Ask anyone in India, what was “2G Scam”, and you will be told how the 2G spectrum was given away for a fraction of what “could have been” raised, a mammoth figure of Rs 1,76,000 Crores. Media houses even decided to write down all the zeros to drive home the point, it is 1,76,000,00,00,000.
Fine. Let us ignore for a moment that the telecom policy at the time did not have revenue maximization as the policy objective. If 2G spectrum allotment was indeed a scam, and the exchequer should have raised Rs 1,76,000 Crores from it, what should we expect from the nationwide 4G spectrum?
At least equal, if not double?
Reliance has paid far less for a nationwide 4G spectrum, and yet the media today is busy with anything and everything that is a non-issue – Beef, Bharat Mata Ki Jai, Bose files, Nehru and what not.
Chronology of a Scam
Reliance Jio is an immaculate and educative illustration of how “capitalism” works in our country. Lets start at the beginning. Step-by-step.
Step 1: Set up a front company
Quietly set up a low-profile incestuous front company, Infotel Broadband Services Pvt Ltd (IBSPL) with your former crony friends (Nahata’s). Keep incestuous comp so small barely anyone notices. Especially competitors. Net worth: 2.49 Cr; 1 client; income Rs 15 lakh.
Nobody cares if said cronies are infamous for sabotaging our telecom industry in the 90s (HFCL: ring a bell?). Infotel was a small Internet Service provider (ISP) run by Anant Nahata, son of Mahendra Nahata, promoter of the infamous Himachal Futuristic Communications Limited ( HFCL).
Readers may remember that HFCL had bid irrationally in 1995 acquiring 9 licences for mobile telephony ( 2G). They did not have the financial muscle to roll out the same and eventually telecom minister Sukh Ram bailed them out. Even then it was rumoured that HFCL was actually a front for the Ambanis. Readers may recall that HFCL had bid the highest as licence fees and Reliance Telecom had bid the lowest. Reliance got some category C circles like North East, West Bengal, Orissa etc for peanuts. When HFCL did not pay up the licence fees , Indian govt not only lost over Rs 20, 000 crore in revenues, in several circles the roll-out of GSM got delayed by 2 years.
IBSPL, incorporated in February 2007, had been granted a pan-India ISP licence in November 2007. In 2009–2010, it had just a single leased line client from whom it earned Rs 14.78 lakh. On 31 March 2009, it had Rs 18 lakh in its bank, with Rs 11 lakh diverted towards the 100 percent margin money for the bank guarantee of Rs 10 lakh given by the firm to the DoT for the ISP licence.
Step 2: Rig the bid. WIN.
In February 2010, the DoT issued a notice inviting applications to participate in the auction of 3G and 4G spectrum, which would be held separately. Any corporate entity holding Unified Access Services/Cellular Mobile Telephone Services/Internet Service Provider (UAS/CMTS/ISP) licences could bid for the spectrum. Any entity that could give an undertaking that it would obtain a UAS/ISP category ‘A’ licence as a “new entrant nominee” licencee before starting operations was also allowed to participate in the auction for the Broadband Wireless Access (BWA) spectrum, as per the DoT guidelines.
The DoT had already clarified, first in 2008 and again in 2010, that voice services were permitted only using second generation (2G) and 3G spectrum. The TRAI had recommended that 4G or BWA spectrum should be utilised for faster diffusion of broadband and data services only.
In June 11, 2010, Incestuous company gets 4G broadband spectrum across India by bidding 5,000 times its net worth. Yes, Infotel paid 5,000 times its Rs.2.5 crore net worth to win spectrum across India. IBSPL managed to meet the financial requirements for bidders – an earnest money deposit in the form of a bank guarantee from Axis Bank of Rs 252.5 crore, a sum that was a hundred times its net worth. (Doubts have been raised about the authenticity of this bank guarantee, but that’s another story.)
