CAG Says ‘Undue Favours’ Shown to Reliance, Airtel

New Delhi: A spate of CAG audit observations spells fresh trouble for the big players in the telecom and petroleum sectors. Trouble is brewing anew for the controversial telecom venture of Mukesh Ambani as the Comptroller and Auditor General has castigated  the Department of Telecom (DoT) for showing undue favour of Rs. 3367.29 crore to Reliance Jio and giving it out of turn financial advantage by exploiting deficiencies in the policy of the department.

In fact, the CAG also said that another telecom leader — the Sunil Bharti Mittal-owned Airtel — also got out of the turn favours from the DoT, putting a question mark over the whole 4G spectrum auction process. This, in turn, could raise the pitch for cancelling of the allocation and holding the auction afresh. The CAG, in its report placed before Parliament, said Reliance Jio got its undue advantage after the DoT allowed it to provide voice-calling facility under the new licensing regime.

In more bad news for Mukesh Ambani-led companies, another CAG report has questioned the decision of the Petroleum Ministry to allow Reliance Industries Limited (RIL) to charge a marketing margin on its KG-D6 gas in US dollars and thereby making the exchequer poorer by Rs. 201 crore due to urea subsidy payout.

In the telecom space, the CAG has raised concerns over financial gaps to the tune of over Rs. 31,000 crore which had occurred due to non-imposition of fines and the undue gains to private operators including Reliance Jio, Airtel, RCOM and Tata Tele. Bharti Airtel made an undue gain of Rs. 499 crore because of DoT’s decision to merge the Chennai telecom circle with Tamil Nadu in a hasty manner in 2005, it added.

Reliance Communications and Tata Teleservices got undue benefits to the extent of Rs 882.06 crore (2009-10 to 2013-14) after the DoT granted telecom licences for dual technology in October 2007/January 2008, the CAG said. It has also pointed out that the DoT failed to implement the Telecom Regulatory Authority of India’s recommendations to levy spectrum usage charges for the combined total of spectrum allocated in different technologies (GSM and CDMA) in specific bands, without any reason on record.

The government auditor also pulled up DoT’s vigilance arm for failing to impose penalties to the tune of Rs 4,300 crore on telecom operators for violating mobile tower radiation rules. It said the DoT allowed operators to enter into mutual commercial agreements for intra-service area roaming in 2008, resulting in an adverse financial impact on revenues. “We observed that the amendment was made in irregular manner and facilitated indirect sharing of spectrum by the telecom service providers in the guise of Intra Service Area Roaming (ISAR) without making any payment,” the CAG said.

Reliance Industries Ltd in 2010 acquired Infotel Broadband which had won pan-India wireless access spectrum in auctions. The Broadband Wireless Access (BWA) spectrum can be used for 4G services. “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,” the CAG said.

RIL spokespersons have officially said no favour has ever been sought or given by the government. “We have always conducted our business as per the prevailing laws and have abided by the rules and regulations prescribed by the Department of Telecom (DoT) and other regulatory authorities,” a spokesman said.

As of now, it is not clear how the Centre intends to act on the CAG’s latest observations.

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