Tuesday, March 8, 2016

Aircel - Maxis scam : ED - IT raids dig up empire of PC's son in 14 countries

J Gopikrishnan / New Delhi / Feb 29, 2016

Former Finance Minister P Chidambaram’s son Karti has built a huge empire for himself in different parts of the world by making investment in real estates and engaging in other business activities in London, Dubai, South Africa, Philippines, Thailand, Singapore, Malaysia, Sri Lanka, British Virgin Island, France, USA, Switzerland, Greece and Spain. This came to light from the documents recovered during the recent joint raids of the Enforcement Directorate and Investigation Wing of Income Tax in the Aircel-Maxis scam.
The investigation team got the details of Karti’s wealth following raids on his company, Advantage Strategic Consulting, which is involved in the Aircel-Maxis deal for financial transactions with telecom beneficiaries. 
Most of the transaction and purchases of properties and acquisition by Karti was executed through Advantage’s Singapore-based subsidiary Advantage Strategic Consulting Singapore Pte Ltd. According to the investigators, the ED and I-T (Investigation Wing) are expected to contact their international counterparts to get more details from the 14 countries as per the United Nation’s Convention on prevention of money laundering.
The 2G Court had already issued Letter Rogatory to Singapore for getting transaction details of the Karti-controlled company in Singapore.
The probe details coming out of the recent raids expose massive wealth acquired by Karti during 2006 to 2014 when his father was Finance Minister and Home Minister at the Centre. Karti’s Singapore firm acquired 88 acres in September 2011 at Surridge Farm in Somerset in the UK for one million Pounds. The deal comprises four land titles, which were seized by joint probe team of ED and I-T. Karti’s company in Singapore also has investments in Artevea Digital Limited in Cambridge and has transactions with another London-based company Oppenheimer Investments (UK) Limited.
According to the details unearthed by investigators, Karti’s Singapore-based firm had acquired majority shares of a big resort in Sri Lanka, known as Lanka Fortune Residencies. This company owns the prestigious resorts ‘The Waterfront’, ‘Weligama Bay Resort’ and Emerald Bay Hotel. During the raid, the tax sleuths unearthed the acquisition agreement papers between Karti’s Singapore company and share holders of the Sri Lankan firm. Document of money trail of investments made in a Sri Lanka with a Lanka-based financial firm, Union Development & Investment Company Private Limited, were also seized in the December raids.
The probe details how Karti’s Singapore firm routed money via Dubai to acquire three farms and vineyards in South Africa, identified as Rowey Farm in Grabouw, Cape Orchards and Vineyards Private Limited, and Zandvliet Enterprises, a wine and stud farm in Ashton. The Karti-controlled Singapore firm also had money transactions with Nicholls Steyn and Associates in South Africa.
The Dubai-based Desert Dunes Properties Ltd has also investment in Karti’s Singapore-based company Advantage. The sleuths have unearthed a money trail of 1.7 million Singapore Dollars between these firms. Another Dubai-based company, Pearl Dubai FX LLC, also had financial transaction with the Advantage.
The Advantage’s Singapore subsidiary had entered into joint ventures with the Philippines-based companies to obtain a franchise team of International Premier Tennis League (Asia). The Philippine firms, which were engaged in joint ventures with the Karti-controlled company, are SM Arena Complex Corporation, Sports Entertainment Events Management Inc and two persons from Philippines - Juna Kevin and Haresh C Hiranand.  
The Advantage had also had financial transactions with another real estate company in Singapore known as Real Beyond Pte Ltd having three subsidiaries in Malaysia. The investigation has unearthed that these transactions led to 16 land purchases in Thailand.
The Advantage’s Singapore unit has set up a firm in British Virgin Island (BVI), namely Somerset Surridge Ltd. The Advantage also invested 400,000 Singapore dollars in another BVI firm known as Full Innovations Ltd. It also has financial dealing with Geben Trading Limited in BVI and offices in Switzerland. This firm’s major transactions were through the famous Swiss Bank, namely UBS. The investigators got proofs of transactions in Dollars and Euro. The Advantage also has transaction of five million Singapore dollars with another firm in Singapore, namely Unison Global Investment Ltd.
The Karti-controlled company in Singapore has also entered into joint ventures with Gravitas Investments, Match Point International Tennis Events to buy a franchise Tennis team called ‘Manila Mavericks’.
The investigators unearthed that this deal was worth of 12 million US dollars and the money was paid in 10 installments. 
The Advantage had also acquired a residential flat in Malaysia worth 1.9 million Malaysian Ringgits from a firm called Peninsular Smart. The probe team also found that the Advantage holds franchisees of CafĂ©’ Coffee Day in some areas of Malaysia. The investigators have found several transactions to Karti’s Singapore firm with Malaysian companies. Malaysia is the head quarters of telecom giant Maxis which acquired Aircel in 2006. The raids have seized some payment details amounting to more than Rs.30 crore in foreign currencies.   
The Advantage in Singapore also opened a subsidiary firm in Barcelona in Spain known as Advantage Estrategia Esportiva SLU in August 2012. This is a sports academy having four acres with seven tennis courts. Karti-linked Singapore firm has also one million US dollar investments in a company in France known as Pampelonn Organisation. The Advantage also has transactions with a Greek firm known as Pisani John Sakellarios in Athens. 
Karti’s Singapore company has also transferred 50,000 dollars to a Bank of America account in the name of “Chennai Reserve - Business Advantage Checking” and the beneficiary of this transaction was one company called Kitchen Inc, a Delaware Corporation company in New York engaged in issuance of Convertible Promissory Notes.
The Chennai-based Advantage also has transactions with Aircel Televenutres, DCB Client, Diageo Scotland Limited, Katra Group, Sri Lanka Export Development Board, Unifi Wealth Management Ltd, VST Tillers Tractors, Carlton Trading Company, Claris Life Sciences’, ITC Centre, Best Land Realty Limited, Essar Steel Limited, Gokul Builders and Estates, S Kumar, INX Media, Reflections, Thiagarajar Mills Private Limited, Sak Soft, EL Forge Limited.  

