He may have recently reclaimed the title of born-again reformer, but the image of Manmohan Singh as the man who wrung his hands in despair while A Raja robbed his treasury refuses to go away. In fact, it has come back looking truer than ever.
As early as September last year, Firstpost documented how both the PM and Finance Minister P Chidambaram could have stopped Raja from issuing telecom licences and spectrum at 2001 prices if they had wanted to. Even though Raja announced the issue of licences on 10 January 2008, it was not till the end of February that the actual letters of intent were issued. The PM and the FM had time to act, but didn’t.
Now there is more evidence that Raja’s actions could not have taken the PM by surprise, but that he actually failed to act on warnings from his senior-most officials.
Early this October, former Cabinet Secretary KM Chandrashekhar told the Joint Parliamentary Committee (JPC) probing the 2G spectrum scam that he had warned Manmohan Singh that if Raja’s spectrum prices were not revised due to higher demand and inflation, the exchequer would lose Rs 35,000 crore.
A report in The Hindu today gives us further details about how the PM failed to do his duty by ignoring his Cabinet Secretary’s advice.
According to Chandrashekhar’s calculations, the real value of a pan-India 2G licence with 4.4 Mhz of in-built spectrum should be Rs 8,700 crore and not the Rs 1,658 crore decided by Raja. This figure of Rs 8,700 crore for 4.4 Mhz compares quite well with the price of Rs 14,000 crore for 5 Mhz fixed for this year’s auction – i.e. nearly four-and-a-half years later – which was widely deemed a flop. By purley inflation-indexing Chandrashekhar’s figure, the 2012-end price could be close to Rs 14,000 crore.
The newspaper reports that Chandrashekhar’s letter to the PM was written on 4 December 2007 – more than a month before Raja gave his licences. He wrote that prices need to be indexed to increase spectrum fees. His reasoning? “All asset prices have increased substantially over the last six years, with inflation being about 34 percent. In the case of spectrum, the quantum allocated has increased by around 40 percent over this period, while teledensity has become 5-1/2 times. On this basis, the value of Rs 1,650 crore paid in 2001 becomes (1,650 x 1.34 x 5-1/2 divided by 1.4) = Rs 8,700 crore, ie, about Rs 7,000 crore higher”.
The revenue loss figure of Rs 35,000 crore mentioned by Chandrashekhar came from the fact that there was enough spectrum to give licences to at least five new operators (with an initial 4.4 Mhz each). Thus the Rs 7,000 crore loss on each licence with spectrum would work out to Rs 35,000 crore for five licensees.
Chandrashekhar’s letter is damaging not only to the PM’s credibility, but the Congress party’s repeated claim that there was no loss from Raja’s decisions. After the recent auctions drew few bidders, Communications Minister Kapil Sibal, P Chidambaram and I&B Minister Manish Tewari were quick to attack the Comptroller and Auditor General (CAG) for his own higher loss calculations. “Where the Rs 1.76 lakh crore, Mr CAG?” they asked in unison.
Firstpost has already explained that the Rs 1.76 lakh crore “presumptive loss” was only one of the four potential loss estimates given by CAG Vinod Rai. To this, Chandrashekar adds his own loss estimates of Rs 35,000 crore.
Clearly, the PM and the government knew there would be a potential revenue loss, but they continued to pretend there was no loss by acquiescing with Raja’s nefarious plan.
Chandrashekhar’s letter, quoted in The Hindu, rubs it in better than even the CAG. He wrote to the PM: “The fact that the market considers this asset under-priced (can be seen) by the long queue for fresh licences, the alacrity with which Reliance and two other firms paid up the fee when allowed to do so (within a few hours). SingTel has, as per media reports, made an offer of Rs 5,000 crore for the licence (bundled with the initial 4.4 Mhz spectrum), while Mr Ratan Tata offered in 2005 to pay Rs 5,000 crore for 5 Mhz (3G) spectrum”.
The CAG was working on the right track, even though the actual loss would depend on market conditions.
Chandrashekhar’s letter proves that everyone who had anything to do with the 2G spectrum auction doesn’t have a figleaf left to cover themselves with.