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CAG suggests cancellation of Reliance Jio’s broadband spectrum

MUMBAI: Just days after Mukesh Ambani announced that Reliance Jio will roll out 4G broadband services from next year, the Comptroller and Auditor General (CAG) has dropped a bombshell by recommending cancellation of broadband spectrum allocated to Infotel Broadband Services for alleged violation of auction rules.

Infotel Broadband Services, which has since been renamed Reliance Jio Infocomm, is a subsidiary of Reliance Industries. Reliance Jio Infocomm is the only company in the country to have 20 MHz of pan-India airwaves to provide 4G services.

In a draft report sent to the Department of Telecom for comments, the CAG said that “neither the top management of the DoT nor the important committees could detect these telltale signs of collusion and sharing of confidential information by the biggest bidder, a tiny ISP”.

The inter-ministerial committee (IMC), the report said, did not satisfy itself as to how the IBSPL, a company with a net worth of Rs 2.5 crore ( Rs 25 million), would be able to pay the bid amount of Rs 12,847.77 crore ( Rs 128.48 billion) within ten days.

The report further stated that IBSPL through the covert and overt assistance of third party/private bank bid for Rs 12,847.77 crore (5000 times of its net worth) for pan-India spectrum and then sold the company on the day of completion of the auction.

This, the draft report said, “indicated IBSPL’s collusion and sharing of the confidential information with a third party in violation of auction conditions/rules.” It also stated that by the inclusion of inadequate eligibility criterion for participation in the auction, the promoters of the IBSPL enriched themselves and made unfair gain.

The CAG has demanded the government “to 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 country’s auditor also rejected DoT response that the eligibility criterion for participation in the auction was finalised after due diligence and on sector regulator TRAI’s recommendations. CAG said it was the department’s responsibility to ensure that only serious ISPs participated in the auction.

The CAG has also rejected DoT’s stand to allow Reliance Jio to offer voice telephony using broadband spectrum against a payment of ₹1,658 crore ( Rs 16.58 billion).

According to CAG, the decision to allow an ISP licence holder having BWA spectrum to provide voice services against payment of Rs 1,658 crore ( Rs 16.58 billion) resulted in undue advantage worth Rs 22,842 crore ( Rs 228.42 billion) to Reliance Jio.

The CAG also pulled up sector regulator TRAI for not giving clear recommendations and remaining a passive observer when changes were made in its suggestion to reduce quantum of spectrum in auction.

The DoT said that the auction rules allowed all kind of telecom operators to participate in auction and there were no inherent limitation in providing voice service using BWA spectrum.

The report also alleged that IBSPL promoter-director went on electronic media on 11 June 2010 to confirm that they had been in talks ith RIL during the course of the auction process.

This, the report said, was in “gross violation of the confidential clause of NIA which had prohibited bidders and insiders from conveying any confidential information to any other person, including any other bidder or its insiders”.

Mahendra Nahata, the head of HFCL, the parent firm of IBSPL, however claimed said that the company did not share any confidential information with anybody.

RIL, on its part, said, “There is no final CAG report that we are aware of. That said, we outrightly reject any suggestion whereby spectrum was acquired in any manner other than through a transparent bidding process duly supervised by Government of India.”