India - spectrum assignment investigations

CVC questions DoT on 2G spectrum auctions

The DoT is facing a fresh round of questions from the Central Vigilance Commission (CVC) on its decision to reject auctions for 2G spectrum.

Rejecting DoT's earlier explanations for not holding auctions for 2G spectrum, the CVC has shot back a questionnaire seeking "clear and specific" replies. Its letter to DoT, which comes over a month after DoT assigned licences to 120 LoI holders, is both scathing and dismissive of the rationale offered by DoT so far. The CVC states, the reasons given by DoT for refusing to hold auctions for 2G spectrum are "neither convincing nor acceptable". Further, it advises DoT to follow an auction process, else clarify the reason as to why auction cannot be held for balanced allocation of spectrum in 2G.

This could impact the chances of the 120 licence holders, since the CVC direction may not be easy to evade.

Meanwhile, a news agency reported on Tuesday that the government may be issuing spectrum for Tamil Nadu circle to five operators - Datacom, Idea, Unitech, Swan Telecom and Loop Telecom. Besides Tamil Nadu, abundant spectrum is available in Andhra Pradesh, Karnataka, Kerala, Orissa, Bihar, Madhya Pradesh and Kolkata and telecom minister, A Raja is likely to distribute it soon.

DoT has offered many different reasons for not embracing spectrum auctions, even seeking refuge in the UASL license itself. Experts dismiss this as invalid as UASL licenses of existing operators can in no way be used to deny auctions amongst those who do not hold even an LoI, leave alone a licence.

Raja had initially said there were "legal difficulties in auctioning spectrum", which was later diluted to "practical difficulties" by DoT. CVC is unwilling to accept either of these two reasons. The CVC's harshness arises from concerns that the DoT is allowing new entrants to sell spectrum at a massive premium and entirely at the cost of government revenue.

TRAI, in its recommendations of August 28, 2007, Section 5.27 (iv) had said, "any proposal of permission for M&A should not be entertained till rollout obligation is met". This restricts M&A's for one year in metros and up to three years in circles. The license agreements signed in early March do not have any such restrictions, allowing companies to sell pan-India spectrum obtained at a paltry Rs 1,651 crore fee for Rs 6,000 Rs 8,000 crore. All told, a loss upwards of Rs 20,000 crore confronts the government on this account alone.

Expressing its strong preference for auctions, the CVC asks, "If TRAI's recommendations of 2003 was to award fresh licenses via a multi-stage bidding process, why and under whose recommendations and approval this procedure was not followed and licenses were issued at 2001 prices".