A PROJECT REPORT ON

2G SPECTRUM SCAM
By 1. Piyush Jain 2. Reema Choudhary 3. Syed Faiz

Department of Computer Engineering
ARYA INSTITUTE OF ENGINEERING & TECHNOLOGY KUKAS, JAIPUR [2010-2011]

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A PROJECT REPORT ON 2G SPECTRUM SCAM In partial fulfillment of requirements for the degree of Bachelor of Engineering IN Computer Engineering Submitted By Reema Choudhary Piyush Jain Syed Faiz Under the Guidance of DEEPAK SHARMA SIR Page | 2 .

Jaipur. Rajasthan and is being submitted to ARYA INSTITUTE OF ENGENNERING AND TECHNOLOGY. Piyush jain 2. During the academic year 2010-2011(Semester-II) .L GUPTA) Page | 3 . Computer Department Mr. Deepak Sharma Head. Syed Faiz Date: Place: Jaipur Submitted To: Mr.CERTIFICATE This is to certify that the project entitled 2G SPECTRUM SCAM has been carried out by the team under my guidance in partial fulfillment of the degree of Bachelor of Engineering of RAJASTHAN TECHNICAL UNIVERSITY. Reema Choudhary 3. Deepak Demla I/c Principal (Mr. M. Team: 1.

Jaipur Page | 4 . Deepak Sharma (Lecturer. Jaipur Team: 1. Piyush jain 2. Rajasthan and is being submitted to ARYA INSTITUTE OF ENGENNERING AND TECHNOLOGY. Syed Faiz Submitted To: Mr. Reema Choudhary 3.PROJECT APPROVAL SHEEET Following team has done the appropriate work related to the 2G SPECTRUM SCAM in partial fulfillment for the award of bachelor of Engineering in Computer Engineering of RAJASTHAN TECHNICAL UNIVERSITY.Humanities) External Examiner: Date: Place: ARYA INSTITUTE OF ENGENNERING AND TECHNOLOGY.

CONTENT INTRODUCTION CIVIL SERVANTS. 1.1 Ratan Tata petitions over leak 6. Conclusion 11. 9.3 Corporations involved 2. 2.1 Politicians. 4. 8. involved Ministers and Parliamentarians Page number 2. 7.C. Petitioners to 2g scam Loss to Exchequer Relationship between media and government 4. POLITICIANS AND CORPORATIONS INVOLVED IN SCAM 2. No. References Page | 5 .5 Media persons and lobbyists involved 3. 5.A.TABLE OF CONTENTS S. Response to scam Arrests and Chargesheets P.2 Bureaucrats involved 2. (Public Accounts Committee) Impact on stock markets 10.4 Corporate personalities involved 2.

Case No:10.719 crore (US$15. 2010. 468 (Forgery for purpose of cheating). evidence was submitted by the Controller and Auditor General (CAG) showing that Raja had personally signed and approved the majority of the questionable allocations. The scam involved allegations regarding y y the under pricing of the 2G spectrum by the Department of Telecommunications which resulted in a hefty loss to the exchequer. 2011 Kanimozhi was named as a coPage | 6 Kanimozhi Member of Rajya . Ministers and Parlimentarians involved Name of the Person involved Occupation and Designation Allegation and Charges A. 1. 471 (using as genuine a forged document or electronic record). A report submitted by the Comptroller and Auditor General based on the money collected from 3G licenses found that the loss to the exchequer due to under pricing of the 2G spectrum was 176. and where no express provision is made for its punishment) of the Indian Penal Code. Politicians and Corporations Involved in scam All the accused have been booked under sections 120(B) (criminal conspiracy). 420 (cheating and dishonestly inducing delivery of property) and 109 (abetment if the act abetted is committed in consequence.16 billion).76 lakh crores (US$40 billion) to the for Communications national exchequer. and the illegal manipulation of the spectrum allocation process to favour select companies The issue came to light after the auction of airwaves for 3G services which amounted to 67. On April 25. and Information Technology In August. Raja The Controller and Auditor General holds Raja personally responsible for the sale of 2G spectrum at 2001 rates in 2008.INTRODUCTION The 2G spectrum scam in India involved the issue of 122 licenses of the 2G spectrum to 85 companies including many new telecom companies with little or no experience in the telecom sector at a price set in the year 2001. resulting the previously mentioned Union Cabinet Minister loss of up to Rs. Year:2011] Civil Servants.03 billion) to the exchequer.379 crore (US$39. The scam came to public notice when the Supreme Court of India took Subramaniam Swamy's complaints on record [With Case type:Writ Petition (Civil). Politicans.

