47.   Letter, it is seen, was issued with the approval of  the  Minister  of

48.   Noticing some mistakes in that office memorandum,  an  amended  office
memorandum was issued by Mr. Govind Mohan, on the same date.  The reason  is
obvious, because the Finance Secretary D.  Subbaroa,  had  made  a  note  on
7.4.2008 stating that the FM’s view was that the  Ministry  must  insist  in
principle on pricing of Spectrum (beyond 4.4.MHz),  although  details  could
be worked out after the auction of 3G Spectrum.  Evidentially it was a  bona
fide mistake committed by Dr. Govind Mohan, because the original Memo  dated
8.4.2008 was contrary to the note prepared by  the  Finance  Secretary,  and
hence he had to issue a corrected OM  the  operative  portion  of  the  same
reads as follows:
‘4.      Union Cabinet in its meeting on October  31,  2003,  inter
alia, decided that spectrum pricing would need to be decided  mutually
between DoT and MoF so as to provide incentive for  efficient  use  of
spectrum as well  as  disincentive  for  sub-optimal  usage.   In  the
context of this decision, the  issues  that  need  to  be  decided  in
respect of 2G spectrum were discussed by Finance  Secretary  in  three
rounds  of  meetings  with  Secretary  (Telecom)  in  February,  2008.
Accordingly, the following amendments are being suggested  in  Pricing
of Spectrum, its allotment among Access providers and  Spectrum  Usage

1. Any allotments of spectrum to access subscriber licensees  under
UASL regime – beyond the initial “start-up”  allocation  of  4.4
MHz – may henceforth be specifically  priced  and  charged  for.
Details in this regard can be worked out;

2. The price determined as above may be made applicable to both the
new and existing operators; such operators who do not intend  to
pay the new charges may be given the option of surrendering  the
spectrum allotted to them;

3. Spectrum Usage Charge, instead  of  being  charged  as  a  fixed
percentage  of  Adjusted  Gross  Revenue  (AGR)  for   different
spectrum bands, may henceforth be charged as a percentage of AGR
based on volume of business  categorization,  so  as  to  better
reflect and  capture  the  circle  specific  scarcity  value  of
spectrum.  The revised charges proposed for various Circles  are
as per the table annexed  to  this  OM  and  as  agreed  in  the
discussions between Finance Secretary and Secretary,  Department
of Telecom;

4. The recommendations of TRAI for  revising  the  subscriber  base
criteria  for  allotment  of  spectrum  may  be  considered  for
implementation  in  the  interest  of  enhancing  efficiency  of
spectrum usage and encouraging technological innovations.

49.       Shri P. Chidambaram, wrote a letter dated 21.4.2008 to  Shri
A. Raja, forwarding a non-paper  containing  Finance  Minister’s  views  on
issues relating to 2G Spectrum and issues relating to 3G (Wi Max Spectrum).
After discussions, it was pointed out that the conclusion be presented  to
the Prime Minister.
50.   The Finance Secretary, as instructed by the Finance Minister, met  the
Secretary DoT on 24th April, 2008 and a hand written note  was  prepared  by
the  Finance  Secretary  on  29.4.2008  on  all  outstanding  issues.    The
recommendations of the MoF were as follows:
“Pricing of Spectrum

3.    We  may  recommend  the  following  principles  for  pricing  of

(i)     The start-up spectrum of 4.4 MHz for GSM (2.5 MHz for CDMA
may be exempted from upfront pricing both for new and existing

(ii)    Under the UASL Licensing regime, there appears  to  be  an
implicit, indirect contractual  obligation  to  allow  further
allotment of spectrum, beyond 4.4 MHz for  GSM  (2.5  MHz  for
CDMA), and upto 6.2 MHz for GSM (5MHz for CDMA) after  payment
of 1% additional spectrum  usage  charges  and  ensuring  that
already allocated spectrum has been  optimally and efficiently
utilized.  This may effectively  protect  operators  who  have
existing allocations upto 6.2 MHz for GSM (5MHz for CDMA) from
payment  of  any  other  charges,  including  the  “up  front”
spectrum price.  Since  it  may  not  be  possible  to  charge
operators already having  allocations  upto  this  range,  the
principle of equity and “level playing  field”  would  require
that the operators, who get fresh allotment of  spectrum  upto
6.2 MHz for GSM ( 5MHz for CDMA) too should not be charged for
spectrum upto 6.2 MHz for GSM ( 5 MHz for CDMA).

