CAG was aware of rules before BWA spectrum auction: Department of Telecom

CAG was aware of rules before BWA spectrum auction: Department of Telecom
Rejecting allegations of favouring Reliance Jio Infocomm, the Department of Telecom has said the CAG was aware of rules before auction of BWA spectrum started, PTI report.

"There was a presentation given to all stakeholders as well as CAG (Comptroller and Auditor General) and CVC (Central Vigilance Commission) on April 6, 2010. The issues being observed by audit were not raised at that time," the DoT said in a reply to a draft report of CAG.

The auction for broadband wireless access (BWA) spectrum, which can be used for 4G services, started on May 24, 2010.

Reliance Jio, a subsidiary of Mukesh Ambani-led Reliance Industries, acquired Infotel Broadband Services Pvt Ltd (IBSPL) in June 2010, soon after the little-known firm won nationwide BWA spectrum for about Rs 12,750 crore.

The CAG in its draft report has castigated officials of the DoT for loopholes that allowed RJio to get pan-India high-speed BWA spectrum at the cost of the exchequer.

The auditor had compared rates of 3G and BWA spectrum from which it estimated that giving permit to RJio to provide mobile telephony accorded undue advantage worth Rs 22,842 crore to the company.

The DoT said 3G spectrum cannot be compared with BWA spectrum due to multiple reasons, the main being low cost of providing service using 3G spectrum compared to the cost in BWA spectrum. The department indirectly also questioned CAG's understanding of technical issues.

"It is not out of place to mention that without proper understanding of Radio Engineering as well as traffic Engineering, it is difficult to appreciate the technological features and its applicability to meet the requirements," the note said.

The DoT rejected demand of CAG to cancel BWA spectrum allocated to RJio. CAG's draft reported alleged that promoter of IBSPL had been in talks with RIL during the course of auction process which was in "gross violation of the confidential clause of NIA (notice inviting application).

"There is no evidence of release of confidential information with an intention of modifying the bidding behaviour. In fact the spectrum auctions conducted in year 2010

were one of the most successful auctions in the Indian telecom history which fetched final bid price multiple times the reserve price," the DoT note said.

The department said it would not have been appropriate for the department to bar conversation or know the details of talk between two private parties.

The CAG had questioned DoT for not seeking sources of funding of IBSPL for the earnest money of Rs 253 crore, which was 1,500 times the company's annual turnover and 100 times its paid-up capital when the application was submitted.

The DoT note said that there is no barrier in law for anyone small or big to raise money through financial market process.

"All these transactions are well known to financial regulators since amounts involved are very big. There are many private players in financial market like Flipkart, Myntra who started quite small through raising money from market and recently merged operations in Rs 2,000 crore deal," the note said.

The department rejected CAG's observation that IBSPL made unfair gain of Rs 4,800 crore by selling stake to Reliance Industries Limited.

"There is no evidence to suggest that IBSPL made unfair gain of Rs 4,800 crores. As per the records there was no transfer of existing equity shares held by IBSPL promoters. RIL invested in the company by subscribing to the fresh equity shares at par issued by the company as per prevailing guidelines," the note said.

The DoT said that all decisions related to to auctions were of the nature to fulfil the larger policy objectives in the interest of the economy and the government has not only the sovereign right to take policy decision but is also duty bound to take necessary steps to achieve policy objectives.

Read more about: cag, spectrum, reliance jio
Story first published: Wednesday, August 6, 2014, 9:20 [IST]
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