Scandal in the Airwaves

There is a joke in the telecom industry on the origins of the 2G (Second Generation) spectrum controversy. When Dayanidhi Maran had to resign as Telecom Minister in May 2007, and the then Minister for Environment and Forests A Raja stepped into his shoes, the new Telecom Minister brought with him to Sanchar Bhavan, the headquarters of the Telecom Ministry, those real estate brokers who normally hang around Paryavaran Bhavan (headquarters of the Environment Ministry). It was in this way, telecom industry insiders laugh, that a clutch of real estate brokers got a toehold in the telecom sector. These real estate brokers soon cornered spectrum allocations, resulting in a tussle for the sharing of the scarce electromagnetic waves between existing telecom services providers, and the ‘new services providers’.Facts relating to the spectrum scam weren’t much different.

The scam can be traced to real estate companies — Swan and Unitech — bagging spectrum licences at throwaway prices. They then offloaded their shares at exorbitant prices to multinational telecom giants. Swan Telecom, for instance, bagged licences for operating in 13 circles by paying a mere Rs 1,537 crore. Within months, it sold 45 per cent of its shares to Etisalat, the UAE telecom giant, for US $900 million (approximately Rs 4,500 crore). Swan Telecom was earlier known as Swan Capital and owned by Anil Ambani. In 2007, this company was taken over by Maharashtra based real estate entrepreneurs Shahid Balwa and Vinod Goenka. There are rumours in telecom circles that the takeover by Balwa and Goenka was felicitated by Raja.

Unitech, another real estate company, too reaped a bumper harvest without investing a penny in telecom infrastructure.The company got licences to operate in 22 circles for Rs 1,651 crore. Within weeks, it sold 60 per cent of its shares for Rs 6,120 crore to the Norwegian company Telenor, currently a major telecom player in Pakistan and Bangladesh. Unitech had applied for licences in several names — Unitech Infrastructure, Unitech Builders and Estates, Aska Projects, Nahan Properties, Hudson Properties, Volga Properties, Adonis Projects and Azare Properties among them. They were able to merge all their licences when Telecom Minister Raja signed another dubious notification allowing this to happen. Valued at a whopping Rs 60,000 crore, the 2G spectrum allocation scam is perhaps the mother of all scams in India.

After he became Telecom Minister, A Raja allotted 2G spectrum to new entrants in the telecom sector at throwaway prices. Spectrum allotted in the beginning of 2008 was sold at rates fixed in 2001. This happened in spite of the Telecom Regulatory Authority of India’s (TRAI’s) — and the Finance Ministry’s — vehement objections. There was also no auction, and licences were given on a shabby ‘first come first serve’ basis. Third, the entire procedure lacked Cabinet approval, even though deals involving such huge sums of money require mandatory approval of the Cabinet Committee on Economic Affairs.

Even as the allegations broke out, Raja kept insisting he was sticking to the rulebook. He justified his decisions saying he was trying to break the cartelisation in the telecom sector, and claimed that the ‘aam aadmi’ would benefit by his actions. Even his party chief and Tamil Nadu Chief Minister M Karunanidhi rubbished the allegations against Raja, saying that leaders of certain political parties could not tolerate the rise of a Dalit.A series of investigative reports by this newspaper, however, suggested otherwise. The Telecom Minister’s money parking methods — by floating companies in the names of close relatives — was soon out in the open. After Raja became a Union Minister in 2004, many of his close relatives started real estate companies. Companies like Green House Promoters, Equaas Estates and Kovai Shelters Promoters have Raja’s brothers, nephews and nieces as directors on their boards. The Minister even got his wife, MA Parameswari, appointed on the board of directors for Green House and Equaas Estates. This he did by violating another code — the service rules and the code of conduct for Ministers.

As a Cabinet Minister, Raja had to inform the Prime Minister about his wife’s business, and file a mandatory affidavit saying there was no clash of interest in the discharge of his duties. He did neither. The Minister now defends himself by saying the entries with the Registrar of Companies are wrong, and that he and his wife were not aware that she was a director in Equaas! Equaas Estates’ domestic turnover, on the other hand, showed more than Rs 755 crore in its very first year. Even this, Raja now says, was a “wrong entry” in the books of the Registrar of Companies. Meanwhile, Green House Promoters, one of the many companies with Raja’s relatives on its board, opened an office in Singapore in violation of Indian foreign exchange norms. And one director of Kovai Shelters, Dr R Sridhar, a nephew of the Telecom Minister, holds a 15 per cent share in the company despite being a Class I officer in the Ministry of Environment.

