2G Spectrum Scam

Q. What is the 2G Spectrum Scam?

In 2008, the union government awarded pan India licenses and second generation telecom spectrum to 9 companies in 122 circles for offering mobile telephony services. These licenses were awarded in an arbitrary and non-transparent manner for a paltry sum of ` 1658 crores, which was the price discovered in 2001, when the teledensity was very low.

Q. Who are allegedly involved in the scam?

  • Telecom Minister A.Raja
  • Corporate Houses
  • Government Officials
  • Corporate Lobbyists
  • Media Houses

Q. What is the amount of scam involved?

Based on the subsequent auction of airwaves for third generation (3G) services, which fetched nearly Rs. 63,000 crores, and that for broadband access, which fetched over Rs. 35,700 crores, the notional loss to the exchequer due to under pricing of 2G spectrum was estimated by the CAG to be a whopping Rs. 1,76,000 crores !!

Q. What does Rs 1.76 lakh crore mean to our nation?

  • 4 Times the money used to build the golden quadrilateral connecting delhi, mumbai, chennai, kolkata – to improve our road connectivity and trigger economic growth.
  • 30 lakh RTC buses – Could be a big boost for our defunct public transport.
  • 11 crore buffaloes – Could improve our dairy sector
  • 1868 Nagarjunsagar dams – Could vastly improve irrigation sector (No more need for loan waivers)
  • 23 Shamshabad airports – Could improve the aviation sector big time.
  • 25 Lakh Nursing homes – Could be a big boost of our disastrous health sector (India remains home to one-third of the world’s undernourished children)
  • 30 Lakhs Schools – Can go a long way in improving our literacy rate – 65%
  • 35 Crore Computers – Could establish India as the IT capital of the world
  • 504 Fighter Jets – Could strengthen our defense system in a big way.

Q. Can this money be recovered?

Yes. Under Section 23 and 24 of the Indian Contracts Act 1872, a contract becomes void if it is tainted with corruption. The government can cancel the current licenses and recover the lost money by fresh allocation of 2G spectrum through international competitive bidding after laying down transparent eligibility criteria in consultation with TRAI (Telecom Regulatory Authority of India).

Q. Did we ever recover such scam money previously?

Yes. In 2007, the Indian Army did not hesitate to scrap a $600 million-worth deal for 197 helicopters with Eurocopter, the world’s largest maker of civil and military helicopters (and a subsidiary of EADS, the European defence and aerospace group), following the Central Vigilance Commission (CVC)’s criticism of the bidding process and illegal use of middlemen, violative of the existing policy of prohibiting middlemen in military deals. The Army subsequently went in for a fresh and open bidding process.

Q. Do we have enough evidence to prove the scam?

There were many events leading to the day when the licenses were given…

  • TRAI had recommended auctioning of spectrum at market rates.
  • Raja ignored advice of TRAI, Law Ministry, Finance Ministry and even the PMO.
  • Licenses issued on a first-come-first-served basis
  • Cut-off date for applications advanced by a week
  • Rules changed after the game had begun.
  • One more clinching evidence is that the bidders were asked to give a bank guarantee of 1600 cr, and the time given to satisfy the clause – 45 mins. Its impossible for even the biggest of the corporate houses to arrange for such a huge money in just 45 mins. But, the successful bidders were able to provide the bank guarantee. If they did not had prior knowledge about the clause, how can they arrange for it? This proves clear favoritism.

Q. What should the government do?

As we discussed before, the immediate steps should be to recover the scam money by canceling the licenses and issue new licenses international competitive bidding. But there should be some long term measures to eradicate the menace of corruption from our country. A JPC or PAC as demanded by the opposition will not do any good .

  • Enact a comprehensive anti-corruption law and create an Independent Anti-Corruption Commission (IACC). IACC set up in Hong Kong in 1974 reduced corruption within a few years. When it was first set up, wags referred to the ICAC as “I can accept cash”. However, the ICAC has worked, precisely because it is independent.
  • Enact a Windfall Profits Tax law (on the lines of the UK law 1997), which will provide for stiff taxation of windfall profits earned by corporates in the exploitation of natural resources either because of monopoly or a change in the global economic environment. The companies that cornered the 2G spectrum licenses through questionable means and sold them within weeks for astronomical sums should be subjected to the proposed windfall profits tax. Such a law will also help tax the abnormal profits made in the mining and other sectors.
  • Enact a False Claims Act (on the lines of the U.S. law). If the exchequer incurs any loss because of fraud or misrepresentation or violation of the due process as determined by an independent, competent authority, the guilty will have to pay a civil penalty equivalent to three to five times the loss sustained. The U.S. Government has collected over $24 billion from corporates under this Act.

Q. How can you help to stop this scam?

There are many ways you can help in recovering this scam..

  • Sign online petition to Prime Minister of India (You took the pain to read this mail, spare 30 more secs and this is the least you can do for the future of our country)
  • Email to Prime Minister of India ( manmohan@sansad.nic.in This e-mail address is being protected from spambots. You need JavaScript enabled to view it This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; pmosb@nic.in This e-mail address is being protected from spambots. You need JavaScript enabled to view it )
  • Post a card to Prime Minister of India (The Prime Minister of India,
    PMO Building, South Block,
    Raisina Hill, New Delhi – 110101)
  • Send one rupee money order to Prime Minister of India. The Money Order will cost Rs.2.25 (Re.1 + Re.1 as MO fee and Rs.0.25 for the MO form), and has the added advantage of someone in PMO having to acknowledge it.
  • Join & Spread awareness about ‘Cancel 2G Spectrum Licenses’ Campaign on Facebook, Twitter and Orkut communities.
  • Get involved in the various anti-corruption campaigns by any of the NGO within your reach.