All these massive investments, transactions, acquisition of companies and properties abroad were executed by the Advantage after the Aircel-Maxis deal in 2006. It is learned that ED and IT has dispatched all these information to Supreme Court, which is monitoring the probe on Aircel-Maxis scam in a sealed cover and also shared with their counterparts in CBI. Both CBI and the ED had said in their chargesheets that FIPB clearance given by then Finance Minister Chidambaram to Maxis to acquire Aircel was totally illegal.

Six telecom companies hushed up over Rs. 45000 cr : CAG

J Gopikrishnan / New Delhi / March 8, 2016

In what could be a mega scandal, the Comptroller and Auditor-General (CAG) has unearthed under-invoicing of revenue to the tune of over Rs45,000 crore by six telecom companies from 2006 to 2010. The CAG submitted a related report to the President’s Office and the Ministry of Finance in mid-February. The report, which is expected to be tabled in Parliament during the Budget Session, says that due to this massive under-invoicing, the exchequer lost more than Rs12,000 crore in taxes, that does not include penalty for tax evasion.
Given the go-ahead by the Supreme Court and the Delhi High Court, the CAG audited the revenue and expenditure receipts of Airtel, Vodafone, Reliance Communications, Idea, Tata and Aircel.
The auditors decided to undertake this exercise after they came across several cases of discrepancies in revenue calculations of the telecom companies in 2010 when the CAG was preparing the 2G scam report.  Alerted by the auditors, then CAG Vinod Rai ordered auditing of the revenue and expenditure of the six telecom companies.
After they challenged the decision in court, in 2011 Delhi HC asked the six telecom companies to share their accounts with the CAG and passed an order ratifying the CAG’s decision in January 2014. The SC in April 17, 2014, upheld the Delhi HC’s judgment on CAG’s power to audit any entity related to the revenue and expenditure of the Government.
During the audit, which officially started during August 2014, the CAG had called for the records and inspected the offices of all telecom companies.
“We were happy to note that there were several whistleblowers forthcoming to reveal the methods of under-invoicing by the telecom companies. Some companies were maintaining actual and manipulated accounting books and these whistleblowers helped us track down the original revenue earned,” said a senior auditor of the team engaged in the audit of the telecom companies.   
According to the auditors, each of the six firms under-invoiced the revenue between Rs6,000 crore and Rs18,000 crore.  
“What we noted is the difference in auditing in Government and private sectors. In the Government sector, not many people will come forward to help us, whereas in the private sector several people are forthcoming to expose the frauds to CAG,” he added. 
During the 2G scam audit, the CAG found discrepancies in the customer base of the telecom companies and revenue and tax figures. The telecom companies fielded a battery of top lawyers to oppose the CAG in the High Court and the Supreme Court.
The estimated tax evasion figure of over Rs12,000 crore is based on the tax structure and telecom levy norms between 2006 and 2010. The loss figure does not include the penalty for under-invoicing of revenue.

