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Showing posts with label scam. Show all posts
Showing posts with label scam. Show all posts

Sunday, November 21, 2010

Punish The Guilty, Recover The Loot

Irespective of how the current impasse in the parliament over the demand for a joint parliamentary committee (JPC) to probe into the massive 2G  spectrum scam unfolds, it is clear that the country is being pushed deeper into the murky morass of crony capitalism. 

Actually, crony capitalism is a tautology.  Capital in its urge to maximise profits invariably seeks to bend, if not, violate all rules and regulations. Nepotism in awarding contracts, sweet heart deals in disposing off public properties (like, for instance, the  outrageous sale of public sector, Balco and Centaur Hotel, Juhu, Mumbai by the earlier NDA government) and creating illegal and new avenues for money laundering and looting public resources are some of the forms that crony capitalism takes.


The capitalist state puts in place certain rules and institutionalises regulators to ensure adherence to these rules in order to provide a level playing field for the capitalists. However, given the fundamental nature of capitalism, where the big fish eats the small ones, these rules and regulations are pushed to the limits of violation.  Capitalism inherently breeds cronyism. 

In countries like India, late entrants into the global capitalist system, (particularly when it embraces the neo-liberal economic trajectory of globalisation) such cronyism becomes all pervasive trapping in its web governmental institutions, indeed, the entire government itself.  This has precisely been the case in the current 2G spectrum scam, with the Supreme Court now dragging in the prime minister and his office. 

To illustrate how such crony capitalism operated in this 2G spectrum scam, consider the following:

For the release of the fourth license and the spectrum needed  for operationalising  the corresponding universal access service license in January 2008, the communications ministry adopted a completely inexplicable principle of `first come first served’ as well as a license fee based on 2001 price.  These 2G licenses were priced at 2001 levels allegedly to ensure that the spectrum should not become expensive, presuming that the benefit would be passed on to the consumers.  However, this was nowhere ensured through the license terms and conditions. As a result, the parties who had secured these licenses have sold or are selling their shares at huge profits.

The deal between UAE’s telecom operator Etisalat and a Bombay-based builder’s Swan Telecom has brought out the magnitude of largesse being doled out.  Swan Telecom bought a license for 13 circles along with the necessary 2G spectrum for a paltry Rs 1,537 crore.  Subsequently, it had sold 45 per cent of its stake to Etisalat for $900 million without putting up any infrastructure, let alone starting operations.  This, therefore, was the market price for the spectrum at around $ 2 billion, as against the price of $300 million SWAN paid.  With the present exchange rate, this would mean that Swan had got a value 5.9 times of what it had paid just eight months earlier in January 2008 without having spent a single paisa in operationalising its license. The government has actually got only one-sixth of what it should have got, had it gone through a fresh auction route – a loss of Rs 4,500 crore to the exchequer.

But this is not all.  Even this loss proved to be an underestimate when one finds the details about the later Unitech-Telenor (of Norway) deal.  Here, Unitech like Swan had not spent a single paisa for executing its license.  It had sold a 60 per cent stake of the telecom firm,  which had paid Rs 1651 crore as license fee for all the 23 circles which it had applied for, to Telenor.  Obviously, Unitech got a better return on its sale because it had given away majority stake and had larger number of circles.  Unitech had got 6,120 crores. Unitech, thus, had got a valuation which is seven times more than  what it had paid.   

For a number of these corporations, who were awarded the so-called 'first come first served' licenses, the promoters are either unknown or shadow companies. This further reinforces the doubts regarding the bona fides of these companies as also the intent of the policy.

In the interests of the country, it is absolutely essential that this colossal scam must be thoroughly probed. Hence the demand for a JPC.  The JPC must not only identify the culprits and prepare the grounds for their punishment, but it must also study the manner in which the system has been so grossly manipulated to allow such a scam to take place. On this basis, more effective rules and regulations must be drawn up to ensure that such known avenues of manipulation are minimised, if not plugged. 

Probing the 2G spectrum scam is not only in the interest of upholding political morality.  This is absolutely essential. The probe, however, must also result in recovering to the national exchequer the loss estimated by the CAG to be  of a mammoth Rs 1,76,379 crores. Our estimations of this loss, stated in these columns earlier, is to the tune of Rs 1,90,000 crores.  All those who have been allocated the 2G spectrum at throw away prices must be made retrospectively to pay the difference.  The benchmark can be the  auction price of the 3G spectrum that is available in public domain.  The licenses of those corporates who refuse to do so must be cancelled and these must be freshly auctioned. 