(iii)   Spectrum beyond 6.2 MHz in case of GSM (5MHz  in  case  of
CDMA) should be priced.  This is defensible on  the  following
grounds.  First, as per the terms of the UAS license, there is
no contractual obligation on the part  of  the  Government  to
necessarily allot spectrum beyond 6.2 MHz (beyond 5MHz in case
of CDMA); and,  secondly,  Government  retains  the  sovereign
right to modify the terms of license as also the procedure for
allocation of spectrum, including quantum of spectrum, at  any
point of the time without assigning any reason.”
(emphasis supplied)

Issues relating to merger and acquisition  have  been  dealt  with  in
Paras 16 to 18 and the same read as follows:
“Issues relating to Mergers and Acquisitions

16.   DoT have issued a notification on April 22, 2007 on  “Guidelines
for  intra  service  merger  of  Cellular  Mobile  Telephone   Service
(CMTS)/Unified Access Services (UAS) Licensees”.

17.   The guidelines derive  substantially  from  the  recommendations
made by TRAI on  this  subject  vide  Report  of  August,  2007.   The
guidelines mandate a “spectrum transfer  charges”  to  be  payable  as
specified by Government.

18.   DoT may be advised that fixation of “spectrum transfer  charges”
shall be in consultation with DEA.”

51.   Shri P. Chidambaram and Shri A. Raja met on  29.5.2008  and  12.6.2008
for resolving the then outstanding issues relating  to  the  allocation  and
pricing 2G and 3G Spectrums.  Meeting of two Ministers would not  by  itself
be sufficient to infer the existence of a  conspiracy.   Even  before  those
meetings, as instructed by the Finance Minister, the Finance  Secretary  and
Telecom Secretary had already met on 24.4.2008, had  agreed  that  it  might
not be possible to charge operators already having allocation upto  6.2  MHz
and the principle of equity and level playing field would require  that  the
operators who get fresh allotment  of  Spectrum  upto  6.2MHz  for  GSM  too
should not be charged for Spectrum upto 6.2 MHz  for  GSM.   Therefore,  the
allegation that Shri P. Chidambaram had over-ruled his officers’  views  and
had conspired with Shri A. Raja is without any basis.

52.   Criminal conspiracy cannot be inferred on the  mere  fact  that  there
were official discussions between the officers of the MoF and  that  of  DoT
and between two Ministers, which  are  all  recorded.   Suspicion,  however,
strong, cannot take the place of legal proof and the  meeting  between  Shri
P. Chidambaram and Shri A. Raja would not by itself be sufficient  to  infer
the existence of a criminal conspiracy so as to indict Shri P.  Chidambaram.
Petitioners submit that had the Minister of Finance and the Prime  Minister
intervened, this situation could have been avoided, might be  or  might  not
be.  A wrong judgment  or  an  inaccurate  or  incorrect  approach  or  poor
management by itself, even after  due  deliberations  between  Ministers  or
even with Prime Minister, by itself cannot  be  said  to  be  a  product  of
criminal conspiracy.

53.   We are of the considered view that materials on  record  do  not  show
that Shri P. Chidambaram had abused his position as a  Minister  of  Finance
or conspired or colluded with A. Raja so as to fix low  entry  fee  by  non-
visiting spectrum charges fixed in the year 2001.   No  materials  are  also
made available even for a prima facie conclusion that  Shri  P.  Chidambaram
had deliberately allowed dilution of equity of the two companies, i.e.  Swan
and Unitech.   No materials is also available even prima facie  to  conclude
that Shri P. Chidambaram had abused  his  official  position,  or  used  any
corrupt or illegal means for obtaining any pecuniary advantage  for  himself
or any other persons, including Shri A. Raja.

