The 4G Scam – Jio aur khao

Ambani acquired nationwide 4G spectrum at 1/10th of the Rs 1,76,000 Crores expected from the 2G auctions, without as much of a whimper of a protest.

Ask anyone in India, what was “2G Scam”, and you will be told how the 2G spectrum was given away for a fraction of what “could have been” raised, a mammoth figure of Rs 1,76,000 Crores. Media houses even decided to write down all the zeros to drive home the point, it is 1,76,000,00,00,000.

Fine. Let us ignore for a moment that the telecom policy at the time did not have revenue maximization as the policy objective. If 2G spectrum allotment was indeed a scam, and the exchequer should have raised Rs 1,76,000 Crores from it, what should we expect from the nationwide 4G spectrum?

At least equal, if not double?

Reliance has paid far less for a nationwide 4G spectrum, and yet the media today is busy with anything and everything that is a non-issue – Beef, Bharat Mata Ki Jai, Bose files, Nehru and what not.

Chronology of a Scam

Reliance Jio is an immaculate and educative illustration of how “capitalism” works in our country. Lets start at the beginning. Step-by-step.

Step 1: Set up a front company

Quietly set up a low-profile incestuous front company, Infotel Broadband Services Pvt Ltd (IBSPL) with your former crony friends (Nahata’s). Keep incestuous comp so small barely anyone notices. Especially competitors. Net worth: 2.49 Cr; 1 client; income Rs 15 lakh.

Nobody cares if said cronies are infamous for sabotaging our telecom industry in the 90s (HFCL: ring a bell?). Infotel was a small Internet Service provider (ISP)  run by Anant Nahata, son of Mahendra Nahata, promoter of the infamous Himachal Futuristic Communications Limited ( HFCL).

Readers may remember that HFCL had bid irrationally in 1995 acquiring 9 licences for mobile telephony ( 2G). They did not have the financial muscle to roll out the same and eventually telecom minister Sukh Ram bailed them out. Even then it was rumoured that HFCL was actually a front for the Ambanis. Readers may recall that HFCL had bid the highest as licence fees and Reliance Telecom had bid the lowest. Reliance got some category C circles like North East, West Bengal, Orissa etc for peanuts.  When HFCL did not pay up the licence fees , Indian govt not only lost over Rs 20, 000 crore in revenues, in several circles the roll-out of GSM got delayed by 2 years. [1]

IBSPL, incorporated in February 2007, had been granted a pan-India ISP licence in November 2007. In 2009–2010, it had just a single leased line client from whom it earned Rs 14.78 lakh. On 31 March 2009, it had Rs 18 lakh in its bank, with Rs 11 lakh diverted towards the 100 percent margin money for the bank guarantee of Rs 10 lakh given by the firm to the DoT for the ISP licence.

Step 2: Rig the bid. WIN.

In February 2010, the DoT issued a notice inviting applications to participate in the auction of 3G and 4G spectrum, which would be held separately. Any corporate entity holding Unified Access Services/Cellular Mobile Telephone Services/Internet Service Provider (UAS/CMTS/ISP) licences could bid for the spectrum. Any entity that could give an undertaking that it would obtain a UAS/ISP category ‘A’ licence as a “new entrant nominee” licencee before starting operations was also allowed to participate in the auction for the Broadband Wireless Access (BWA) spectrum, as per the DoT guidelines.

The DoT had already clarified, first in 2008 and again in 2010, that voice services were permitted only using second generation (2G) and 3G spectrum. The TRAI had recommended that 4G or BWA spectrum should be utilised for faster diffusion of broadband and data services only.

