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Thursday, 17 November 2011 00:28
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Don’t Trai the CAG

Rs 176,645 crore figure based on Trai recommendations


One lakh seventy six thousand six hundred forty five crore, or a mere Rs 2,645 crore? The debate over the losses caused by A Raja has hotted up with RP Singh, the CAG’s Director General who signed off on the 2G report, saying, after his retirement, that he was forced to go along with the much higher figure; Vinod Rai, the CAG chief, stands by the larger figure. Before getting into the fight over whether Singh or Rai is stretching facts, take a look at where the figures came from. Of the Rs 1,76,645 crore, Rs 36,993 crore is for the ‘excess’ spectrum that older firms like BSNL/MTNL/Bharti/Vodafone have got above the 6.2 MHz that their licence agreements say is to be given to them. So, we’re left with Rs 1,39,652 crore of losses due to the licences given by Raja for 157 telecom areas, or circles, across the country—of these, 122 were to new firms like Uninor and 35 to dual-technology firms like RCom and Tata Teleservices.

On May 11, 2010, when the 3G auctions were going on, Trai’s spectrum recommendations had a table that gave the value of an all-India 3G licence at Rs 15,934.82 crore for 6.2 MHz—by the time the auctions ended, this figure was Rs 16,750 crore. Trai did the exercise to see what to charge for the ‘extra’ spectrum, and said 2G prices had to be the same as 3G ones. Given that there are 22 circles for each all-India licence, this means Raja gave out 7.14 all-India licences. Multiply this 7.14 with Rs 16,750 crore and you get a figure of Rs 1,19,534 crore. The reason why you don’t get the Rs 1,39,652 crore figure given in the previous paragraph is because the correct way to do it is really circle by circle, which is what CAG did.

But when Raja only gave 4.4 MHz of spectrum and not 6.2 MHz, did CAG err in calculating the loss based on 6.2 MHz? No, since the licence agreements of these 157 circles said 6.2 MHz will be given eventually, though 4.4 MHz will be given initially. In several places in the May 11, 2010, recommendations, Trai also says 6.2 MHz has to be given.

Another figure, a lower Rs 53,523 crore for all 157 licences comes from the offer telecom firm STel made when Raja said he was giving out licences at Rs 1,651 crore—STel offered Rs 6,000 crore first and Rs 13,752 crore later, the CAG took an average of these. The prices Unitech and Swan sold their equity for, in the same way, gave a loss figure of Rs 55,574 crore and Rs 45,663 crore. You can argue, as Kapil Sibal does, that all figures are irrelevant since the government took a policy decision to give the licences out at 2001 rates, but you can’t fault CAG for pointing out the losses based on various methodologies, including the one favoured by Trai.



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