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DoT critical of CAG remark on telcos cartel

Ajith Athrady, New Delhi, July 17, 2013, DHNS;

Ministry wants Competition Commission to address issue

The Department of Telecom (DoT) is likely to have a fresh spat with the Comptroller and Auditor General (CAG) over the latter’s criticism against the government that it failed to stop telecom companies from forming a cartel.

This allegedly led to failure of the last two radio spectrum auctions, depriving the exchequer of huge revenues.

Apart from urging the CAG to drop the key observation, the DoT is likely to tell the national auditor that the Competition Commission of India (CCI) will address the cartelisation issue and not the CAG. “As the CCI is the competent authority to address the issue of cartelisation, we will tell the CAG the same,” sources in the DoT told Deccan Herald.

DoT has been fighting against the CAG ever since its observation that the exchequer suffered a Rs 1.76 lakh crore loss in the spectrum auction. It will submit its reply to the auditing body saying that the word “cartelisation” should be dropped, sources said.


Earlier, the CAG, in its observation on the “failed” auction, said cartelisation by telecom companies was the main reason for the failure of the recent auction of telecom spectrum and criticised the government for its failure to take action against erring companies.

In November 2012, when the government put on sale the spectrum, it garnered only Rs 13,046 crore as against the targeted Rs 40,000 crore due to the lack of interest among the telecom companies. Even in the March 2013 auction, only one company, Sistema Shyam Teleservices, participated and the government got Rs 3,639 crore.
 
DG (Audit) Post and Telecommunications, an unit of the CAG, said: “Apparent cartelisation by the telecom service providers observed recently in the last two spectrum auctions, wittingly or unwittingly aided and abetted by the inaction/delayed action of the licensor... have already cost the government very dearly as tranches of spectrum valued at hundreds of billions of rupees were left unsold.”

The lukewarm response to the auction led to suspicion that some telecom companies worked together to manipulate the outcome and compel the government to reduce reserve price of the spectrum. Before the auction started, many telecom companies openly said the reserve price was too high and it would not be economically viable for them to participate in the bidding.

The CAG report, if published with the allegations, would be damning for the telecom department, sources said. “The government does not want to repeat the damage it had faced in the 2G spectrum allocations in 2008,” they said.

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