Q.What is the 2G Spectrum Scam?
Ans. In 2008, the union government has awarded pan India licenses and second generation telecom spectrum to 9 companies, in 122 circles for offering mobile telephony services. These licenses were awarded in an arbitrary and non-transparent manner for a paltry sum of `1658 crores. This abnormally low price was fixed without taking into account the remarkable increase in telephone density in the country, and the precious and finite spectrum was allocated on a first-come, first-served basis without calling for competitive bids. The government has also failed to lay down eligibility criteria for applicants and has arbitrarily advanced the cut-off date for considering applications. The subsequent sale of cornered spectrum by fly-by-night operators for many times the fee they paid the Government had caused enormous loss running into tens of thousands of crores of rupees to the public exchequer.
Based on the subsequent auction of airwaves for third generation (3G) services, which fetched nearly `63000 crores to the exchequer, and that for broadband access, which fetched over `35700 crores, the notional loss to the exchequer due to under pricing of 2G spectrum was estimated to be a whopping `160,000 crores !!
Q. Can we cancel the 2G licenses?
Ans. Yes. Under Section 23 and 24 of the Indian Contracts Act 1872, a contract becomes void if it is tainted with corruption. The Government can cancel the licenses and take back the 2G spectrum thus allotted, and return the license fee to the licensees after deducting fee for the period they used it.
Q. How do we recover the lost money?
A. The government can recover the lost money by fresh allocation of 2G spectrum through international competitive bidding after laying down transparent eligibility criteria in consultation with TRAI (Telecom Regulatory Authority of India).
Q. What can be done to punish the guilty and prevent such scams from recurring?
Ans. The government can immediately take up the following measures to prevent similar scams from recurring and deter guilty parties from committing such fraud in
- Enact a law under which any license/lease of natural resources by the Government to corporates shall become void if there is evidence of corruption/ fraud/collusion/loss to the Government. The fear of losing licenses/leases obtained with illegal money will deter corporates from indulging in corruption.
- Enact a Windfall Profits Tax law (on the lines of the UK law 1997), which will provide for stiff taxation of windfall profits earned by corporates because of the monopoly enjoyed by them in the exploitation of natural resources the Government allocated them either because of monopoly or a change in the global economic environment. The companies that cornered the 2-G spectrum licenses through questionable means and sold them within weeks for astronomical sums should be subjected to the proposed windfall profits tax.
- Enact a False Claims Act (in the lines of the U.S. law). If the exchequer incurs any loss because of fraud or misrepresentation or violation of the due process as determined by an independent, competent authority, the guilty will have to pay a civil penalty equivalent to three to five times the loss sustained. The U.S. Government has collected over $24 billion from corporates under this Act.
- Enact a comprehensive anti-corruption law, in particular, create an empowered, Independent Anti-Corruption Commission (IACC). In Hong Kong creation of an effective IACC in 1974 reduced corruption within a few
There is evidence that significant reduction in corruption alone will enhance our economic growth rate by 1.5 to 2 percent per annum. Honesty is not merely a moral imperative; it is an economic necessity to accelerate and sustain high growth rates and eliminate poverty.