In earlier instances, Raja often defended himself by saying Swan and Unitech were Maharashtra and Delhi-based companies, and no one from Tamil Nadu was associated with them. Documents filed with the Registrar of Companies, Mumbai, however, prove otherwise. On December 17, 2008, Swan allotted Rs 380 crore worth of shares to the Chennai-based Genex Exim Ventures, a company floated just four months ago with a meagre capital of Rs 1 lakh. According to the documents available with the Registrar of Companies, Chennai, Genex was incorporated on September 17, 2008 with two directors — Mohammed Hassan (58) and Ahamed Shakir (41) — who came from Kilukarai, a small coastal village in Ramanathapuram district in Tamil Nadu. Ahmed Syed Salahuddin (32), who represented the company on the board of Swan, also came from the same village.

There is more indication of the Tamil Nadu link. Ahmed Syed Salahuddin, who represented the company on the board of Swan, is the younger son of Syed Mohammed Salahuddin, an NRI businessman who heads the Dubai-based real estate conglomerate ETA Ascon Star Group. This group began its Indian operations in 2006 by floating several real estate firms across the State. Raja was then Union Environment Minister, and his party DMK had assumed power in Tamil Nadu. ETA signed an MoU with the Tamil Nadu Government for setting up an IT Special Economic Zone worth Rs 3,750 crore when A Raja became Union Telecom Minister in May 2007. Tamil Nadu Chief Minister M Karunanidhi was present at the MoU signing ceremony for the proposed project at Kancheepuram, near Chennai, on a nearly 500 acre plot.It seems mysterious that a large business group entered Swan’s board through a company with a meagre
Rs 1 lakh paid up capital. Incidentally, Genex Exim has not filed any document with the authorities to show its source of income, even after acquiring Rs 380 crore worth of shares of Swan Telecom.

How Raja had blatantly favoured Swan was evident from a rather unusual deal struck between that company and the state-owned BSNL. This “intra-circle roaming deal”, signed between the two companies on September 13, 2008, was literally silent when it came to money. According to the MoU, Swan could use spectrum, communication towers and the entire network of BSNL free of cost. Though the BSNL management suggested charging 52 paise per call, this clause was mysteriously absent in the MoU. BSNL was forced to sign this deal just 10 days before the sale of Swan’s shares to Etisalat. It helped swell Swan’s coffers without the company investing a single rupee.BSNL had never entered into an “intra-circle roaming deal” with any operator till then. When controversy broke out, BSNL Chairman and Managing Director Kuldeep Goyal sought to quell the trouble by coining a new word for it — a “Limited MoU”!

Meanwhile, Raja shunted out all senior officials in BSNL and the Wireless Planning Co-ordination (WPC) wing of the Telecom Department who objected to the deal. Top telecom officials alerted the Prime Minister, but nothing came out of it. Even a Congress MP, Dharam Pal Sabharwal, wrote to Manmohan Singh in November 2008, but with no result. Another letter written to the Prime Minister by CPI(M) Politburo member Sitaram Yechury in February 2008 clearly warned of a “scam in the offing” when more than 575 real estate companies and stock broking firms approached the Telecom Ministry for spectrum licences. All this while, Raja kept insisting that he had the approval of the Prime Minister.

The Telecom Minister even blatantly lied in Parliament when he said his decisions on 2G spectrum allocation were never objected to by TRAI or the Finance Ministry.The unreformed Raja was also eager to allot 3G (Third Generation) spectrum before the end of his tenure. His attempts, however, came to naught after the Government decided to refer the 3G auction to a Group of Ministers. Earlier scheduled for January 16, the date was changed to January 30 and has now been deferred indefinitely after the intervention of the Cabinet Secretary, who suggested a “thorough study” into the process.

Current developments however suggest that the auction may not take place during the tenure of this Government. The question that arises now is, who authorised Raja to announce the auction dates in advance, before getting a Cabinet clearance?Although he was aware of Raja’s corrupt ways, it was perhaps the compulsions of coalition politics that kept Prime Minister Manmohan Singh away from stepping in and setting things right. For, observers believe, every time he summoned Raja, Raja’s party chief Karunanidhi landed in Delhi and dashed off to the Congress leadership, asking it to keep the Prime Minister quiet. This is perhaps what happened on December 4, 2008 when Karunanidhi landed in Delhi with a multi-party delegation to raise the issue of the ‘plight’ of Sri Lankan Tamils. The delegation met the Prime Minister at 10 am. An hour later, the DMK chief met Sonia Gandhi along with his daughter Kanimozhi — this time separately. Even his close confidant, Union Minister TR Baalu, was asked to leave after the photo session. After the meeting, Karunanidhi held a Press conference where he said he had discussed the Sri Lankan issue with the Prime Minister and Sonia Gandhi. Sceptic Tamil leaders, however, wonder why were not allowed to participate in the talks with Sonia Gandhi when they were all present in the meeting with the Prime Minister. Many of them believe that Karunanidhi had in fact asked for Sonia Gandhi’s ‘help’ in sharing the burden of the spectrum scam during that meeting.

http://jgopikrishnan.blogspot.com/2009/03/spectrum-scandal-and-telecom-ministers.html