54.   We are, therefore, of the considered opinion that no case is made  out
to interfere with the order dated 4.2.2012 in C.C. No. 01 (A)  /  11  passed
by Special Judge CBI (04)  (2G  Spectrum  Cases),  New  Delhi  or  to  grant
reliefs prayed for in I.A. No. 34 of 2012.  Special  Leave  Petition  (Crl.)
No. 1688 of 2012 is, therefore, not entertained, so  also  I.A.  No.  34  of
2012 in Civil Appeal  No.10660  of  2010  and  they  are  accordingly  stand

(G.S. Singhvi)

(K.S. Radhakrishnan)
New Delhi,
August 24, 2012

On the United Voters of India and Free Agents

Posted in Uncategorized by realitycheck on November 2, 2010

Atanu Dey has a really thought provoking post over at his blog called A bit on Democracy in India.

The central problem according to him and shared by all of us is :

How do we get men of better quality into elected office ?

The man is an accused, lodged in jail, more than likely guilty of a heinous crime — and wins an election. I can confidently assert that had I contested that election, I would have lost to that man. I am not a paragon of virtue but it is hard to imagine that I am less than a man who is suspected of being a viciously violent person.

I don’t know you, dear reader, but I can bet my bottom dollar that you are not as ethically challenged as that minister of telecommunications accused of a spectrum scam that has probably cost the country billions of dollars. I bet that you have more integrity than the prime minister who shields corrupt politicians from being brought to justice. I wager that you are not so greedy as to siphon off thousands of millions from funds allocated for organizing a games event. Yet you, and thousands like you, don’t have a snowball’s chance in hell of ever being elected to any political office. Indeed it is your scruples, your sense of decency, your moral values, your integrity and intelligence which will be your handicap in getting you to any political office.

Source : A bit on Indian Democracy (emphasis mine)


He proposes a new voting bloc called “The United Voters of India”. This is how it would work.

Who decides whom should one vote for? I guess the voter decides. In the UVI context, the group collectively decides. Membership to UVI is voluntary but the condition is that the member adhere to the sworn duty of voting, and voting only for the candidate chosen by the association. The members choose whom to vote for through “primary” elections in which all members are eligible to vote — but it is neither compulsory nor mandatory. The only compulsory bit is that the member eventually vote at the real elections for the candidate chosen by the group.

This is a subject that fascinates me because it contains a call to action.   Like many of you I have spent countless hours dreaming about ways to break this gridlock – How do we get into this ecosystem as a mutant – where everyone already thriving in it stands to lose by allowing us in ?   Atanu comes tantalizingly close with his theory of  “endowment effect” – but I think we are actually in a far worse state.  We are in a loop of exclusive benefits leading to political power. This has been iterated over and over again to a point where entry of a mutant can only be tolerated as a court jester.

Most readers are probably going, “Here he goes again with his free agent theory“.  I do feel dirty for taking on an idea promoted by a man of such high intellect with such a mundane counter as “people vote for their benefit protectors”.

Getting elected

Consider this : Does Atanu Dey who has shown such a passion with concrete ideas for improving India really have no chance of getting elected ?

Dont lose hope yet. All he has to do is join an existing party such as the Congress, the Left, the Trinamool, etc – and get a ticket. There are many ways to go about that including just purchasing a ticket. Lo and behold, we have a new MLA or MP.  Hundreds of people including our prime minister and home minister make it to politics that way. Many more such as Kiran Bedi, Narayan Murthy, are waiting in the wings. So it cant be that hard to get in line. That is not what he is really asking.

So me try to rephrase.

Can a person like Atanu Dey contest on the basis of his own big picture issues and win ?

