2G spectrum scam

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Jump to: navigation, search The 2G spectrum scam involved officials and ministers in the Government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones. According to a report submitted by the Comptroller and Auditor General based on money collected from 3G licenses, the loss to the exchequer was 176,379 crore (US$39.16 billion). The issuing of the 2G licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department investigated political lobbyist Niira Radia and the Supreme Court of India took Subramaniam Swamy's complaints on record [With Case type:Writ Petition (Civil),Case No:10, Year:2011].[1] The case details of the main PIL filed with the supreme court is Type:Writ Petition (Civil),Case No:423, Year:2010.[2] Former Telecom Minister of the NDA government Arun Shourie was the whistleblower who helped uncover the scam and also exposed many loopholes in the UPA government's policy towards issuing telecom licences.[3] In 2008, the Income Tax department, after orders from the ministry of Home and the PMO, began tapping the phones of Nira Radia. This was done to help with an ongoing investigation into a case where it was alleged that Niira Radia had acted as a spy.[4] Some of the many conversations recorded over 300 days were leaked to the media. The intense controversy around the leaked tapes became knownin the media as the Radia tapes controversy. The tapes featured some conversations between politicians, journalists and corporatation. Politicians like Karunanidhi, journalists like Barkha Dutt and Vir Sanghvi and industrial groups like the Tata Group were either participants or mentioned in these tapes.

Contents
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1 Parties involved o 1.1 Politicians involved o 1.2 Bureaucrats involved o 1.3 Corporations involved o 1.4 Corporate personalities involved o 1.5 Media persons and lobbyists involved o 1.6 Petitioners 2 Shortfall of money 3 Relationship between media and government o 3.1 Ratan Tata petitions over leak 4 Response to scam 5 Impact on stock markets 6 See also 7 References

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[edit] Parties involved

The selli of the li enses brought attention to four groups of entities - politi ians who had the authorit to sell li enses, bureaucrats who i plemented and influenced policy decisions, corporations who were buying the licenses, and media professionals who mediated between the politicians and the corporations on behalf of one or the other interest group.

[edit] Politicians involved

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Kanimozhi,Member of Parliament and daughter of DMK chief and Tamil Nadu Chief Minister Karunanidhi.In November 2010 Outlook published transcripts of six conversations between lobbyist Niira Radia and Kanimozhi from May 2009. India Today claims that these conversations reveal that Kanimozhi filtered the information flowing to her father (the Chief Minister of Tamil Nadu) and thereby "tipped the scales in favour of" A. Raja, who was Minister of Communications and Information Technology during controversial 2G wireless spectrum allocations in 2008. The New York Times's Delhi correspondent Lydia Polgreen said Raja's rise to telecommunications minister was "emblematic" of how politics in India really work, with the DMK "more closely resembling a sprawling family business empire than a political party," and highlighted Mr. Raja's "close relationship" with Kanimozhi.Raja was arrrested on February 2, 2011 for his alleged role in manipulating rules to allocate favorable spectrum to some telecom companies at throwaway prices.

Following the Central Bureau of Investigation's raid on Tamil Maiyam, an NGO of which she is a director,Kanimozhi said the DMK party will come out clean in the CBI probe, stating "The law has to take its own course. It is a process to prove us not guilty."After the February 2nd arrest DMK party members and workers immediately passed a resolution declaring that the arrest doesn't mean Raja is guilty, and claimed opposition parties were targeting him for political purposes.
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A. Raja, the Ex-Minister of Communications and Information Technology who was the minister when the controversial second round of spectrum allocations took place. Mr.Raja, an MP of the Dravida Munnetra Kazhagam from the Nilgiris constituency, was forced to resign following the public outcry. He was appointed the minister of telecommunications again for the second time when the UPA returned to power in the last general elections despite huge reservations from economists and other political parties. This was due to the pressure exerted by the DMK, one of the main allies of the Congress. He was arrested for his role in the spectrum scam and currently is lodged in the Tihar Jail in Outer Delhi. The CBI has raided his various houses, offices and other NGOs and beneficiaries related to A.Raja. M. Karunanidhi, the Chief Minister of Tamil Nadu and the DMK chief. Kanimozhi is the daughter of M.Karunanithi and the entire scam is hugely directed toward the top brass of his party. The Radia tapes indicated his wife and his daughter as beneficiaries in the deals involving huge corporates. Recently, Kalaignar TV, a television channel owned by Karunanithi and his family members was raided in connection with the

