Deal cancelled due to CAG, now to pay the damages
Even when the CAG hinted at irregularities and losses in the deal Isro’s commercial arm Antrix signed with Bangalore-based Devas Multimedia (partly owned by Deutsche Telecom), it was obvious the numbers were vastly exaggerated. Buoyed by its largely correct 2G report in 2010, the CAG compared the prices obtained from the auction of 3G spectrum with the ‘satellite spectrum’ that Antrix was bundling along with the satellite it was building for Devas. The problem, as was pointed out by the former Isro chief, G Madhavan Nair, even then was that ‘satellite spectrum’ and ‘terrestrial spectrum’ were two different things since ‘satellite spectrum’ cannot be re-used—former VSNL chief BK Syngal had told FE when the CAG report had come out that while 100 MHz of ‘terrestrial spectrum’ could service 900 million customers, the same amount of ‘satellite spectrum’ could service just 1-2 million customers. Indeed, as Nair argued unsuccessfully then, the idea was never to use the ‘satellite spectrum’ for providing services of the type telcos offered on the ground, and if indeed Devas had done this, he or the government would simply have stopped this or asked it to pay a licence fee. But a scam-scarred government was having none of this, and the two expert committees it set up indicated procedures had not been followed, and scrapped the deal.
Sadly for the government, Devas refused to give up when the contract was cancelled in mid-2011, filed for arbitration and has now won an award of $562 million plus $110 million of interest from the International Court of Arbitration. Given the spirit of arbitration, the government would do well to pay up the award—it can, of course, delay the award for years as it has in other cases—and do well to introspect on its often one-sided and arbitrary decisions without paying any attention to the commercial interests of the aggrieved parties. It is also a wake-up call for the CAG and the media which more often than not does not even try to put things in perspective. In the Coalgate report, for instance, as this newspaper pointed out, the CAG looked at revenue streams over 20-40 years and did not even bother to discount these; nor did it look at the difference between likely reserves, proven reserves and what is extractable. None of this is to say the CAG does not play an extremely valuable role—had it not been for the CAG, the A Raja licences would never have been cancelled and coal blocks would continue to have been allocated in an opaque manner instead of being auctioned. But both the government and the CAG need to examine all aspects of their decisions/reports more closely—it is the possibility of other cases going against the government that explains why it is trying to delay so many of them.