Step 3: Buy the front company
Publicly buy the said incestuous company within 1 hour of the bid at a pittance of the price of the spectrum. Infotel bid and paid Rs.12,847.77 Crores for 20 megahertz (MHz) of the spectrum in all 22 circles, after paying Rs.252.50 Crores as earnest money, and then sold 95% of the company for Rs.4,800 Crores to RIL, hours after the auction for wireless broadband licenses concluded.
Step 4: Get the license changed
Get down to doing what you and dad know best: greasing palms. In the face of opposition from an independent regulator (TRAI), get your broadband license converted to Unified Licence “UAS” (for voice service) with help from the government.
In April 2012, at the request of the DoT, the TRAI furnished guidelines on changing the licensing framework and replacing it with a new Unified Licence regime, which went on to facilitate the migration of internet service providers into full service operators offering voice services. The TRAI guidelines were deliberated upon by a DoT committee and subsequently by the Telecom Commission. Thereafter, two more committees were constituted to debate different aspects of the issue, one in August 2012 and one in September of the same year.
The upshot of these deliberations was that in February 2013, the conversion of ISP licences to the new unified licence was approved and Reliance Jio was the first to take advantage of this decision. The company paid an “entry fee” of Rs 15 crore and a “migration fee” of Rs 1,658 crore in August 2013 and was granted a unified licence on October 21, 2013, formally authorising it to provide voice services.
Step 5: CAG starts talking
Get your Unified License by paying an entry fee of Rs 15 cr & a “migration fee” of Rs 1,658 Crores at 2001 prices. Easy peasy!
Remember the “2G scam”, CAG estimated a loss of Rs.1.76 trillion in DoT’s allocation of 2G spectrum in 2008. That valuation was done using the value ascertained from the 3G auction at 2010 prices. But our “Jio” dude got a license to provide voice services on its 4G spectrum at 2001 prices!
Although CAG murmured (22,000 Crores loss), no one heard a thing. The-times-they-were-a-changing.
The draft report of the CAG prepared in 2013 did not mince words:
“The DoT failed to recognise the tell-tale sign of rigging of the auction right from [the] beginning of the auction”
“The government should get the matter investigated even at this juncture, fix responsibilities on the bidders, which violated the auction conditions/rules prescribed and cancel the allotment of the BWA spectrum along with exemplary punishment on the colluding firms,” the draft report stated.
“Reliance Jio Infocomm appeared to have been accorded an undue advantageof Rs.22,848 crores,” – CAG report, 2 May 2014.
Step 6: But, you had prepared a pawn for this
Switch your political allegiance, bless the CM who is the best bet for unbridled crony capitalism. Some honest UPA ministers like Jaipal Reddy and AK Antony had started coming in the way of the ambitions of Mukeshbhai, so he decides to provide his blessings to his fellow Gujarati. Mukeshbhai owns most of the Indian media via his interests in the holding company Network-18. An elaborate image makeover exercise is undertaken to whitewash the blood stains of the ex-pariah Mr Modi.
Step 7: Your pawn in power, CAG dilutes its report
Now that your pawn is in power, CAG changes tune. Loss comes down to Rs 3,367 cr. Everything is now moving fast.
“Reliance Jio Infocomm Limited (formerly, M/s Infotel)… paid UL entry fee of Rs 15 crore and additional migration fee of Rs 1,658 crore in August 2013. This migration, allowed at prices discovered in 2001, resulted in undue advantage of Rs 3,367.29 crore to M/s Reliance Jio Infocomm,” – CAG report, 9 May 2015
CAG gave no explanation of how the figure of the “undue benefit” changed to a minuscule proportion of the original estimate in the course of a mere year.
However, even in its final report, the CAG pointed out that the DoT did not maintain parity in the spectrum charges that were being paid by the UAS/CMTS operators providing voice services and operators who were using broadband wireless access to provide voice services. While UAS/CMTS operators were paying between 2 percent and 5 percent spectrum usage charges, depending on the quantum of spectrum held, broadband wireless access operators were asked to pay only 1 percent of the adjusted gross revenue as spectrum usage charges.
Step 8: Flout tariff norms, get away with it
If you are questioned for breaking rules on freebies ask former employee (now AG) to get you a free pass. Does it matter that TRAI had never relaxed this condition for any operator in 15 years? No, apparently.