In June 11, 2010Incestuous company gets 4G broadband spectrum across India by bidding 5,000 times its net worth. Yes, Infotel paid 5,000 times its Rs.2.5 crore net worth to win spectrum across India. IBSPL managed to meet the financial requirements for bidders – an earnest money deposit in the form of a bank guarantee from Axis Bank of Rs 252.5 crore, a sum that was a hundred times its net worth. (Doubts have been raised about the authenticity of this bank guarantee, but that’s another story.) [2][3]

India’s Broadband Wireless Access spectrum auction, 2010

Step 3: Buy the front company

Publicly buy the said incestuous company within 1 hour of the bid at a pittance of the price of the spectrum. Infotel bid and paid Rs.12,847.77 Crores for 20 megahertz (MHz) of the spectrum in all 22 circles, after paying Rs.252.50 Crores as earnest money, and then sold 95% of the company for Rs.4,800 Crores to RIL, hours after the auction for wireless broadband licenses concluded. [4]

Step 4: Get the license changed

Get down to doing what you and dad know best: greasing palms. In the face of opposition from an independent regulator (TRAI), get your broadband license converted to Unified Licence “UAS” (for voice service) with help from the government.[5]

In April 2012, at the request of the DoT, the TRAI furnished guidelines on changing the licensing framework and replacing it with a new Unified Licence regime, which went on to facilitate the migration of internet service providers into full service operators offering voice services. The TRAI guidelines were deliberated upon by a DoT committee and subsequently by the Telecom Commission. Thereafter, two more committees were constituted to debate different aspects of the issue, one in August 2012 and one in September of the same year.

The upshot of these deliberations was that in February 2013, the conversion of ISP licences to the new unified licence was approved and Reliance Jio was the first to take advantage of this decision. The company paid an “entry fee” of Rs 15 crore and a “migration fee” of Rs 1,658 crore in August 2013 and was granted a unified licence on October 21, 2013, formally authorising it to provide voice services.[6]

Step 5: CAG starts talking

Get your Unified License by paying an entry fee of Rs 15 cr & a “migration fee” of Rs 1,658 Crores at 2001 prices. Easy peasy!

Remember the “2G scam”, CAG estimated a loss of Rs.1.76 trillion in DoT’s allocation of 2G spectrum in 2008. That valuation was done using the value ascertained from the 3G auction at 2010 prices. But our “Jio” dude got a license to provide voice services on its 4G spectrum at 2001 prices!

Although CAG murmured (22,000 Crores loss), no one heard a thing. The-times-they-were-a-changing.

The draft report of the CAG prepared in 2013 did not mince words:

“The DoT failed to recognise the tell-tale sign of rigging of the auction right from [the] beginning of the auction”

“The government should get the matter investigated even at this juncture, fix responsibilities on the bidders, which violated the auction conditions/rules prescribed and cancel the allotment of the BWA spectrum along with exemplary punishment on the colluding firms,” the draft report stated.

Reliance Jio Infocomm appeared to have been accorded an undue advantage of Rs.22,848 crores,” –  CAG report, 2 May 2014.

Step 6: But, you had prepared a pawn for this

Switch your political allegiance, bless the CM who is the best bet for unbridled crony capitalism. Some honest UPA ministers like Jaipal Reddy and AK Antony had started coming in the way of the ambitions of Mukeshbhai, so he decides to provide his blessings to his fellow Gujarati. Mukeshbhai owns most of the Indian media via his interests in the holding company Network-18. An elaborate image makeover exercise is undertaken to whitewash the blood stains of the ex-pariah Mr Modi.

Step 7: Your pawn in power, CAG dilutes its report

Now that your pawn is in power, CAG changes tune. Loss comes down to Rs 3,367 cr. Everything is now moving fast.[7]

“Reliance Jio Infocomm Limited (formerly, M/s Infotel)… paid UL entry fee of Rs 15 crore and additional migration fee of Rs 1,658 crore in August 2013. This migration, allowed at prices discovered in 2001, resulted in undue advantage of Rs 3,367.29 crore to M/s Reliance Jio Infocomm,” – CAG report, 9 May 2015

CAG gave no explanation of how the figure of the “undue benefit” changed to a minuscule proportion of the original estimate in the course of a mere year. [8]

However, even in its final report, the CAG pointed out that the DoT did not maintain parity in the spectrum charges that were being paid by the UAS/CMTS operators providing voice services and operators who were using broadband wireless access to provide voice services. While UAS/CMTS operators were paying between 2 percent and 5 percent spectrum usage charges, depending on the quantum of spectrum held, broadband wireless access operators were asked to pay only 1 percent of the adjusted gross revenue as spectrum usage charges.

