Sunday, March 22, 2009

Spectrum Scam : India's Mother of All Scams

The 2G Spectrum allocation scam, considered as the mother of all scam in India, caused more than Rs. 60,000 crores loss to public exchequer exposes the vulnerability of prevailing laws of the Nation, at the whims and fancies of political-middlemen nexus. The word Spectrum simply means the allotment of Electro Magnetic Waves, the property of a Nation to the mobile telephone operators as well as to the others in the communication industry.

The entire scam broke out during the dubious decisions taken by the Telecom Minister A.Raja, by allotting 2G(second generation) spectrum to new entrants in the telecom sector at damn cheap price. The whole procedure lacks cabinet approval, while such a huge deal seeks mandatory approval of Cabinet Committee on Economic Affairs. The Spectrum was allotted in 2008 beginning at price fixed in 2001, violating the Telecom Regulatory Authority of India’s vehement objection. More over there was no auction, the license were gifted on a shabby ‘first come first serve method’.

The license fee fixed in 2001, where India had only four million subscribers, were simply applied to when spectrum licenses were granted in 2008 also, ignoring the fact that the subscribers number had crossed 300 million. Nothing prevented Minister Raja to ‘gift’ licenses to the mobile companies at a throw away prices, though TRAI Chairman Nripendra Mishra and Finance Ministry made objections.

There is joke in the Telecom sector on the basic root of the spectrum controversy. When Dayanidhi Maran was thrown out of the Telecom Ministry on May 2007, the then Minister for Environment and Forests Raja entered the Sanchar Bhavan, the head quarters of the Telecom Ministry along with the real-estate brokers of Parayavaran Bhavan(head quarters of Environment Ministry). According to telecom officials, this spectrum scam is the entry of real estate brokers in the telecom sector or tussle in sharing of the scarce electro magnetic waves (spectrum) between the existing telecom brokers and new real estate brokers.

The joke became a fact, when real estate companies Swan and Unitech bagged the spectrum license at a throw away price and they off-loaded their shares at a whopping price to multi-national telecom giants. The Swan Telecom bagged the license for Rs.1537 crore for operating in 13 circles. Within months (September) it sold its 45 per cent of shares to Etisalat, the telecom giant in UAE for 900 million US dollars (Approximately Rs.4500 crore).

Similarly, the Unitech, another real estate company too entered into a bumper deal, without investing anything in telecom infrastructure. The company got license to operate in 22 circles for Rs.1651 crore. Within weeks, it sold 60 per cent shares for Rs.6120 to the Norwegian company Telenor, who is currently a major telecom player in Pakistan and Bangladesh.

The way on which these two controversial real estate companies bagged the telecom licenses can be compares to the DDA flat allotments or other real estate allotments in fictitious names. In a crucial strategic sector like telecom the Unitech gave application for licenses in several names. They had applied in the names of Unitech Infrastructure, Unitech Builders and Estates, Aska Projects, Nahan Properties, Hudson properties, Volga Properties, Adonis Projects and Azare properties. But they were able to merge all their licenses, when Raja notified another dubious notification.

Swan Telecom, floated just two years ago, earlier known, Swan Capital. Anil Ambani earlier owned this company. Ambani had submitted for GSM license in January 2007, when his Reliance Mobile was permitted to operate only CDMA system. When dual policy was declared, Ambani lost interest in Swan, as he can operate both technologies through Reliance. This company was taken over by Maharashtra based real estate entrepreneurs Shahid Balwa and Vinod Goenka of Dynamix Balwa group. There are rumours in the telecom sector that the take over real estate businessmen was felicitated by Raja. Shareholding pattern of Swan coincides with zoology, where the ownership goes to Tiger Trustees, which controls Parrot Investments in Mauritius, which owned by Zebra Investments in off-shore money parking islands in the Indian Ocean.

When all allegations broke out, Raja kept saying he was keeping the rulebook, what his predecessors had followed from 1994. He justified his acts for breaking the cartelization in the telecom sector and claimed ‘aam admi’ would be benefited by his decisions. Even his mentor Karunanidhi rubbished the allegations that the ‘leaders of certain political parties can’t tolerate the rise of a humble Dalit’.