Again, the recovery of these monies, unscrupulously looted, is not only to reassert public morality.  This recovery is much needed to improve the livelihood of the vast mass of the Indian people.  Take for instance, the issue of food security.  It has been estimated that to provide all Indian families (APL and BPL) 35 kg of foodgrains at Rs 3 a kilo, it would cost an additional food subsidy of Rs 84,399 crores.  The loot in the 2G spectrum scam is nearly double of what is required to provide food security to all Indians.  Or, for that matter, to ensure education for all, it is estimated by the National Institute for Educational Planning and Administration (NIEPA) to cost Rs 34,000 crore annually for the next five years.  A  total of Rs 1.7 lakh crores.  This is less than what has been looted in this 2G spectrum scam.  The scam accounts for nearly six times of the health budget proposed for this year.

A government that continues to wear the pretence of concern for the aam admi must be forced to speedily uncover the manner in which such a colossal loot of our country’s resources has taken place.  Further, the government must be forced to recover this loss and put these huge sums of money to provide the much-needed food security, education and health for our people. 


From People's Democracy

Friday, November 6, 2009

The Great Spectrum Robbery: More Skeletons Tumble Out Of Manmohan Singh's Cupboard

Even after the Spectrum Scam came to light, the UPA government made no move to stop this open loot of the public exchequer

The telecom spectrum scam is now back in the news with CBI raiding the Department of Telecom (DoT), reportedly at the request of the Central Vigilance Commission (CVC). The CVC had earlier written to the Department of Telecom on this issue and had made clear that it was not satisfied at the explanation given by DoT.

Why A Raja of the DMK (the minister concerned), who has self-admittedly been the key figure in this entire exercise, should be outside the investigations of the CBI is the key question?

Is it merely an exercise to find some lowly scapegoats and thereby divert attention from the real figures? If the minister continues to be in charge, he will obviously try and thwart the investigations. Even the prime minister has already given a clean chit to the minister, making CBI investigations even more difficult.

To recapitulate the spectrum swindle, the all-India license and the spectrum for additional cellular operators (2G operators) was given away on a first-come-first-served basis at 2001 prices. TRAI, experts within and outside the government, had all stated then that there was no justification for using 2001 prices when there were barely 4 million mobile subscribers as against 300 million subscribers in 2007.

Soon after this sale, the parties who had secured the licenses sold it at about 6-7 times the price they had paid without doing any development at all. The difference between what the companies paid - a total of Rs 9,000 crore - and what the market price of these licenses were - anything between Rs 60,000 to 100,000 crore - is the scam, making it by far the biggest scam ever in this country.

Who were the companies that benefited from this award of licenses?

There were nine corporate entities who secured 120 licenses, which benefited from this under-valuation of the license fees -- Unitech Builders, Venugopal Dhoot’s Videocon, Swan Telecom, Loop Telecom (reportedly owned by Ruias), S Tel, an unknown company owned by a shadowy entity Telecom Investments (Mauritius) Ltd and older players such as Shyam Telelink,, Idea Cellular, Spice and Tatas. Only a few of these were telecom companies or had any real interest in telecom.

The deals struck soon after between UAE’s telecom operator Etisalat and Swan Telecom, and that between Unitech and Talenor (of Norway), brought out the magnitude of the under-valuation. Swan Telecom sold 45 per cent of its stake to Etisalat for $900 million, taking its book value to $ 2 billion (Rs 10,000 crore).
This is without putting up any infrastructure, let alone actually starting operations.

The Unitech-Talenor (of Norway) deal was no different: it sold 60 per cent of its stake to Talenor for Rs 6,120 crore while paying only Rs 1,651 crore as license fee. Thus, the new entrants secured licenses for Rs 1,651 that were being valued in excess of Rs 10,000 crore by the market within a few months of their securing the licenses!

A Raja, the minister concerned, has provided two defences to the charge that his actions led to a huge loss to the exchequer. One is the argument that he had no alternative as first-come-first-served was some kind of internal law that all telecom ministers had to obey and all his predecessors had also followed. He has not referred to any document or policy which suggests that all new licenses had to be given only on a first-come-first-served basis.

Both the TRAI and officials in the Department of Telecom had in fact suggested a bidding procedure for award of licenses. The second argument that Raja has advanced is that the license fee of Rs 1,651 crore was somehow written in stone by TRAI, a contention that TRAI has since denied.