We are getting closer. Almost impossible – but the degree of impossibility depends on how many ‘free agents’ are in his constituency. I can confidently say that south of the Vindhyas there are very few places where such a miracle can happen. I suspect this is true even in the north – but I leave it to better informed people from that area. You may wonder, what about the dozens of independents who make it past the polls.  Those are really local satraps who protect this or that tailored benefit in that area and have little to articulate by way of “big picture” issues. This could be a route to a landlord, a sugar factory owner, a former politician or someone who has a disproportionate influence in his area.

Endowment vs Ad hoc benefits

What we have in India are not endowments or entitlements – it is in fact something far worse.  We have ad hoc benefits to groups purely at the pleasure of the politicians protecting them. In fact, the politicians are themselves selected for advancing new benefits or protecting existing benefits from examination. Allow  me to explain.

From Atanu’s blog an excellent description of the “endowment effect” –

once you give people something, you cannot say, “oops, that was a mistake, so give it back to me” and expect them to give it up.

It is easy to gloss over the all important “you” and “them” in the above sentence.  In this context,  you refers to the state – represented solely by the humans elected and sitting in the parliament and legislatures.  Them refers to the beneficiaries of the said endowment.

Now imagine a system, where there is a feedback loop between you and them. If the nature of the endowment is such that it directly impacts who gets elected and thus gets put in a position to command the future of the endowment – we have an adhoc benefit.  We expect these humans (ie the Indian state) to scrutinize the very endowment which put them there in the first place.  This would be high treason to the beneficiary group and indeed this is the worst mistake a political party can do today in India. If this feedback loop between you and them is iterated over multiple electoral cycles, the gaps get filled up and it becomes a formidable well oiled machine.

To be sure this machine can also accommodate a sprinkling of harmless court jesters – like Tharoor or Aiyar – who pose no danger to the link of endowments.  It must also accommodate a few fixers such as Pranab and PC. The primary purpose of this machine is however benefit protection, big ticket issues are treated as nuisances that need minimum effort patching. However, this machine has one fatal vulnerability – which I shall address later.

The UVI voting block

I think this sounds very similar to the frequent appeals to “the middle class” to vote for governance. Popular bloggers like Offstumped (formerly of INI)  still seem to believe in this.  I claim the middle class is hopelessly divided into free agents and locked in voters. The middle class is least likely to rebel/defect against their protectors.

A true test of the UVI voting block would be : Can you get Christians to join it ? Even the cool rocker types ? You can extend this to Muslims, caste groups like Gounders, Vellalas, other flexible but numerically tiny beneficiaries like public works contractors, government employees just coming off a 50% hike in DA.

Let me further put across the weakness of the UVI in another way.

Consider this duty of a UVI member :

The only compulsory bit is that the member eventually vote at the real elections for the candidate chosen by the group.

Now lets us consider the dilemma of a UVI member with ad hoc benefits, say an OBC or  Minority. What you are essentially asking him to do is “Sacrifice your benefit protector – who is very much on the ballot – and vote for a larger interest”.  The UVI charter would then seek to extract a sacrifice from him while the free agents have to make no such sacrifice.  Very few will resolve this dilemma the way we want it. Indeed over a period of time, the UVI will end up being a free agent voting block. Which is not a bad thing, but then it has little use as a compulsory voting group. Free agents are all ears for debate.  The UVI might then become a platform to inspire debate. A short distance from there is an outfit to relentlessly challenge conventional wisdom advanced by the big media.  This I think is extremely effective because it has the potential to exploit the fatal vulnerability of the “well oiled” machine I mentioned earlier.

More on this vulnerability later. Let us just say the necessary condition for this adhoc-benefits regime to thrive is darkness and ignorance.

This post should not be interpreted as a cynical view at the UVI. I would be the first person to join such an outfit, but you already got me and others like me at “Hi, I am UVI..”. It is about breaking the logjam and releasing a population of free agent voters – none of whom might be like me or you.

A big thanks to Atanu Dey. We owe him for producing such thought provoking pieces day after day. These exercise a part of the brain which has been numbed by our education system.


