‘Cancel Reliance Jio’s broadband spectrum’

The CAG has suggested cancelling nationwide broadband spectrum allocated to Infotel Broadband Services, now a Reliance Industries company, for allegedly rigging the auction and violating rules.

CAG in a draft report sent to the department of telecom for comments, said, ‘The DoT failed to recognise the tell-tale sign of rigging of the auction right from beginning of the auction’ in which a small ISP, Infotel Broadband Services Pvt Ltd (IBSPL) emerged winner of pan-India broadband spectrum by paying 5,000 times of its net worth.

RIL, which acquired IBSPL within hours of it winning the spectrum and later renamed it Reliance Jio, said, ‘There is no final CAG report that we are aware of. That said we outrightly reject any suggestion whereby spectrum was acquired in any manner other than through a transparent bidding process duly supervised by Government of India.’ According to the draft report, IBSPL, ranked 150th in the list of ISPs, submitted an earnest money deposit of Rs 252.50 crore ‘through the covert and overt assistance of third party/private bank’, bid for Rs 12,847.77 crore (5000 times of its net worth) for pan-India spectrum and then sold the company on the day of completion of the auction.

These, according to the draft report, ‘indicated IBSPL’s collusion and sharing of the confidential information with a third party in violation of auction conditions/rules.’

RIL spokesperson said the auction for the BWA spectrum was one of the most competitive auction in the Indian telecom history which fetched final bid price more than six times the reserve price for the Pan-India spectrum.

The draft CAG report said, ‘Due to inclusion of inadequate eligibility criterion for participation in the auction, the promoters of the IBSPL enriched themselves and made unfair gain.’ CAG rejected DoT response that the eligibility criterion for participation in the auction was finalised after due diligence and on sector regulator TRAI’s recommendations saying it was department’s responsibility to ensure that only serious ISPs participated in the auction. DoT in its response admitted that there was no eligibility criterion with respect to minimum net worth or paid up capital for participation in the auction.

‘Neither the top management of the DoT nor the important committees... could detect these tell tale signs of collusion and sharing of confidential information by the biggest bidder, a tiny ISP. ‘The IMC (inter-ministerial committee) did not satisfy itself as to how the IBSPL, a company with a net worth of Rs 2.5 crore, would be able to pay the bid amount of Rs 12,847.77 crore within ten days,’ it said.

CAG in the draft report said, ‘the government should get the matter investigated even at this juncture, fix responsibilities on the bidders, which violated the auction conditions/rules prescribed and cancel the allotment of the BWA spectrum along with exemplary punishment on the colluding firms.’

The CAG estimated that decision of government to allow Internet service providers licence holder having BWA spectrum to provide voice services against payment of Rs 1,658 crore resulted in undue advantage worth Rs 22,842 crore to RJio.

The DoT has said the auction rules allowed all kind of telecom operators to participate in auction and there were no inherent limitation in providing voice service The BWA auction rules gave option to participants to procure BWA spectrum under UASL against payment of Rs 1,658 crore as paid by other operators but there was no guarantee of giving them initial spectrum as was given to incumbents. CAG has rejected logic of DoT saying that auction guidelines linking of BWA spectrum with UASL is ‘unfair and highly inappropriate.