CAG slams DoT for loopholes that allowed Reliance Jio Infocomm get valuable BWA spectrum at cost of country

Jan 20 2014, 21:25 IST
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Mukesh Ambani's Reliance Jio Infocomm refuted all charges. (Reuters) Mukesh Ambani's Reliance Jio Infocomm refuted all charges. (Reuters)
SummaryReliance Jio Infocomm acquired Infotel soon after the little-known co won spectrum for Rs 12,750 cr.

In a severe indictment, the Comptroller and Auditor General (CAG) has castigated officials of the Department of Telecom for loopholes that allowed Mukesh Ambani's Reliance Jio Infocomm to get pan-India high-speed BWA spectrum at the cost of the exchequer.

Reliance Jio Infocomm, a subsidiary of Reliance Industries, acquired Infotel Broadband Services Pvt Ltd (IBSPL) in June 2010, soon after the little-known firm won nationwide BWA spectrum for about Rs 12,750 crore.

The CAG, in a draft report sent to DoT for comments, criticised the eligibility criteria set for bidders. The BWA spectrum sale, which took place when A Raja was telecom minister, did not provide a lock-in period for winners.

Reliance Jio Infocomm refuted all charges. It said in response to an e-mail query that the TRAI had emphasised that DoT should devise the scheme by which large and small ISP operators are permitted to deploy BWA networks.

"Due to the provision of inadequate eligibility criterion for the participation in the auction of BWA spectrum and deficient due diligence on the part of DoT officials, the promoters of IBSPL... made windfall gain of Rs 4,800 crore at the cost of public exchequer immediately after closure of BWA spectrum auction in June 2010," the CAG's draft report said.

The CAG said that while the DoT had barred promoters holding 10 per cent in a telecom company from selling their stake for three years after spectrum allocation, no such curbs were prescribed for the BWA auction.

"A non-participant company exploited the loophole left by the DoT officials in the eligibility criterion for obtaining BWA spectrum by acquiring a winning company without participating in the auction within hours of closure of auction process, thereby vitiating the sanctity of the auction process," it said.

Reliance Jio Infocomm said the lock-in period was with respect to licence and not for 3G and BWA spectrum.

The CAG report said IBSPL changed from a private limited company to a public limited company, IBSL, on June 17, within a week of winning the spectrum, and on the same day decided to allot 94.96 per cent shares to Reliance, which led to windfall gains for the promoters of Infotel.

Reliance Jio Infocomm, however, said there was no gain for Infotel's shareholders because it subscribed to fresh equity issued by the company. Also, the spectrum was procured at an auction-determined price, not an administered price.

"There was no question of any windfall gain," Reliance Jio Infocomm said.

CAG said DoT neither

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