A 2G PROBLEM: WAS IT A SCAM, AFTER ALL?
The special court’s December 21 verdict in the three cases that effectively make up the 2G scam, acquitting all 35 of the accused, has resulted in an outpouring of indignant triumphalism in some quarters. There was no scam and no loss, goes one refrain. The Supreme Court was clearly wrong to cancel 122 licences (associated with the 2G scam) in 2012, goes another. The telecom sector is in a mess today because of the Supreme Court’s ruling, says a corollary. The United Progressive Alliance shouldn’t and wouldn’t have lost the 2014 Parliamentary polls, says a fourth.
This reaction isn’t entirely unexpected. The 2G scam roiled political, business, social, even media circles. Several businessmen and highprofile politicians spent substantial time in jail (before they were granted bail). The big numbers involved and details of the nexus between politicians and businessmen (not to mention their go-betweens) captured public imagination. So much so that when details of irregularities in the allocation of coal mines broke subsequently, it didn’t create as much of a buzz.
The special court was actually ruling on a combination of three cases: whether former telecom minister A Raja and others were guilty of criminal conspiracy in issuing licences and spectrum; whether Loop Telecom was a front put up by the Essar Group to circumvent laws; and whether A Raja and others were guilty of laundering ₹200 crore. The first two cases were filed by the Central Bureau of Investigation; the third by the Enforcement Directorate.
The matter concerns alleged irregularities in the allotment of spectrum by the United Progressive Alliance government in 2008. The controversy blew up in 2009-10, fuelled by a report by the Comptroller and Auditor General, the government’s auditor, that the state had suffered notional losses of Rs 1.76 lakh crore by not auctioning spectrum. This number is notional or, as some would like to describe it, “presumptive”. The first arrest was made in 2011 by the Central Bureau of Investigation. More details emerged as the investigation progressed – of specific irregularities, the role played by intermediaries, the favouritism shown to some companies. (The special court’s verdict says none of these have been proved).
In 2012, the Supreme Court cancelled 122 telecom licences issued by the UPA. While doing so it said the allotment was “unconstitutional” and “arbitrary”. Now, almost seven years after the first arrest was made, the special court has ruled that the prosecution has not proved the charges against the accused in any of the cases. That simply means that there was, indeed, no scam, or, at the least, one that can be proven. As Justice OP Saini says in his judgement: “… for the last …seven years, on all working days, summer vacation included, I religiously sat in the open court from 10 am to 5 pm, …, for someone with some legally admissible evidence in his possession, but all in vain. Not a single source turned up. This indicates that everybody was going by public perception created by rumour, and speculation. However, public perception has no place in judicial proceedings.”
The Enforcement Directorate and the Central Bureau of Investigation have both said they will appeal the case in the High Court. The court’s ruling is clearly a slap in the face for both agencies, even factoring in the higher bur- den of proof that is required in criminal cases. Saini’s report on how the investigation was carried out (he has dwelt on this at length in his judgement) is downright damning.
Still, it would be a mistake to conflate the special court’s ruling with the Supreme Court’s 2012 one cancelling 122 licences. The Supreme Court can rule on anything, even government policies, and in the 2G case, it decided that there was enough proof to show that there were irregularities and instances of arbitrariness in how decisions were made. While the court’s order was a blow to the various companies involved, it did help the telecom business as a whole . Indiscriminate allotment of licences and allocation of spectrum had taken the num- ber of telcos operating in some regions of India to around 12, making the business unviable for all. The scrapping of licences resulted in consolidation. It also pushed the government to move to an auctioning regime for spectrum, making the process much more transparent.
Chanakya is in the minority that isn’t convinced that an auction is the best way to allocate a scarce and precious national resource (such as spectrum), nor that revenue maximisation (through auctions) should be any government’s ultimate goal . Still, auctions do seem to be the most efficient way to discover price, and if repeated auctions have increased the quantum of debt on the books of telcos, then they partly have only themselves to blame.
Clearly, the Supreme Court was within its rights to scrap the licences. As for the big number, 1.76 lakh crore, it was always going to be difficult to justify a “presumptive” loss figure.
It’s far tougher to address two other questions, though. One, while there were “irregularities” and there was “arbitrariness”, in the allocation of spectrum, was there a scam? This is a question that only the two federal investigative agencies can answer and Chanakya hopes they answer it better in the High Court than they did in the special court, which has decided, on the basis of the evidence on hand, that there was no criminality (and, by extension, no scam; this is Chanakya’s extension, not the special court’s). Two, to what extent did the 2G scam affect the UPA’s prospects in 2014 ? That’s anybody’s guess, but Chanakya believes that given the circumstances at the time, and the finely-honed machinery of the Bharatiya Janata Party’s campaign in 2014, the answer to that would probably be: “Not much”.