Step 8: Flout tariff norms, get away with it

If you are questioned for breaking rules on freebies ask former employee (now AG) to get you a free pass. [9] Does it matter that TRAI had never relaxed this condition for any operator in 15 years? No, apparently. [10]

Step 8: Actual Loss of Revenue

On 19th June 2017, The Department of Telecommunications (DoT) expressed its inability to meet its revenue target of Rs 47,305 crore for FY18 and asked the finance ministry to revise the projection to Rs 29,524 crore — almost a 40 per cent fall. [11]

This was a result of not only was the lower 1% spectrum usage on 4G, but also the reduced earnings from the 2G & 4G rivals due to various aggressive promotional freebies RIL was allowed to get away with.

Why is there a silence on this?

Of course, this loss may also be called “presumptive”. But haven’t we heard that word before, in a different era, when another word was common: SCAM. Because SCAM aptly describes the history of this company, yet we hear almost nothing about it. No outrage, no debates, nothing.

Ask yourselves, Why? Itana Sannaata Kyun hai Bhai?

Prima facie, this is a loot of a bigger magnitude than the 2G scam, so why haven’t we heard about it, barring a few stories from the non-mainstream media outlets like TheWire or the gutsy Caravan Magazine?

Answer is simple: who will speak up?

Government?

It is estimated that BJP spent more than Rs 10,000 Crores on their election campaign in 2014. Someone financed all of that, and now wants their pound of flesh back.

As we see above, the CAG under this government actually even watered down the charges against Mr Ambani. We already see how defence deals such as Rafale are being renegotiated to benefit Mr Ambani and Mr Adani. Meanwhile, the Rs 5000 Crore fine slapped by the Enforcement Directorate on Adani for the coal imports over invoicing has been swept under the carpet.

Modi government has been an epitome of Crony Capitalism, and thrived on the chamchagiri by the rich and the powerful.

Modi has been busy giving so many favors to the cronies who funded his campaign, In return, Even the huge economic disaster of Tughlaqi proportions, the Demonetisation, was praised by Mr Ambani.

This government has been weakening CVC and CIC, and failed to appoint a Lokpal for 3 years.

So much for “Na Khaunga Na khaane doonga”.

Media?

Take a look at the graphic below. A single company, Network-18 has a stake in nearly all major news outlets in India, and Mr Ambani controls Network-18. RIL made its first investment in Network-18 in January 2012 with a minority stake in the company. On 29th May 2014, soon after Narendra Modi was sworn in as the Prime Minister of India, it acquired a majority stake in the company by paying Rs 4,000 Crores. [12][13]

Ever seen a loyal dog bark at its owners?

Opposition Parties?

Several mainstream opposition parties are no different from BJP when it comes to crony capitalism. They too, like BJP, get massive funding from the corporate sector, and return favors to them. Keep in mind that Mr Ambani’s company is here today because of the favorable treatment it received from the numerous governments of the past, of varying political affiliations.

The few parties that have dared to raise these issues are hounded and targeted viciously by the mainstream media controlled by Mr Ambani. Left has been painted as “anti-national” by our Corporate media. AAP is targeted even more furiously.

Do you seriously expect the opposition to dare to raise their voice against Mr Ambani, knowing fully well what might follow?

Civil Society and NGOs?

2G and Coal Scams were exposed because of the tireless work by several NGOs and anti-corruption crusaders. Most notable was NGO Telecom Watchdog and NGO Centre for Public Interest litigation led by Prashant Bhushan, that actually used judicial intervention that forced a CBI probe on the issue. [14]

So where are these people now?

Some, we now know, are in the bed with the ruling party, have become Ministers, LGs and a baba has now become the CEO of a successful FMCG company, itself a huge beneficiary of crony capitalism. Clearly, they were partisan

Others, who are still fighting, are being discredited and attacked by our media. The leading crusader, Mr Prashant Bhushan has been stonewalled by our judiciary on several occasions including this case, which deserved at least an investigation prima facie. In this case, our Honorable judges asked him:[15]

“Prashant Bhushan, you have an image of a crusader. But can you become the centre for public interest litigation? We cannot allow this.”

Usually, there should have been an outrage over such a remark, but when the media has already been bought, who will raise this?