It is expected that if the Government start acting on the CAG report, the telecom companies might have to pay up to  Rs30,000 crore to the exchequer by way of tax and penalty. 
PS : CAG report was tabled in Parliament on March 11, 2016. Recommending the Government to check the revenues of telecom companies from 1999, the CAG in its report exposed that from 2006 to 2010, six major operators had under- invoiced Rs. 46045.75 crore resulting a tax loss of Rs.12488.93 crore to the exchequer. The apex auditor caught Airtel, Tata, Reliance Communications, Idea, Vodafone and Aircel for hushing up their revenues to evade mandatory remitting of portion of the revenue to the Government, which was collected from people.

The detailed audit report has devoted one chapter for each telecom company’s revenue during the four years and tax evasion. Among the total tax evasion of more than Rs.12488 crore, Reliance Communications evaded Rs.3728.54 crore and Tata evaded Rs.3215.39 crore. CAG found Airtel evaded Rs. 2651.89 crore, followed by Vodafone (Rs1665.39crore), Idea (Rs.964.89 crore) and Aircel (Rs.262.83crore).

Monday, August 3, 2015

Aircel-Maxis spectre back to haunt Chidambaram

Aircel-Maxis spectre back to haunt Chidambaram
CBI seeks details of deal’s audit from CAG

J Gopikrishnan
August 3, 2015 ‘The Pioneer’

In a move that could spell trouble for former Finance Minister P Chidambaram, the CBI has sought from the CAG details of its audit report in the Aircel-Maxis deal exposing “undisclosed” and “illegal”  fund flow of  Rs1,255 crore to Aircel from Malaysian company Maxis.
While the Foreign Investment Promotion Board (FIPB) had given approval for only `3,514 crore of investment by Maxis in Aircel, the CAG’s P&T Audit wing with the help of its counterpart auditors from Malaysia, has discovered that Aircel got `4,769 crore from Maxis in clear violation of Foreign Exchange Management Act (FEMA) and Prevention of Money Laundering Act (PMLA). 
“During the course of investigation of the above-referred case (Aircel-Maxis), it transpired that P&T Audit Office had conducted audit of Department of Telecommu-nications with reference to the Aircel-Maxis deal and had raised certain audit paras/objections. In this context, the following documents/information are required,” said CBI in a “Most Urgent” communication to CAG in the first week of July.
The CBI sought details of the audit report, audit paras/objections raised and also replies from Finance Ministry and Department of Telecom. In its final finding in January, the CAG’s P&T Audit wing observed that the FIPB approval to Aircel-Maxis was a “mockery” of FDI norms. It also pointed out that communications from the Finance Ministry in 2006 were “silent” on the value of the FDI flow in the above deal. 
It also blamed Finance Ministry and DoT for allowing Maxis to acquire 99.3 per cent of shares in Aircel in “secret ways.” During that period in 2006, foreign companies were allowed to invest only 74 per cent in telecom companies.  Interestingly to the CAG’s query in this regard, the Ministry of Finance in September 2013 said they had relied on the statement given by the Company Secretary of Aircel. 
Reiterating the CBI’s earlier findings, the auditors also said that as FIPB Chairman Chidambaram had no authority to approve any deal above `600 crore.
As per the rule, any investment above Rs 600 core has to be approved by the Cabinet Committee on Economic Affairs (CCEA). Despite this, the FIPB meeting chaired by Chidambaram approved the Rs 3,500 crore worth Aircel-Maxis deal in March 2006.
The CAG auditors found that this was the only case in which Chidambaram gave FIPB approval, while he referred all other similar cases to the CCEA. Under Chidambaram, the Finance Ministry even sent Malaysian company Maxis’ subsidiary Astro’s Rs 660 crore investment proposal in Sun TV Group to the CCEA for approval. The CBI in its charge sheet against former Telecom Minister Dayanidhi Maran, termed this investment as a quid pro quo from the Malaysian tycoon Ananda Krishnan.
“Audit further found that the letter of the Finance Ministry conveying the approval of FIPB in March 2006 did not indicate the approved quantum (amount) of the foreign investment i.e., upto which value the investment was to be made by Maxis group in Aircel Ltd,” said the CAG’s audit wing.
It was interesting to note that the Finance Ministry’s letter was dated March 20, 2006, and on the very next day Maxis invested Rs 3,514.35crore in Aircel. The CAG in its findings has given a detailed chart on how Rs 4,769 crore has flown from Maxis to Aircel.
The auditors also found that the Finance Ministry’s communications to Aircel were addressed to the c/o address of Amarchand Mangaldas & Suresh A Shroff & Co. Incidentally, in December 2014, Chidambaram represented one of the promoters of this firm in their legal battle of separation in Mumbai High Court.
In its charge sheet in August 29, 2014 against Maran brothers and Maxis owners, the CBI said that Chidambaram illegally gave FIPB clearance to Aircel-Maxis deal. The charge sheet also said that probe in the illegalities in grant of the FIPB clearances will be finished soon.  In October, the Supreme Court (SC) had ordered the CBI to submit a status report on the probe against Chidambaram upon BJP leader Subramanian Swamy’s petition.
In the first week of December, the CBI had interrogated the former Finance Minister. However, the CBI Joint-Director Ashok Tewari, the officer who summoned Chidambaram was unceremoniously shunted out to his parent cadre in Himachal Pradesh within months.