The chargesheet. Civil Servant (IES officer of 1984 batch He was private secretary of Raja during UPA-I when the licences were awarded. When Raja became the Telecom Minister once again in UPA-II. Baijal joined Noesis. a consulting firm. He was the Secretary of the Department of Telecommunications. something which has been attacked by Arun cadre). Post Civil Servant retirement. 2010 he was appointed as the Chief Vigilance Commissioner. Thomas later stepped down after the Supreme Court questioned his track record as a civil servant in the wake of investigations into the 2G spectrum allocation scam. Raja has made (IAS officer of references to Baijal's decisions in 2003 as the basis for his Pradip Baijal 1966 batch MP decisions in 2008. Raja re-designated him Economic Adviser. He is alleged to have recommended policies that favored certain Telecom companies when he was heading the TRAI. On September 7.Karunanidhi Sabha conspirator in the supplementary chargesheet filed by the Central Bureau of Investigation (CBI) in connection with the 2G spectrum case. J. The houses and offices of the bureaucrat were recently raided by the Central Bureau of Investigation as part of their investigations. Bureaucrats involved Name of the Person involved Occupation and Designation Allegation and Charges Civil Servant Siddhartha (IAS officer of He was the Telecom secretary who served in the DOT at the time Behura 1973 batch UP of the 2G allocation. Thomas 1973 batch Kerala cadre). She has been charged with section 7 and 11 of the Prevention of Corruption Act. which was submitted before the Supreme Court establishes how Rs 200 crore connected with the scam traveled from a partnership firm of businessman Shahid Balwa of Swan Telecom to the Karunanidhi family-owned Kalaignar TV. The sections deal with acceptance of alleged gratification. that Page | 7 RK Chandolia . cadre) Civil Servant (IAS officer of P. Chandolia had been promoted to the Joint Secretary rank. Shourie and several media pundits.

Corporations involved y Unitech Group a real estate company entering the telecom industry with its 2G bid.Videocon Group Prashant Ruia . had handed out letters of intent to representatives of various companies. Page | 8 . It is said that it was Chandolia who.Dynamix Group Venugopal Dhoot .DB Realty and Etisalat DB Telecom(formerly Swan Telecom) Vinod Goenka . gave him the charge of all important policy-related work. from DDG-access services A K Srivastava's room.Reliance Group (ADAG) Shahid Balwa .cadre).Essar Group All of them have either been questioned by the CBI or are prospective suspects in the scam. Chandolia interacted with all the licensees. sold 60% of its company stake at huge profit to Telenor after buying licensing (Including land values properties for towers) y Swan Telecom sold 45% of its company stake at huge profit to Emirates Telecommunications Corporation (Etisalat) after buying licensing y y y y y y y y y y oop Mobile Videocon Telecommunications Limited S Tel Reliance Communications Sistema Shyam Mobile (MTS) ± Sistema Mobile Russia Vodafone Essar Tata Teleservices Virgin Mobile India Dishnet Wireless Allianz Infra Corporate personalities involved y y y y y y Anil Ambani .

75G (EDGE). Based on the fees offered by S Tel. a former airline entrepreneur turned corporate lobbyist whose conversations with politicians and corporate entities were recorded by the government authorities. the CAG estimated the loss to the exchequer at 67. y y y Prashant Bhushan. on behalf of the Centre for Public Interest Litigation. The first method was based on the fact that S Tel. Petitioners to 2g scam y Subramaniam Swamy. Shankar are also petitioners in the suits filed by civil society groups. Loss to Exchequer The Comptroller and Auditor General of India used three different methods to assess the presumptive loss to the exchequer resulting from not auctioning 2G spectrum. Krishnamurthy and N. The CAG reasoned that since 2G is really 2. Raja's appointment as minister. explicitly offered to pay significantly higher license fees for the spectrum. activist lawyer and politician. its price should be comparable to that of 3G Page | 9 . an NDTV journalist alleged to have lobbied for A. a Hindustan Times editor alleged to have edited articles to reduce blame in the Nira Radia tapes.Media persons and lobbyists involved y Nira Radia. on behalf of the civil society organisationTelecom Watchdog Others:Several eminent people like former chief election commissioners J. He is also one of the petitioners in the 2G PIL currently being heard in the Supreme court. Vir Sanghvi. one of the licensees.M. Gopalaswami and former central vigilance commissioner (CVC) P. Lyngdoh.S. whose letters to the Prime Minister demanding action and affidavits and cases in the Supreme Court brought the issue into the public limelight. T. The contents were later leaked by unknown parties creating the Nira Radia tapes controversy y y Barkha Dutt.364 crore (US$14. y Paranjoy Guha Thakurta. a journalist who was one among the very first to write on the irregularities in the awarding of 2G spectrum allocation by the Telecom Ministry.95 billion) The second method was based on the price discovered by the 3G auction in 2010. Anil Kumar.