Finally, remember, Mr Ambani was able to make PM Model for his product by paying just Rs 500!

 

References

1.
Reliance and Infotel: One More Telecom Scam? 2010. The Second Take. June 19. [Source]
2.
Ghosh, Shauvik. 2014. DoT refutes CAG allegations on “undue favours” to Reliance Jio. http://www.livemint.com/. August 6. [Source]
3.
Pahwa, Nikhil. 2010. India’s Broadband Wireless Auction Ends; Operator & Circlewise Results. MediaNama. June 11. [Source]
4.
Editorial, Reuters. 2010. India’s richest man back in telecoms with Infotel. Reuters. June 11. [Source]
5.
DoT refutes CAG’s charges of favouring Reliance Jio by allowing it to convert it’s ISP permit into a unified license. 2017. The Economic Times. http://economictimes.indiatimes.com/industry/telecom/dot-refutes-cags-charges-of-favouring-reliance-jio-by-allowing-it-to-convert-its-isp-permit-into-a-unified-license/articleshow/37537848.cms. Accessed July 13.
6.
Aditi Roy Ghatak, Paranjoy Guha Thakurta . 2016. The Immaculate Conception of Reliance Jio. The Wire. March 4. [Source]
7.
Reporter, BS. 2015. Reliance Jio got advantage of Rs 3,367 crore: CAG. business-standard.com. May 9. [Source]
8.
The Rs 19,000 crore mystery: How the CAG figure for “undue benefit” to Mukesh Ambani’s Reliance Jio shrank. 2015. The Caravan. May 31. [Source]
9.
Report, PTI. 2017. Reliance Jio tariff case: Attorney general favours non-intervention of Trai. http://www.livemint.com/. February 1. [Source]
10.
Gairola, Manoj. 2017. Did Mukul Rohatgi Give a Regulatory Carte Blanche to Reliance Jio? The Wire. June 14. [Source]
11.
Rathee, Kiran. 2017. DoT asks FinMin to slash telecom revenue target by 40%. business-standard.com. June 19. [Source]
12.
RIL buys Network18 group for up to Rs 4,000 crore – Times of India. 2017. The Times of India. http://timesofindia.indiatimes.com/business/india-business/RIL-buys-Network18-group-for-up-to-Rs-4000-crore/articleshow/35754576.cms. Accessed July 14.
13.
Almost All TV Channels are controlled by Mukesh Ambani threatening Independent Journalism: P. Sainath. 2016. SabrangIndia. April 21. [Source]
14.
Chronology: How the 2G scam case UNFOLDED. 2012. rediff.com. May 14. [Source]
15.
SC to Prashant Bhushan: How can you become the centre for public interest litigation? 2017. The Economic Times. http://economictimes.indiatimes.com/news/politics-and-nation/sc-to-prashant-bhushan-how-can-you-become-the-centre-for-public-interest-litigation/articleshow/50557288.cms. Accessed July 14.
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51 comments

  • इसका अनुवाद हिंदी में भी करें जो आम जनता को पता चले

    • saafbaat editor

      जी हाँ, हम अपने कई लेखों का अनुवाद हिंदी में करते हैं, पर ये बहुत मेहनत का काम है, समय लगेगा

    • Aap Google translate ka use karke Abhi k Abhi hindi me pure article padh skte ho. Aap puraa article copy kijiye aur translate.google.com par ja k paste kijiye.. vaha aap hindi me padh skte hai..

      • saafbaat editor

        Maine is site par kuchh articles ka Hindi anuwaad daala hai, aur iska bhi kar raha hun. Google ya bing translate ko hi use karta hun, par kayi baar lambe sentences ya kuchh terms mein, wo theek se naheen kar paate hain, in sabko manually karna padta hai. Is article ka bhi lagbhag half translate kar chuka hun, jaldi hi daalunga.

  • Aariz Mohammed

    It is just paying back to the investment of election campaigning.

  • This has to be exposed to the people of India as this cam is happened during the rule of a party which came into power in the name of 2G scam.