Enforcement Directorate (ED) had already attached Rs.750 crore worth of properties of Sun TV in March. However, the ED has not yet launched prosecution proceedings against the people involved for PMLA and FEMA violations in the Aircel-Maxis scam. The SC is expected to hear the case next week.

Thursday, May 28, 2015

My Interview in Dagens Nyheter in March 2012 about 2G Scam

Below is the rough translation of my interview appeared in Swedish-Norwegian newspaper - Dagens Nyheter (DN). The interview was published on March 23, 2012. I was in Norway to present a paper on "India's Telecom Scandal' at annual media conference called SKUP. The interview was bascially focused on the role of Telenor, the Government controlled telecom company in 2G Scam :
 Telenor knew all 

The Indian journalist J. Gopikrishnan (41) revealed the corruption scandal that could cost Telenor 17 billion kroner. He refuses to accept that Telenor did not know the about the corruption allegations surrounding on its Indian partner. Telenor says it is innocent. I won’t agree, said the Indian journalist J. Gopikrishnan.

He was the first journalist who questioned how a number of companies without the knowledge of the telecom industry were awarded cellular licenses in India in 2008. Gopikrishnan has since been credited with having discovered what is known as India's biggest corruption scandal. Time magazine has named the issue as one of the worst examples of abuse of power ever.

Among the companies that were awarded mobile phone licenses was the real estate company Unitech. Norwegian Telenor entered into partnership with Unitech in 2009. Today, their jointly owned Uninor 41 million customers, but the company is now without a mobile license after a recent highest Indian court’s order.

In December 2008, J. Gopikrishnan and medium-sized newspaper The Pioneer revealed close ties between the former telecommunications minister Andimuthu Raja and several real estate companies that were awarded mobile licenses.

The way the awards were handed out on, after a first come first served principle, is later cancelled by the Indian Supreme Court, and both the now former telecommunications minister and Telenor partner Sanjay Chandra is accused of corruption.

Telenor, the company came after the licenses were awarded. The company therefore believes it is an innocent casualty in the case, and that it had no reason to doubt the way the licenses were awarded.

Telenor’s claim that they did not know anything can’t be believable, says J. Gopikrishnan. I do not think you Norwegians are stupid. First, Telenor was very much aware of the value inherent in the Indian telecom market, and must have understood that the licenses were awarded for cheap, he says. Obviously there was huge corruption and known to all.