Step 9: Actual Loss of Revenue
On 19th June 2017, The Department of Telecommunications (DoT) expressed its inability to meet its revenue target of Rs 47,305 crore for FY18 and asked the finance ministry to revise the projection to Rs 29,524 crore — almost a 40 per cent fall.
This was a result of not only was the lower 1% spectrum usage on 4G, but also the reduced earnings from the 2G & 4G rivals due to various aggressive promotional freebies RIL was allowed to get away with.
Why is there a silence on this?
Of course, this loss may also be called “presumptive”. But haven’t we heard that word before, in a different era, when another word was common: SCAM. Because SCAM aptly describes the history of this company, yet we hear almost nothing about it. No outrage, no debates, nothing.
Ask yourselves, Why? Itana Sannaata Kyun hai Bhai?
Prima facie, this is a loot of a bigger magnitude than the 2G scam, so why haven’t we heard about it, barring a few stories from the non-mainstream media outlets like TheWire or the gutsy Caravan Magazine?
Answer is simple: who will speak up?
It is estimated that BJP spent more than Rs 10,000 Crores on their election campaign in 2014. Someone financed all of that, and now wants their pound of flesh back.
As we see above, the CAG under this government actually even watered down the charges against Mr Ambani. We already see how defence deals such as Rafale are being renegotiated to benefit Mr Ambani and Mr Adani. Meanwhile, the Rs 5000 Crore fine slapped by the Enforcement Directorate on Adani for the coal imports over invoicing has been swept under the carpet.
Modi government has been an epitome of Crony Capitalism, and thrived on the chamchagiri by the rich and the powerful.
Modi has been busy giving so many favors to the cronies who funded his campaign, In return, Even the huge economic disaster of Tughlaqi proportions, the Demonetisation, was praised by Mr Ambani.
This government has been weakening CVC and CIC, and failed to appoint a Lokpal for 3 years.
So much for “Na Khaunga Na khaane doonga”.
Take a look at the graphic below. A single company, Network-18 has a stake in nearly all major news outlets in India, and Mr Ambani controls Network-18. RIL made its first investment in Network-18 in January 2012 with a minority stake in the company. On 29th May 2014, soon after Narendra Modi was sworn in as the Prime Minister of India, it acquired a majority stake in the company by paying Rs 4,000 Crores.
Ever seen a loyal dog bark at its owners?
Several mainstream opposition parties are no different from BJP when it comes to crony capitalism. They too, like BJP, get massive funding from the corporate sector, and return favors to them. Keep in mind that Mr Ambani’s company is here today because of the favorable treatment it received from the numerous governments of the past, of varying political affiliations.
The few parties that have dared to raise these issues are hounded and targeted viciously by the mainstream media controlled by Mr Ambani. Left has been painted as “anti-national” by our Corporate media. AAP is targeted even more furiously.
Do you seriously expect the opposition to dare to raise their voice against Mr Ambani, knowing fully well what might follow?
Civil Society and NGOs?
2G and Coal Scams were exposed because of the tireless work by several NGOs and anti-corruption crusaders. Most notable was NGO Telecom Watchdog and NGO Centre for Public Interest litigation led by Prashant Bhushan, that actually used judicial intervention that forced a CBI probe on the issue.
So where are these people now?
Some, we now know, are in the bed with the ruling party, have become Ministers, LGs and a baba has now become the CEO of a successful FMCG company, itself a huge beneficiary of crony capitalism. Clearly, they were partisan
Others, who are still fighting, are being discredited and attacked by our media. The leading crusader, Mr Prashant Bhushan has been stonewalled by our judiciary on several occasions including this case, which deserved at least an investigation prima facie. In this case, our Honorable judges asked him:
“Prashant Bhushan, you have an image of a crusader. But can you become the centre for public interest litigation? We cannot allow this.”
Usually, there should have been an outrage over such a remark, but when the media has already been bought, who will raise this?
Finally, remember, Mr Ambani was able to make PM Model for his product by paying just Rs 500!