Raja turns tables

Posted in Uncategorized by realitycheck on October 31, 2009

Raja alleges 1.6 Lakh Crore scam during NDA rule.

“The NDA Government is responsible for irrational decisions without any legal backing. The scam during the NDA regime could be much more than Rs 1.6 lakh crore.” Mr Raja facing allegations, of a Rs 60,000-crore spectrum scam, from the BJP said that he will not resign. “Ours is a Government that has followed all rules to the letter and spirit by following the regulations of the Telecom Regulatory Authority of India,” he said.

Source  : HBL (Emp added)

1. Obviously there is no story behind it.

2. Raja forgets that the DMK was also part of the NDA government.

3. Were there any letter pad companies that made windfall ?

4. Even if there was a scam, let us finish this investigation first and then get on to the next one.

5. Note the “Ours is a government…” quote.  This is a clear signal that the Congress cant wiggle out and pin blame on Raja alone.  Sachin Pilot in on stage and would agree.

This CBI case is dead on arrival. The people of India have lost 60K Cr because their property (airwaves) has been stolen. The only way for this story to make more headway is for the media to latch on to this. In the 90’s the media would stay put on corruption stories and that was in no small way for the downfall of the Congress. What happened “post liberalization” ?


The vote magnet

Posted in Uncategorized by realitycheck on June 3, 2009

I really need to dump all the ideas buzzing in my head into a coherent post later this week. The central question is : What impact does our system of benefit protection impact whatever we have by the name of democracy ?

My opinions on some events.

1) The PMK loss : 

This is an example of getting punished for working for a larger interest. There is no question that it was Dr A. Ramadoss who was instrumental in the OBC quota. Is anyone amazed they were rejected ? Even R. Velu who was arguably the real performer in the Railways lost to Mr Jadadhratchagan.  According to the theory of this blog, Mr Ramadoss’s work was commendable – but for the OBC group, not for the MBC group. There is really nothing by way of benefits for his voters. Result : His voters were picked the next larger group or were turned into free agents (either vote on issues or vote for cash) Repeat lesson for Laloo and Mulayam.

2. The Congress sweep of urban India :

Barring Bangalore, the Congress swept all urban areas by a huge margin. What happened here ? Do these people really want more power cuts, pathetic living conditions, zero municipal development. Do not believe the pundits. Our word is that urban India responded very favourably to the divisive quota policy. The reason is simple, they are the most equipped to take advantage of it. The media did a commendable job by completely suppressing any discussion of this issue.  Again, many of skeptical about this theory. Arent ‘middle class’ people supposed to vote on issues ?   No they arent we say. If you dont believe us please poll the student body of DU and their parents this year.

3. The hero – the media

The recent sickening coverage of the ‘racist australia’ make people wonder whether they are really subject to any checks. Hello, seven guys are accused of raping an American girl in the Congress paradise of Mumbai. Can you imagine what hell would have broke loose if something like this (god forbid) happened in Oz? 

If you accuse them of hopeless bias, exagerration, dramatization, and working up a frenzy, the perplexing defence the media will offer you is : “Hey let us go, only 1% of 3% watch English electronic media”. The fact is, the media still sets the table at dinner. What they dont like isnt even on the menu. Competition is laughable as they are mostly from the same gene pool.  For example : they could have easily pursued the spectrum scam as vigorously as Varun. This would have dramatically changed the colour and the mood of the free agent voters.

4. The BJP

The BJP cannot hope to be a Congress-lite. It does not work that way. Did they wheel-deal on various scams ? Why are they completely silent on the SEZ issue ? I do not remember them raising the corruption issue seriously on even one occassion. The Swiss bank stuff was funny : someone remarked that the BJP’s swiss bank plans made the other guys get their cash out and defeat them soundly.

I agree with the must-read Indian blogger Barbarindian that the BJP cannot move closer to the Congress on key issues and hope to be relevant.  No one is going to be nicer to them for doing that.

Now the Congress is really consolidating by these schames (scam schemes). The vote marshals are motivated. There is a lot of cash moving around. Good times.