Second, Telenor is familiar with the political divisions in India and Asia. The company knows well that it is not possible to enter India when they have an  already established telecom operation in Pakistan, says Gopikrishnan, referring to the inflamed relations between Pakistan and India.
He believes that Telenor must have relied on political connections of its Indian partner and to was allowed to invest in India by paying a premium amount.  He believes, however, Telenor can work in the Indian market in the long run if they win auction.

Robbery in broad daylight

Telenor was proud on the wrong partner knowing all. Now, the best thing it can do now is to pay the market price when the licenses will be auctioned again. J. Gopikrishnan believes this corruption case in India is robbery in broad daylight. He tells about the deadlines that were changed in the last minute and that the telephone companies were able to raise money in such a short time are ample examples of manipulation. Now he believes the Indian Government's only option is to sell the cancelled licenses again in an auction to the highest possible price. Gopikrishnan guess Telenor must have to pay between three and four billion kroner to restore the licenses Uninor lost, corresponding to 17-23 million kroner. 

This weekend Gopikrishnan is attending journalists' conference of SKUP in Tonsberg town.
For me, this is not a scoop. For me it was luck in the career. I met a whistleblower and he guided me. I only made the job a journalist should do, he says when asked about his comments on the journalistic work.

Saturday, November 15, 2014

Mahatma Gandhi on Journalism

Famous quotes of Mahatma Gandhi on Journalism :  

The sole aim of journalism should be service.

Journalism has become the art of “intelligent anticipation of events.”

Journalism should never be prostituted for selfish ends or for the sake of merely earning livelihood or, worse still, for amassing money.

Journalism has a distinct place in familiarizing and expressing public opinion.

A Journalist’s peculiar function is to read the mind of the country and to give definite and fearless expression to that mind.

The newspaperman has become a walking plague. He spreads the contagion of lies and calumnies.

The press was called the Fourth Estate. It was definitely a power but to misuse that power was criminal.

Newspaper today had almost replaced the Bible, the Koran, the Gita and other religious scriptures.

The newspapers should be read for the study of facts. They should not be allowed to kill the habit of independent thinking.

In the East, as in the West, the newspapers are fast becoming the people’s Bible, the Koran The Zend-Avesta and the Gita rolled into one.

Freedom of the press is a precious privilege that no country can forego.

An itch for new is a variety of dissipation, debilitating to the mind and spirit, unless it is properly curbed.

The liberty of the press is a dear privilege, apart from the advisability or otherwise of civil disobedience.

The newspapers had become more important to the average man than the scriptures.

Courtesy : http://www.gandhi-manibhavan.org/

Wednesday, November 12, 2014

If I am pushed, I would think of one more book : Vinod Rai

Sunday, 21 September 2014 | J GOPIKRISHNAN | in Agenda

In a free-wheeling interview, Vinod Rai, whose tell-all book has brought up several debatable topics, shares with J GOPIKRISHNAN  the intricacies of his tenure as the 11th Comptroller and Auditor General of India

Your critics are asking what your motive to have come out with this book now is . How do you answer such queries?

Actually after retirement, I thought of letting this thing be a closed chapter. Whatever CAG can say, we had put it in our reports. But still some people were making allegations against me and the institution. My colleagues also suggested that I should put all these things in a book, which can be understandable to the common man.
Our CAG reports are not widely circulated and are technical in nature. I thought we should educate and alert the younger generation. These details will give them a perspective of our system and would lead to a demand for transparency in the future. As alleged by some people, I am not trying to attack anyone, neither do I have any motive.
In this book, you have devoted an entire chapter on the CBI’s ‘dirty tricks’ against you after the 2G scam came to light. Were you hurt by the UPA Government’s dubious move to turn the CBI on you?

I am not hurt. I was extremely surprised when I got an e-mail from a journalist, Dheeraj Tiwari, of The Economic Times on November 30, 2011, asking me for response on the CBI move to launch a preliminary enquiry (PE) against me.