  • Worth reading once
    If you really really think your self a big supporter #bhakt of #bjp or any political party
    As we heard everyone saying just wait, you will see hell bigger #scams prevail of this #modigovernment
    No political party is friend of indian public
    Its all about business
    These #beef #religion etc are distraction for people like us

  • Worth reading once
    If you really really think your self a big supporter #bhakt of #bjp or any political party
    Hemang Raval Akhilesh Pandey Tagged you just because you have lots of knowledge and this can add more
    As we heard everyone saying just wait, you will see hell bigger #scams prevail of this #modigovernment
    No political party is friend of indian public
    Its all about business
    These #beef #religion etc are distraction for people like us

  • Pingback: The Reliance 4G Scam – Jio Ya Maro | GGI News

  • Pingback: The Reliance 4G Scam – #JioYaMaro | GGI News

  • Prakash rajput

    Worth reading….an eye opener…partially if not fully. It is high time when all such news should reach to the public domain.
    Electronic media is most biased thing that can happen….but even the print media is not taking interest….

  • worth reading
    This shows how our politicians are playing in the hands of businessman, though they are elected by the innocent people of our country.

  • Never seen this much of researched article. Worth reading!

  • BJP are bullshit
    They are making us fool
    No changes and development will come
    Only fake promise

  • Very very true analysis. If that was 2G scam and many convicted in that case. Then in case of Jio it is maha 2G scam and may be by amount double in some time hence must be prosecuted.

  • Sanjeevtripathi

    What’s new in this, this practice well stablish in Congress erra. For any bidding even for theka of area cleaning happens in same way. A single company apply three tender with different name. And then get the bidding

    • saafbaat editor

      As the author points out, the new thing is not the lack of SCAMs, but the selective silence of Corporate media, and the puzzling non-intervention of the constitutional bodies such as the CAG or SC now.

  • I do not know what to believe and what not! but there are people (from both sides) who always tries to provide wrong information’s to the people (due to political reasons). Also sometimes it becomes difficult to whom or to which report we should believe! May be its good idea to analyse by ourselves first before commenting on any particular govt. and also good to compare with previous govts activities with current!

    http://economictimes.indiatimes.com/news/economy/finance/failure-of-debt-laden-telecom-operators-can-trigger-defaults-bankers-tell-government/articleshow/58847744.cms

    • Disgruntled ek-Bhakt

      If the 2G spectrum was supposedly worth 1,76,00,000 Crores, then the telecom firms should have earned a similar amount out of an investment of that amount by now? Clearly, that has not happened. Even with a much lower price paid for spectrum, telecom operators are indeed struggling to make money in India.

      Now, does that mean there was no scam in 2G? No. Of course there was! And it was rightly investigated.

      Is there any scam in 4G? before 2014, CAG thought there was. So why was that watered down? Why is there no investigation and hungama over it?

  • Congress took 70 years to get listed in scams. BJP will get this status too fast if we have strong opposition as political party or press. So far they have been successful in fooling the public majority of which are still illiterate

  • Indian politicians and businessmen are crooked; they line up their pockets and the voters are ignorant and too busy eking out a living.

  • What we need is a real authentic trusted source of news.. or at least things to get them rechecked

  • Thanks, great article.

  • Auction was took place in 2010, when Fake Gandhi’s empty hand party was in power.

    • saafbaat editor

      Yes, and the CAG, the media and the SC were at least raising it’s voice pre-2014, now even that has been silenced.

  • So you think Courts and Media are biased, don’t forget you are also part of media….

    • saafbaat editor

      As the author points out, there are still some independent media houses that have raised this issue.

  • good to ask Qs

  • Many independent press houses might also be paid to keep mum !!!! Ambani has more control over India than GOI, hope everyone gets that. Reliance keeps doing malpractices as far as business is concerned. No wonder why many big international companies are still not sure about India’s business culture.

  • If it’s so much of a problem then why isn’t someone filing a case and taking the company that court ???
    The elite media & its coterie are super critical of the Ambanis as they are seen with Modi; however the Ambanis have been in big business since Mukeshbhai when there was no Modi. So what’s all this hoopla about…::; sour grapes ??!!

    • saafbaat editor

      If you read the article, you would notice that these efforts of PIL are now getting stonewalled.

      Yes, Mukeshbhai reached here by patronage of other parties.