The Pioneer’s series of investigative reports became a blow to Raja’s pretending of innocence and corruption free. His money parking methods by floating companies in the name of close relatives is now open. After becoming the Union Minister in 2004, Raja’s close relatives started real estate companies. The real estate companies Green House Promoters, Equaas Estates, Kovai Shelters Promoters are filled with his brothers, nephews and nieces as Directors of the Board. He even put his wife M.A.Parameswari in the board of Green House and Equaas Estates, by violating the service rules and code of conduct of ministers. As a Cabinet Minister, Raja has to inform the Prime Minister on wife’s business and file a mandatory affidavit that there is no clash of interest in the discharge of his duties.

Raja’s now prefers to say that all the entries in the Registrar of Companies are wrong and he and his wife was not aware that, she was a director. The Equaas Estates’ domestic turn over in the very first years shows more than Rs.755 crore, which they now prefers to say a wrong entry like Satyam Computer Raju’s confession.

Green House has even opened a Singapore office, violating the foreign exchange norms. In Kovai Shelters, one director Dr.R.Sridhar, nephew of Raja is holding 15 per cent shares, while holding a Class-1 officer post in the Ministry of Environment.

The Pioneer reported on December 15, quoting highly placed sources in the Telecom Ministry on the plan of Swan Telecom to acquire 49 shares in Raja’s relative’s Green House. But this move was aborted and the money parking took a different route.

The documents filed with Registrar of Companies, Mumbai reveal the mysterious allotment of shares to Tamil Nadu based businessmen in Swan. On December 17, 2008 the Swan has allotted Rs.380 Cr worth shares to Chennai based Genex Exim Ventures. This company was floated four months ago with just Rs.1 Lakh capital.

Earlier, when the spectrum controversy broke out, Raja used to defend that the Swan and Unitech belong to Maharashtra and Delhi and no person from Tamil Nadu was associated with these companies.

According to documents filed with the Registrar of Companies in Chennai, Genex was incorporated in September 17, 2008 with two directors, Mohammed Hassan (58) and Ahamed Shakir (41). The company was represented by Ahmed Syed Salahuddin (32) on the board of Swan. All three of them belong to Kilukarai, a small coastal village in Ramanathapuram district in Tamil Nadu.

The Tamil Nadu link now gets further strengthened. Ahmed Syed Salahuddin is the younger son of Syed Mohammed Salahuddin, the NRI business tycoon heading the Dubai based real estate conglomerate ETA Ascon Star Group, which in turn began its Indian operations in 2006 by floating several real estate firms across the state. Raja was then Union Environment Minister and his party the DMK assumed power in Tamil Nadu.

The ETA Group entered into a MoU with the Tamil Nadu government for setting up an IT Economic Special Zone worth Rs 3750 crore, when A Raja became the Union Telecom Minister in May 2007. Tamil Nadu Chief Minister M Karunanidhi was present at the much-hyped MoU signing ceremony for the project proposed at Kancheepuram, near Chennai on a nearly 500 acre plot.

It is mysterious that a large business group should enter Swan’s board through a company with a meager one lakh paid up capital. Incidentally, Genex Exim, having acquired more than Rs.380 Cr of Swan Telecom shares, has not filed any document with the authorities to show their source of income.

Raja’s favoritsm towards the Swan was exposed in the unprecedented deal with the state owned BSNL. On September 13, 2008 the BSNL had entered an unprecedented deal with Swan. The Intra Circle Roaming deal signed with the Swan is literally silent on the finance part. When controversies broke out the BSNL Chairman and Managing Director Kuldeep Goyal prefers to coin a new terminology for the deal. ‘The Limited MoU’ described by him is a day light robbery of public assets.

Raja shunted out all the senior officials in the BSNL and Wireless Planning
Co-ordination (WPC) wing of Telecom Department who objected the favoritism to the Swan. BSNL has never entered into Intra Circle Roaming deal with any operator till date.
With this deal, the Swan can use the spectrum, communication towers and the entire network of BSNL, without any cost. Though the BSNL management suggested charging 52 paise per call, it was mysteriously absent in the MoU.