spectrum scam. CBI has unearthed evidence of money trail leading towards the Kalaignar TV.

[edit] Bureaucrats involved

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Siddhartha Behura, former telecom secretary who served in the DOT at the time of the 2G allocation. P. J. Thomas, Secretary of the Department of Telecommunications at the time of the 2G allocation. Pradip Baijal, a bureaucrat who is alleged to have recommended policies that favored certain Telecom companies when he was heading the TRAI. Post retirement, Baijal joined Noesis, a consulting firm.[5][6] Raja has made references to Baijal's decisions in 2003 as the basis for his decisions in 2008; something which has been attacked by Arun Shourie and several media pundits. The houses and offices of the bureaucrat were recently[when?] raided by the Central Bureau of Investigation as part of their investigations.[7] R K Chandolia, private secretary of Raja during UPA-I when the licences were awarded. He was an Indian Economic Service officer of the 1984 batch cadre.When Raja became the Telecom Minister once again in UPA-II, Chandolia had been promoted to the Joint Secretary rank. Raja re-designated him Economic Adviser, that gave him the charge of all important policy-related work. Chandolia interacted with all the licensees. It is said that it was Chandolia who, from DDG-access services A K Srivastava's room, had handed out letters of intent to representatives of various companies.[8]

The above mentioned all are involved with the case.

[edit] Corporations involved

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Unitech Group a real estate company entering the telecom industry with its 2G bid; sold 60% of its company stake at huge profit to Telenor after buying licensing (Including land values properties for towers)[9] Swan Telecom sold 45% of its company stake at huge profit to Emirates Telecommunications Corporation (Etisalat) after buying licensing[9] Loop Mobile Videocon Telecommunications Limited S Tel Reliance Communications Sistema Shyam Mobile (MTS) Sistema Mobile Russia Tata Communications Vodafone Essar Dishnet Wireless Allianz Infra[10]

[edit] Corporate personalities involved

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Anil Ambani - Reliance Group (ADAG)[11] Shahid Balwa - DB Realty and Etisalat DB Telecom(formerly Swan Telecom) Vinod Goenka - Dynamix Group Venugopal Dhoot - Videocon Group

Prashant Ruia - Essar Group

All of them have either been question by the CBI or are prospective suspects in the scam.

[edit] Media persons and lobbyists involved

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Nira Radia, a former airline entrepreneur turned corporate lobbyist whose conversations with politicians and corporate entities were recorded b the government y authorities .The contents were later leaked by unknown parties creating theNira Radia tapes controversy Barkha Dutt, an NDTV journalist alleged to have lobbied for A. Raja's appointment as minister. Vir Sanghvi, a Hindustan Times editor alleged to have edited articles to reduce blame in the Nira Radia tapes.

[edit] Petitioners
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Subramaniam Swamy, activist lawyer and politician, whose letters to the Prime Minister demanding action and affidavits and cases in the Supreme Court brought the issue into the public limelight. Paranjoy Guha Thakurta, a journalist who was one among the very first to write on the irregularities in the awarding of 2G spectrum allocation by the Telecom Ministry. He is also one of the petitioners in the 2G PIL currently being heard in the Supreme court.[12] Prashant Bhushan, on behalf of the Centre for Public Interest Litigation. Anil Kumar, on behalf of the civil society organisationTelecom Watchdog Others:Several eminent people like former chief election commissioners J.M. Lyngdoh, T.S. Krishnamurthy and N. Gopalaswami and former central vigilance commissioner (CVC) P. Shankar are also petitioners in the suits filed by civil society groups.[10]