I straight away called CBI Director Amar Pratap Singh. He said no such thing was proposed against me, but a probe had been launched against my former colleague Atul Rai. He sent an officer providing the details of the case.
The information report provided by the CBI officer showed that a PE was registered against Rai, CEO and MD of IFCI, and unknown officials of the Ministry of Finance. The allegations related to some investment decisions of IFCI. Rai worked with me in the Finance Ministry before he took command of IFCI. According to the PE, in February 2007, I apparently helped Rai to be expeditiously relieved from the ministry to become the CEO and MD of IFCI. In many places in the CBI report, my name was mentioned in a bid to put pressure on me and create innuendos. CBI’s PE gives an impression that Rai and I are close relatives. Let me state that I don’t even have a distant relation with him.
I decided to take on the CBI Director and told him that I will go to the media if the agency dared to do such nasty things. I asked him, “How can you do such things against a constitutional authority. If I am challenged, I will go to the media and expose it all”.
You must be aware of the persons behind this dubious move, but haven’t mentioned them in your book.

They decided to hit me personally after the 2G scam blew out. It was to injure my credibility and break me, to make me weak. I don’t want to name or identify the person or persons behind this move. Obviously, they were showing their vendetta for the CAG report on 2G. It must be a person powerful enough to influence the CBI Director.
Anyway, now your enemies are no more in power and you don’t have to worry about the CBI case.

The CBI has not yet closed this case. Why is it not closing this PE? It is simmering somewhere. Can you treat officials like this? I am a constitutional authority. Can the CBI do such things? Are they empowered to put my name in their information reports?
In your book, there is no mention about the role of your former boss and then Finance Minister P Chidambaram in the 2G scam. After the CAG report, his role came out and even courts have said that he and A Raja decided the price and approved the sale of shares to foreign companies jointly. How did your audit miss this angle?

We have audited the documents from the DoT. We also checked the documents from Finance Ministry. We have found objection of Finance Ministry officials. Those days, we did not come across these documents. These things had not been brought to our notice.
Later, it was proved that Chidambaram always insisted on illegal non-paper method for communicating with Raja.

No comments. Those days these things were not available to us.
CAG officials are facing tough resistance from Mukesh Ambani’s Reliance in KG Basin audit. What is your advice to the Government in this regard?

They are not co-operating. Documents are not shared with us. The Government has to take a call. Actually, the Government invited us to conduct an audit on KG Basin. Hence my suggestion is that in an original contract, there should be a clause providing liberty to the Government to appoint a Government auditor as and when it wishes.
Now you are facing legal actions for your revelations. Sanjay Nirupam sent you a notice. What is your strategy?

If they want to pursue the case, I am ready. I have said only the truth. They have abused me, called me names in the PAC meeting; there are minutes of the meeting. I will request the Speaker for the proceedings of the PAC. I must tell you that some good samaritan MPs had already given me all details which will prove what Nirupam and Sandeep Dikshit did to me in the meeting.
Moreover, there is a letter written by PAC Chairman Murli Manohar Joshi to all MPs condemning certain MPs’ behaviour towards me. This letter details how these MPs behaved with me in the PAC meeting. In that letter dated November 18, 2011, Joshi cites a Speaker’s ruling which made then Defence Minister VK Krishna Menon apologise to the CAG. These things are enough for me to prove my points in the court. I am ready to face anything, if they want to proceed.
But your book is silent on the JPC proceedings. We have heard there are certain Congress MPs like Manish Tewari who did the same to you.

No, it was different. Manish was aggressive in questioning. In PAC, Nirupam and Sandeep were calling me all sorts of names. They used the words — fraud, politically motivated etc. In public, politicians and ministers called me rogue, r-virus, Bhoomihar from Ghazipur etc. I have explained all these things with fitting rebuttals in my book.
Certain media organisations were also after you.

Generally, media always supported CAG and widely published our findings. Of course, some were against us; very few have vested interests. But most of the people in media always supported us.
What are your future plans? Entering politics or writing more books?

As far as politics is concerned, I can say no, never. I am not fit for politics. More books? Well, if I am pushed, I would think of one more book. I have not yet taken any decision on future plans; may be I will in a month’s time. I am not saying no to more books.
So you have more arsenal in store…if you are pushed?

