The 2G Spectrum Scam is one the biggest financial scams that took place in India in 2008. This scam cost about Rs. 1.76 lakh crore to the Indian treasury. This scam is related to allocation or distribution of licenses of 2G mobile phone spectrum to certain companies by government authorities. This scam reflects the syndicate effort of high profile individuals, businesses and political parties. After investigation, the scandal led to the cancellation of 122 telecom licenses during the allocation process.
In 2008, then Telecom Minister, Andimuthu Raja, allotted the license for 2G Spectrum to favored companies at prices that were significantly lower than the market value. The Telecom Minister along with some associates exchange the license for bribes and kickbacks. The deal was made in a non-transparent and arbitrary manner, with no proper auction process or price discovery mechanism.
Participants and Culprits of 2G Spectrum Scam
|Unitech Wireless||Videocon Telecommunications|
|Swan Telecom||Tata Teleservices|
|Loop Mobile||Idea Cellular|
|S Tel||Reliance Communications|
|Political Parties Involved|
|Dravida Munnetra Kazhagam|
|Individuals Accused and Arrested|
|Andimuthu Raja||Former Telecom Minister|
|Kanimozhi||Member of Parliament|
|Shahid Balwa||Promoter of Swan Telecom|
|Vinod Goenka||Promoter of Swan Telecom|
|Sanjay Chandra||Managing Director of Unitech Wireless|
Timeline of 2G Spectrum Scam
|2001||Indian authorities introduced a “first-come, first serve” policy for awarding telecom licenses.|
|2007/2008||Andimuthu Raja, then Telecom Minister, awarded the 2G Spectrum license with no proper process and any proper price discovery mechanism.|
|November, 2008||The Comptroller and Auditor (CAG) of India submitted a report to the government. The 2G spectrum resulted in the loss of Rs. 1.76 lakh crore to the investors.|
|November, 2008||The Central Bureau of Investigation (CBI) registered a case against several officials of the Department of Telecommunication and some individuals for their association in the case.|
|February, 2011||Cancellation of 122 licenses, issued to telecommunication companies during the 2G Spectrum Allocation, by the Supreme Court of India.|
|April, 2011||CBI filed a charge sheet, accusing A. Raja, along with several other telecom executives and companies of corruption, cheating and conspiracy.|
|May, 2011||Kanimozhi Karunanidhi, daughter of DMK leader and a Member of Parliament, got arrested in association with the case.|
|November, 2011||Kanimozhi, along with four other associates were granted bail by the Delhi High Court.|
|December, 2017||Courts acquit all accused individuals in the 2G Scam, citing a lack of evidence.|
Primary Reasons for 2G Spectrum Scam
There are multiple factors that combinedly led to the scam of 2G Spectrum. Some of the reasons why 2G Spectrum Scam became one of the biggest scam in the history in India are:
In 2001, The Government of India introduced “First Come, First Served” for allotting Telecom licenses for 2G Spectrum. This policy was heavily criticized as it lacked basic licensing discipline. Some of the reasons why this “First Come , First Served” policy was flawed are:
- This policy was not transparent. There were no proper set guidelines for the allocation of the license. Factors like insiders’ information, favoritism, manipulation could be imposed to grant the licensing.
- There was no proper bidding or price discovery mechanism to get the license. This policy did not encourage the service provider to compete for the license. There was no competition in the market for the license, which affected the price of license and later the price of service provided.
- Such opaque and loose price discovery mechanisms led to undervaluation of 2G spectrum. This led to allocation of licenses far below the market rates.
- This policy gave the discretionary power to the ministers to award the license. Ministers abused this power to award the license as per their
Undervaluation of Spectrum
The undervaluation of 2G Spectrum was one of the major contributing factors to the scam. Undervaluation of the 2G Spectrum Scam resulted in a loss of revenue to the government. This scam caused a presumptive loss of 1.76 lakh crore to the exchequer.
Also, the telecom companies colluded with the government officials to acquire licenses at lower prices.
There were multiple players in favoritism in the 2G Spectrum Scam. “First Come, First Serve” policy made it easy for government officials to favor their candidate. In this case
- A Raja favored certain companies while allocating the license. He used his authority to manipulate the process and award the license
- Siddhartha Behura was Telecom Secretary and was a close associate with A. Raja in favoring the license.
- Shahid Balwa was one of the promoters of Swan Telecom who paid A. Raja and other officials for awarding the license. He was arrested in 2011 and charged with criminal conspiracy, cheating, and corruption.
- Similarly, the promoter of Unitech Wireless, Vinod Goenka, paid to different officials for securing the license to his company.
- Promoter of another telecom company, Loop Telecom, allegedly paid kickbacks to A. Raja and other officials to secure the license.
Lack of Transparency
The policy of the government i.e. First Come, First Serve, to allocate 2G license allowed influential individuals to manipulate the rule. Officials and politicians use their influence to award the telecom license.
Due to this policy, there was no competition while bidding or no defined price discovery mechanism. Lack of transparency also made authorities difficult to trace the flow of illegal funds as gifts and kickbacks. It is estimated that more than 1600 crore rupees were shared and gifted for securing the license, to different officials and politicians.
Legal Action Taken
- The Central Bureau of Investigation (CBI) made several arrests of individuals, politicians, bureaucrats and business people.
- CBI filed a chargesheet against A. Raja, the Telecom Minister, and other officials for corruption, criminal conspiracy, fraud etc.
- The special CBI court acquitted all the accused in the case, citing a lack of evidence. This verdict was later challenged in Delhi High Court and Enforcement Directorate
- Delhi High Court also acquitted all the accused in the case, citing a lack of evidence.
- The Supreme Court of India canceled all 122 2G Spectrum License, awarded during the tenure of A. Raja. The Supreme Court set up a Special Investigation Team (SIT) to investigate the scam.