Let us look at this absurd first-come-first-served argument. The minister has referred to National Telecom Policy (NTP) 99 and the TRAI recommendations of 2003 to justify his first-come-first-served principle. The simple fact is that after NTP 99, there was an auction in 2001 for the 4th GSM license and therefore referring to NTP 99 for justifying this principle does not hold water.

In fact, the DoT had referred this matter to TRAI and TRAI had recommended in June 23, 2000 that a multi-stage bidding process be followed with auctioning for the license fee, which is what was finally followed. Secondly, the 2003 TRAI recommendations regarding first-come-first-served principle that Raja talks about, referred to those parties who had secured licenses and were awaiting spectrum and not to issuance of new licenses.

What the minister is deliberately obfuscating here is that in India, we have bundled the spectrum with the license and not auctioned them separately. So giving spectrum on a first-come-first-served basis to parties that have already secured licenses is quite different from that of award of new licenses and spectrum on a first-come-first-served basis.

The then TRAI chairman Nripen Mishra had had rebutted the minister’s claim that TRAI had recommended first-come-first-served with 2001 pieces and clarified their recommendations had asked that new entrants be brought in through a multi stage bidding process. The  TRAI’s recommendations in “Review of License Terms and Conditions and Number of Access Providers” dated August 28, 2008, in para 2.73, had made clear:

The allocation of spectrum is after the payment of entry fee and the grant of license. The entry fee as it exists today is in fact price discovered through a market based mechanism applicable for the grant to the 4th cellular operator. In today’s dynamism and unprecedented growth of the telecom sector, the entry fee determined then is not the realistic price for obtaining a license.

On both counts then, Raja’s defence that he was merely following what TRAI had told him or earlier ministers had done bears no credibility.

But this is not all. There was a detailed note prepared in 2007 by the secretary telecom, DS Mathur, which had evaluated three options regarding award of licenses. It had considered first-come-first-served with 2001 license fee, and two different ways of auctioning the licenses/spectrum.

The note also made clear that the first-come-first-served basis with an old license fee was not the best way of giving out licenses and made no reference to this so-called iron rule of giving licenses on a first-come-first-served basis that Raja keeps talking about. It is interesting to note that as long as DS Mathur was the secretary, no licenses were issued and only after his retirement in December 2007, were the new licenses issued.

Raja has also made another claim in his defence. This is that he broke the cartel of telecom operators. If this were so, then the consumer should have seen his telecom bills drop. This has not happened. What Raja has achieved is that he has enlarged the telecom cartel with his favourite companies.

The claim that he has broken the telecom cartel has also another problem. If his defence is that he was only following existing policy and TRAI recommendations, he cannot take credit for his actions – according to him, he had no other choice. So he is either responsible for taking a decision to break the telecom cartel, and therefore also directly responsible for the loss to the exchequer or he is responsible for merely following existing procedures. He cannot have it both ways.

The other element of the scam is the license terms and conditions. If there was indeed a genuine desire to keep license fees low and thereby benefit the ultimate customer, there should have been strict clauses locking-in share-holding and sale of licenses. Not only was this not done, the Merger and Acquisition Guidelines issued by DoT on 22 April, 2008 superseding its earlier guidelines, deliberately omitted all mention of acquisitions and only talked of mergers.

The ministry seems to have gone out of its way to facilitate the immediate selling of these licenses for speculative gains. Without any lock-in measures, the gross undervaluation of the spectrum could only lead to windfall profits for the new licensees.

The first-come-first-served policy for award of licenses was further compounded by entirely arbitrary operation of even this principle. The cut off dates for submission of applications were announced with only a 72 hour notice; an entirely new date for capping the applicants were chosen without any basis; and the awards of licenses were made in a free-for-all melee, in which the parties depositing the cheques earlier were given preference.

Media reports then talked of CEOs of companies, who were in the know of this capricious principle, coming to Sanchar Bhavan with bouncers to elbow out other competitors and jumping the queue. Never before have we seen such an unedifying spectacle in the award of licenses in the telecom sector. The entire exercise was one of playing favourites and not awarding licenses in an open and transparent manner.

Even after the scam had come to light, the UPA government had made no move to stop this open loot of the public exchequer.

The CPI(M) had demanded a set of immediate measures by which licenses given at such low prices should be locked-in for a specified period. It had also asked that windfall tax should be levied on all such sale of licenses. On both these counts, the UPA government then took the position that this was a corporate issue and the government had no role to play, never mind the fact that they were the ones who had issued licenses at such ridiculously low prices.

It is time that the minister concerned and the government take note that their defence on the spectrum issue has no takers. Raja must go if this government is even half-way serious of addressing the issue of probity in public life.