I said if I am pushed, I will write one more.

[Published in 'The Pioneer'  on Sept 21, 2014]

Friday, March 28, 2014

Rules flouted to aid Mukesh Ambani's Reliance Jio : CAG

DoT  rules  flouted to aid Reliance Jio : CAG

‘The Pioneer” -  January 20,  2014 | J Gopikrishnan | New Delhi

After the exposé on irregularities in the KG Basin, the Comptroller and Auditor-General of India (CAG) has found blatant violations of Department of Telecommunications (DoT) rules and favouritism in the manner the Mukesh Ambani-led Reliance Group was allowed entry into the telecom sector. The CAG has raised several uncomfortable questions about the favouritism shown to Reliance Jio during the audit of 3G / Broadband Wireless Access auction.

The CAG’s recent findings and questionnaires to DoT detail the way the Government provided a backdoor entry to Mukesh Ambani’s company in the telecom sector in 2010. The apex auditor also claimed that favouritism was shown to the company that led to possible loss of more than Rs 20,000-crore to the exchequer during 2011-13.  The CAG also blamed DoT for providing monopoly to Reliance Jio in the broadband and 4G sector by withdrawing State-owned companies BSNL and MTNL.

The DoT has not yet answered the CAG’s queries on violations.  Documents available with The Pioneer show that auction for Broadband Wireless Access (BWA) Spectrum was stage-managed to give backdoor entry to Reliance Jio.
The CAG in its preliminary findings said, “a small company” Infotel Broadband Services Private Limited (IBSPL) was given approval to take part in the auction in mid-2010 without meeting the net worth limit and allowed to bid for more than Rs 12,750-crore.
The small company, with a turnover of just Rs 16 lakh and a single subscriber, had only Rs 3-crore authorised capital during auction. “The DoT did,  however, neither seek the sources of funding for furnishing the EMD (Earnest Money Deposit) of Rs 252-crore (1,500 times the company’s annual turnover or 100 times the paid-up capital of the company) in March 2010, at the time of application for the BWA spectrum,” said the CAG’s preliminary findings, seeking response from the DoT.
The IBSPL won the auction in all circles of India. Within hours of winning the auction, the subsidiary of Reliance Industries Limited (RIL) was allowed to take over 95 per cent of the shares of the small company. The takeover deal was worth Rs 6,000-crore. In the preliminary findings, the auditors say this deal created a windfall of more than Rs 4,800-crore to the IBSPL, which became the RIL’s subsidiary.
The auditors blamed the DoT for violating the mandatory lock-in period of three years, which bars acquisitions and mergers in the telecom sector. “A non-participant company exploited the loophole left by DoT officials in the eligibility criterion for obtaining BWA spectrum by acquiring a winning company without participating in the auction process, within hours of closure of the auction process, thereby vitiating the sanctity of the auction process,” said CAG.

The four-page communication to DoT, signed by Senior Audit Officer Rajendra Kumar, details the RIL’s surrogate takeover plans of the small company during March-June 2010. The auditors also blamed DoT for allowing Reliance Jio to obtain voice service facility while paying only for the BWA Spectrum, which is widely termed as 4G in the Indian telecom sector.

According to CAG auditors, Reliance Jio only paid Rs 12,750-crore for getting broadband operations across India. But later the DoT granted voice facility also without charging any extra money. According to the questionnaire sent to DoT, the auditors pointed out that for the similar voice service facility, the 3G auction winners paid more than Rs 33,000-crore for operating in all circles in India during the same period. Sources in CAG indicated that apart from favouritism, this move of DoT created a clear loss of Rs 20,000-crore to the public exchequer.  

After Reliance Jio’s entry, the State-run BSNL and MTNL withdrew from the broadband sector. These PSUs were also granted BWA spectrum. The Union Cabinet recently approved the reimbursement of money to BSNL and MTNL. In its communication to DoT, CAG said this move will leave “virtually the entire field to a company that had not participated in the auction process.”

Questioning the withdrawal of State-run companies, CAG officials indicated this was a clear move to provide monopoly in broadband sector to the Mukesh Ambani-led Reliance Jio.  

[This report was published in "The Pioneer" on Jan 20, 2014]