The BSNL was forced to sign this deal, just 10 days before the sale of Swan’s shares to Etisalt for 900 million US dollars. The deal literally helped the Swan to pocket huge money, without investing anything.

Nothing happened, though the top telecom officials alerted the Prime Minister. Even a Congress MP Dharam Pal Sabharwal wrote to Prime Minister on this controversial incident on November 2008, no action was taken. According to the letter wrote to Prime Minister by the CPI (M) politburo member Sitaram Yechury in February 2008, clearly warns the ‘scam in the offing’, when more than 575 real estate companies and stock broking firms approached the telecom ministry for spectrum license. Even after misleading the Parliament, Raja kept saying he had the concurrence of Prime Minister.
Raja blatantly lied to the Parliament that his action on 2G-spectrum allocation was never objected by TRAI or Finance Ministry.

At present Raja is eager to allot 3G (Third Generation) spectrum before his tenure. But his attempts were foiled after the Government had decided to refer the 3G auction to Group of Ministers (GoM).

The auction was earlier scheduled on January 16, and shifted to January 30 and now deferred indefinitely, after the intervention of Cabinet Secretary, who suggested ‘thorough study’. But the current developments show that the auction may not take place during the tenure of this government. Now the question hangs fire is who authorized Raja to announce the auction dates in advance, before getting Cabinet clearance.

Though aware of Raja’s daylight robbery in every stage, the compulsions of coalition politics, kept the Prime Minister Manmohan Singh to sit in the gallery as a mute spectator. As and when he summons Raja, his political patriarch Tamil Nadu Chief Minister M.Karunanidhi lands in Delhi and kept Singh silent by dashing into Madam Sonia’s 10 Janpath.

On December 4, Karuanidhi landed in Delhi with a multi-party delegation to raise the issue of the ‘plight’ of Sri Lankan Tamils. The delegation met the Prime Minister at 10 am. After an hour, leaving all the party leaders, Karunanidhi met Sonia Gandhi along with his daughter Kanimozhi. Even his close confident and Union Minister T.R.Baalu was asked to leave after the photo session. After the meeting Karunanidhi held a press conference and claimed that he had discussed the Sri Lankan issue with Prime Minister and Sonia Gandhi.
Skeptic Tamil leaders ask, then why are they not allowed to participate in the talks with Sonia Gandhi, while they were all in the meeting with Prime Minister. According to them Karunanidhi asked Congress ‘help’ in sharing the burden of spectrum scam.
[Writer is Special Correspondent of 'The Pioneer' daily from New Delhi, India.]
('The Pioneer' had published series of reports on Dec 2008 - Mar 2009 on the Spectrum scam and other related issues)


  1. This comment has been removed by the author.

  2. awsome insight ....thanks a lot for the details..u rock

  3. When a thief is caught he is not just advised to leave thieving and allowed to go.Raja should be arrested along with all involved.His crime is worse than Kasabs as he is an Indian and an economic terrorist against his own country as described by the BJP spokesman.He should be put in jail for lifetime and all the money should be recovered.

  4. Dear sir ,
    I gave a link to your post from my post. So please visit my blog also. But i wrote in tamil.

  5. pretty awesome insight.. thanks a lot

  6. Can you check if there is any corruption in the Insurance scheme in TN. It is also run by ETA.

  7. "DoT Invites Bids for 4G Spectrum Allocation"

    Full details at

  8. Thanks a lot... for youths like us who do not have any knowledge about the goings in the political world.. blog is a way in which the youth will actually know about what is happening in our country, and we should be keen on voting right persons.... thx again

  9. Excellent article to know the facts.

  10. Thank you so much for this blog. There are great insights and minute details of the entire episode, which is difficult to find elsewhere.

  11. Can you please post links to your initial articles on Dailypioneer that broke the story? First 10 articles would be worth reading to get started.

    Does anything stop you from posting all articles that you wrote for Daily Pioneer related to the 2G scam from being posted on your blog?