Prabir Purkayastha

Thursday, June 11, 2009

The Murky Truth Behind Mumbai Varsity's Ad Hoc BMM Programme

By Roger Alexander

Since my last article on the so-called job-oriented courses being offered by most Mumbai colleges, more skeletons are stumbling out the Mumbai University's cupboard, exposing a scam of monumental proportions. At the heart of the scam are the lives and future of young students and their gullible parents.

A devastating report report in the Times of India today (June 11) reveals that undergraduate colleges in Mumbai have yet to receive a copy of the new syllabus for the Bachelor of Mass Media (BMM) course despite the fact that classes for the third year have already begun and admissions to the first year are under way!

Can you believe it – a course that cost upwards of Rs 70,000 (you got that right) does not have a syllabus! And this is just the beginning. Mumbai colleges offering this course do not have full-time faculty either. And yet it being packaged and sold as a passport to material success. And starry-eyed students hoping to make it big in the media are being led like lambs to slaughter.

This self-financing course (meaning the government does not pay faculty salaries or for infrastructure) is a goose that lays golden eggs. And many liberal arts colleges have jumped on the moolah-making bandwagon to make a quick buck in the name of providing job-oriented courses. There is also a 'degree' in Bachelor of Business Management (BBM) on offer, but more on that some other time.

So how do the colleges make money out of a course like BMM? The first step, of course, is to obtain Mumbai University's permission to start the programme which already has the UGC's sanction. If it's an 'established' college, the procedure is perfunctory, to say the least.

The next step is to hire 'faculty'. These are not academics paid UGC grades (upwards of Rs 30,000 per month plus benefits) but 'visiting faculty' who are hired on an hourly basis, normally @ Rs 500 per hour/lecture. Most of these lecturers, who may otherwise be qualified in their respective fields, are normally retired teachers or out-of-work journalists and do not figure on the muster as full-time employees.

In fact, many of them move from college to college for lectures during the course of the week. And on landing better jobs they leave mid-term, leaving students high and dry till some other visiting faculty is roped in to keep the course going.

The pathetic state of the self-financing courses is evident from the saga of the making of the BMM syllabus of Mumbai University. According to the TOI report, a meeting of the ad-hoc Board of Studies for the BMM course decided on January 15 to translate the entire course into Marathi so that students would have the option of pursuing the course in either English or Marathi. So far so good. However, it was later came to light that the University had arbitrarily injected an entire component of Marathi and Hindi translation into the syllabus!

Translation? This is a specialised field requiring expertise in two languages. And here you are with the University decreeing students - who can't put two sentences in English together to save their lives - to master a second and even a third language.

The report quotes Nandini Sardesai, retired head of the sociology department at St Xavier's College and now a BMM visiting faculty (sic), pointing out that while the new ad hoc committee for BMM – it replaced the previous ad hoc body - was set up on April 1 and the syllabus changes were presented at the University's Academic Council meeting on April 21. “How did they draft the syllabus in 20 days,” she is reported to have asked.

A memorandum from BMM course-coordinators (a euphemism for someone in charge of hiring visiting faculty) protesting the changes to Mumbai University chancellor SC Jamir states, “The course in Effective Communication in English has become trilingual and expects Class XII proficiency in all three languages. All HSC students will be disadvantaged under the three language formula, as also students who have done CBSE and ICSE.”

(I think the protest was lodged because colleges will have to hire more visiting faculty for the new module, meaning a drain on the revenues unless students are forced to shell more by way of fees.)

However, Pro-Vice Chancellor AD Sawant insists that it is the University's vision (ha!) that all BMM students be able to translate from English to Hindi and Marathi. “This is very important for a journalist. It is also important in the advertising field,”' he opined loftily. (Sawant is a bureaucrat who was a director in the state government's department of education till he was promoted.)

As per the new syllabus, students are not expected to study these texts. “Faculty shall brief the students on the ideas, writing methodology and achievements of these writers in not more than 1,500-2,000 words.”

Just think of it. A student aspiring to be a Marathi journalist now has to master English to pass the course after having studied translation in not more than 2000 words! I've worked for newspapers and magazines for more than two decades and no employer, including TOI, requires its journalists to know a second language, let alone a third one, as a pre-requisite for employment.

With ad hoc committees designing ad hoc course taught by ad hoc teachers in an ad hoc manner in 2000 words or less, Mumbai University wants to produce ad hoc graduates who will take up responsible positions in newspapers and magazines, TV, ad agencies et al.

No wonder the media is in a pathetic state.

Roger And Out
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