Government in tight spot over spectrum issue

Government in tight spot over spectrum issue

Nov 11, 2008

Under fire from its old and present allies, the government is finding it difficult to wriggle out of the telecom spectrum allocation controversy.

Political parties have stirred a controversy close to the general elections, and even the resignation offer by Telecom Minister A Raja has not pacified them.

The issue termed as "Rs 60,000 crore scam" by Left parties, and with Samajwadi Party (SP) general secretary Amar Singh too joining the bandwagon, Raja may have to do a lot of explaining in the coming days.

The CPI (M) has targeted companies like Swan and Unitech, for having hugely benefited during the 2G spectrum allocation, and has warned the government to invoke fair trade practices and anti-monopoly restrictions before the allocations of licences for 3G, likely to be done in December.

CPM alleges telecom fraud, govt denies

7 November, 2008
The government's decision to allow new mobile phone service companies has created huge controversy with the Left alleging that it has led to a loss of Rs 60,000 crore. The government, however, has strongly defended its decision.

An animated telecom minister defended the government's telecom policy of allotting licences to new mobile phone service operators.

"National telecom policy of 1999 does not allow auctioning in 2G phone service," said Telecom Minister A Raja.

On Thursday, the CPM alleged a scam while allotting licences for 2G mobile services. Instead of auctioning away the licences to the highest bidders, the CPM says, the government sold them on a first-come-first-serve basis earlier in 2008. But now, some of these companies have sold stakes to foreign buyers at a profit.

"We think that the rip off has been to the tune of around of Rs 50,000-60,000 crores," said CPM leader Sitaram Yechury.

The telecom ministry says it has always followed this model, but what has led to more questions is the low entry fee.

Each licence has been sold to private companies for an entry fee of Rs 1651 crores in January 2008.

Within nine months, two private buyers - and companies with no previous experience in telecom, Swan and Unitech - have sold a part of their stakes to foreign partners for Rs 4,000 crore and Rs 5,300 crore, far more than what they paid the government.

Government has justified the low entry fee, saying that it will keep costs low and will mean lower call charges for consumers. Government has also defended the stake sale by Unitech and Swan.

"I met the Prime Minister and the Finance Minister. The Finance Minister told me that none of the parent companies has sold out. They have only diluted their stake in order to get FDI," said Raja.

For now, the telecom minister has strongly defended the government's telecom policy. But given the controversy, surely one has not heard the last on this issue.

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