[edit] Shortfall of money

A. Raja arranged the sale of the 2G spectrum licenses below their market value. Swan Telecom, a new company with few assets, bought a license for 1,537 crore (US$341.21 million).[13] Shortly thereafter, the board sold 45% of the company to Etisalat for 4,200 crore (US$932.4 million). Similarly, a company formerly invested in real estate and not telecom, the Unitech Group, purchased a license for 1,661 crore (US$368.74 million) and the company board soon after sold a 60% stake in their wireless division for 6,200 crore (US$1.38 billion) to Telenor.[13] The nature of the selling of the licenses was that licenses were to be sold at market value, and the fact that the licenses were quickly resold at a huge profit indicates that the selling agents issued the licenses below market value. Nine companies purchased licenses and collectively they paid theMinistry of Communications and Information Technology telecommunications division 10,772 crore 's (US$2.39 billion).[13] The amount of money expected for this licensing by theComptroller and Auditor General of India was 176,700 crore (US$39.23 billion).[14]

[edit] Relationship between media and government

Main arti le: Nira Radia tapes controversy Media sources such as OPEN and Outlook reported that Barkha Dutt and Vir Sanghvi knew that corporate lobbyist Nira Radia was influencing the decisions of A. Raja.[15] The critics alleged that Dutt and Sanghvi knew about corruption between the government and the media industry, supported this corrupt activity, and suppressed news reporting the discovery of the corruption.[15]

[edit] Ratan Tata petitions over leak

The tapes leaked to the public include conversations between Nira Radia and Ratan Tata. Tata petitioned the government to acknowledge his right to privacy and demanded accountability for the leak, with the Minister for Home Affairs, CBI, Indian Income Tax Department, the Department of Telecommunication, and the Department of Information Technology as respondents in the petition. [16]

[edit] Response to scam

In early November 2010 Jayalalithaa accused the Tamil Nadu state chief minister M Karunanidhi of protecting A. Raja from corruption charges and called for A. Raja's resignation.[17] By mid November A. Raja resigned.[18] In mid November the comptroller Vinod Rai issued show-cause notices to Unitech, S Tel, Loop Mobile, Datacom (Videocon), and Etisalat to respond to his assertion that all of the 85 licenses granted to these companies did not have the up-front capital required at the time of the application and were in other ways illegal.[19] Some media sources have speculated that these companies will receive large fines but not have their licenses revoked, as they are currently providing some consumer service.[19] In response to the various allegations , the Govt of India has replaced the then incumbent Telecom minister ,A Raja with Kapil Sibal who has taken up this charge in addition to being the Union minister for Human Resources Development.Mr Sibal contends that the "notional" losses quoted are a result of erroneous calculations and insists that the actual losses are nil.[20][21] The CBI conducted raids on Raja and four other telecom officials - former telecom secretary Siddharth Behura, Raja's personal secretary R K Chandolia, member telecom K Sridhar and DoT deputy director general A K Srivastava on 8 December 2010.[22] Raja, Behura and Chandolia were arrested on Feb 2nd 2011.[23]

[edit] Impact on stock markets

The first casualty in Stock Markets once Raja was arrested was DB Realty.[24] DB Realty had given 200+ crores to Kalaignar TV( owned by Karunanidhi's Wife) . The news led to 20% fall in the stock prices of DB Realty. Sun TV had its shares fall by 10% on the next day following rumours of Kalanidhi Maran having stake in Kalaignar TV.[25] Sun TV COO refused the allegations. Swan Telecom Chief Balwa was arrested on Feb 8 [26] and this led to rumours of links with Anil Ambani's Reliance ADAG and it led to 20% fall of his stocks . Its

reported that nearly 2 Billion USD was eroded from his stocks .[27] Spicejet stocks went down after reports of investigation on Maran's recent takeover of Spicejet .[28]