      Ambanis control a large part of media.

  • Pingback: The Myth of an Incorruptible Mr Modi - SaafBaat

  • DarryI I Cabral

    Good information which we did not know. Very well presented in a good flow.
    Every Govt coming into power goes corrupt.
    I am told that the Centre spent the 10k crores on professional PR Consultants, but the States combined spent 43 k crores for the election, which they are now Giving back in special favours.

  • Satendra Singh Rana

    A big diversion by providing heavy literature. I completely disagree with the bias the article suggests to provide. India has lot of enemies and the greatest of them all are our own citizens. We need to remain positive and not give into all negatives that we tend to love assuming we ourselves are pure?!

    • saafbaat editor

      Are Cronies gaining unfair advantage, and our resources, at the cost of the taxpayers not enemies of the country?

      Was exposing scams a “big diversion” for you during UPA times too?

  • Sanjay Tirdiya

    If this is so, precise, correct and understandable, shouldn’t these details be handed over to the Supreme Court and a Court monitored investigation sought by a well meaning citizen reporter ? Cornering and grabbing tenders by subterfuge is a very old practise in India and it’s roots lie in a non-transparent and oaque manner of Governance, as it happened in the Bofors loot scandal. Does anyone know what happened to the Official Secrets Act violation case against Mukesh Ambani for possessing secret Telecom Ministry documents pertaining to Government policy on the matter.

    • saafbaat editor

      Yes, the same people who exposed the 2G scam, already tried it. were stonewalled this time.

  • Sanjaya Varma

    Dear Editor, i have never heard of your online magazine. And also i do not see the name of the person who authored this adticle. You will apprciate that unless there is a name, the credibility drops. So while you facts and insuinuations may have some credence. The author must have the courage to put their name.

    • saafbaat editor

      We are merely providing with summaries of events as they happened, along with the references available to them in public domain.

      This is not an opinion piece, or a case of some story investigated from scratch by our author.

      How does it matter if I say that the author is @xyz or “Sanjaya Varma” or “Arnab Goswami”? The well known Economist magazine, one of the most respected one in the world, doesn’t use names for their journalists. Real journalism is not about “superstars” whose word must be believed in, but about presenting articles with facts that defend themselves.

      If you disagree with factual correctness of ANYTHING presented in any of our articles, please do bring it to our notice, and we will investigate it further.

  • Pingback: The Myth of an Incorruptible Mr Narendra Modi | Kractivism

  • शशि मिश्र

    देशहित में आप अब-तक बैठे इंतजार क्यों कर रहे हैं क्या सुप्रीम कोर्ट भी जिवो का हो गया है।

  • Good compilation and exposition…

  • Very well compiled and written.
    But why other telecom companies are not taking any move if Reliance Jio has been formed out of scams only?
    Moreover I would also like you to write an article about BSNL’s (public sector undertaking) past performances and how this Government is claiming to bring a loss making company into an operational profitable company. I mean is it true or just manipulation of statistics.

  • Yes very well compiled and precise information exposing the clear loot by premium businesses house. There needs a transparent n unbiased media to address the real issues.

  • An eye opener .Very well researched article .I am now read it again to understand all the issues.But people are getting free talk time very nominal fees for data though Reliance jio .So he is passing something to the common man .People are generally happy .But how long they will enjoy such freebies Ambani only knows !?
    👌

    • True, reliance may give some freebees to kill off competition, after making a “back door entry”.

      But ultimately, consumers would have benefited more if this 4G auction was done afresh, allowing more competition.

      We do not know how Reliance will behave once it has a monopoly.

  • Jayanta Bhattacharya

    Political class emerged from the then elite greasing fraternity to the ruling british. Since then whatever happened during post independence are known to sensitive Indians across the nation. First two to three elected functioned on emotional responsibility with meagre economic base. Fifteen years and three five year plans was enough for our business-intellegent sharks to develop the nexus to be, stand by and for the power corridors of the Nation. Since then the tradition with more understanding is flourishing and will flourish. We are now poultry flocks in cages of different states standing (lifetime)ready to be butchered. No way out. As any entity/ body with revolutionary grit and committment will land up in the same circle.

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