Amidst encouraging news of Reliance Jio Infocomm being set to launch a $1.5 billion debt issue abroad; closer to home, the Comptroller & Auditor General of India (CAG) has raised concerns. CAG alleges that that the company has paid lower spectrum user charge vis-à-vis other telecom companies.
This subsidiary of Reliance IndustriesLimited was recently slammed with allegations that the telecom department allowed undue favors worth INR 22,848 crore to the Mukesh Ambani-owned telecom project. In response, the Department of Telecommunications (DoT) has criticized the national auditor for questioning the decision-making power of the government. In addition to this, the DoT has also asked CAG to delete all paragraphs in its report that suggest any undue benefit towards Reliance Jio Infocomm.
The Basis of the Allegations
In the 2010 BWA auctions, according to the claims made by CAG, an unknown company going by the name of Infotel Broadband Services Pvt. Ltd. acquired the pan-India block of 20 MHz airwaves in the 2300 MHz band by spending INR 252.5 crores; nearly 5,000 times its net worth. On the day of the completion of the auction, the company was sold to Reliance Industries Limited.
The head of Himachal Futuristic Communications Ltd., the parent company of Infotel Broadband Services Pvt. Ltd., Mr. Mahendra Nahata went on record late last month to deny such allegations, stating that no conditions within the auction rules were violated and all the requirements towards confidentiality of information were met. In fact, a draft audit report dated June 11, 2010 stated that the company was already in talks with Reliance Industries Limited during the auction process.
Also, in defence to these claims, the DoT cites the sovereign right of the government to take various policy decisions and further defends its own judgment to allocate different prices for 3G and broadband wireless access (BWA) spectrum. The lower reserve prices for BWA spectrum were attributed to technical efficiency and the capital expenditure incurred for laying a network.
The DoT maintains that most of these allegationsare unjustified since they do not fall within the purview of the power and responsibilities bestowed upon the telecom department. In addition to this, the DoT also stands by the various policy decisions by deeming them timely and designed to adhere to the mandate set by the cabinet. All policy decisions in question were taken after due approval from the telecom minister. In a letter, the DoT states that “It (CAG) also seeks to substitute the wisdom and the decisions of the decision making authorities of relevant time with that of another alternate approach suggested in the DAP (draft audit para), which need not have been the best approach.”
The department also defends its decision to permit Reliance Jio its move to a unified license regime, in lieu of which the company will be able to offer voice services with the help of airwaves that are typically meant for broadband wireless spectrum. Companies were allowed to acquire an internet service provider permit or a unified access service license. Upon acquisition of the unified license, any service including full mobile voice services may be provided.
The DoT confirms that the license was obtained by Reliance Jio through an open auction for which they paid an entry fee of INR 1,658 crore without having any bundled airwaves that is otherwise included under the Unified Access Service license.