Indian Income Tax Department.licenses.46 billion) (based on Telenor's investment in Unitech). He has also justified his government's decision not to auction 2G spectrum as being in line with the policy guidelines laid down by the 10th Five-Year Plan.07 billion) The third method was based on the fact that some of the licensees received FDI in the form of equity.666 crore (US$12. Relationship between media and government Media sources such as OPEN and Outlook reported that Barkha Dutt and Vir Sanghvi knew that corporate lobbyist Nira Radia was influencing the decisions of A. Based on this method.8 billion) (based on Etisalat's investment in Swan Telecom) and 69. this can be construed as re-sale of the spectrum by the licensee. who replaced A. the CAG estimated the loss to the exchequer to be anywhere between 57. Raja as the communication minister. Raja. and suppressed news reporting the discovery of the corruption. CBI. For its part. On April 4. The CAG reasoned that this equity infusion was entirely due to the value of the allocated spectrum. the Department of Telecommunication. the CAG estimated the loss to the exchequer to be 176. the Congress-party led government has publicly defended itself on this count and Kapil Sibal. supported this corrupt activity. has refuted the CAG reasoning. Tata petitioned the government to acknowledge his right to privacy and demanded accountability for the leak. and the Department of Information Technology as respondents in the petition. with the Minister for Home Affairs.626 crore (US$15. Page | 10 . and hence was a valid basis for assessing loss to the exchequer. The critics alleged that Dutt and Sanghvi knew about corruption between the government and the media industry. 2011 Indian Parliament's Public Accounts Committee (PAC)questioned Tata Sons Chairman Ratan Tata and corporate lobbyist Niira Radia regarding their roles in 2G Scam. shortly after the spectrum allocation.000 crore (US$39. Ratan Tata petitions over leak The tapes leaked to the public include conversations between Nira Radia and Ratan Tata. Based on this method.

A. S Tel.Response to scam In early November 2010 Telecom Minister A Raja resigned. as they are currently providing some consumer service. Loop Mobile. Page | 11 . the Govt of India has replaced the then incumbent Telecom minister. Some media sources have speculated that these companies will receive large fines but not have their licenses revoked. member telecom K Sridhar and DoT deputy director general A K Srivastava on 8 December 2010. In response to the various allegations.former telecom secretary Siddharth Behura. The CBI conducted raids on Raja and four other telecom officials . Datacom (Videocon).Mr Sibal contends that the "notional" losses quoted are a result of erroneous calculations and insists that the actual losses are nil. and Etisalat to respond to his assertion that all of the 85 licenses granted to these companies did not have the up-front capital required at the time of the application and were in other ways illegal. Raja with Kapil Sibal who has taken up this charge in addition to being the Union minister for Human Resources Development. In mid November the comptroller Vinod Rai issued show-cause notices to Unitech. Raja's personal secretary R K Chandolia.

On April 2. the CBI arrested Mumbai based Dynamix Balwas (DB) group managing director Shahid Usman Balwa in connection with the 2G spectrum allocation scam. was instrumental in channelling the kickbacks allegedly received by the former telecom minister. Hari Nair.K. 2011.233).Raja. Raja's personal aide.000 page chargesheet in the 2G spectrum scam before a Special Court in Delhi naming nine individuals and three companies.Raja and R. Reliance Anil Dhirubhai Ambani Group 8. Raja. Senior Vice-President.K.985 crore (USD $ 6. The accused include the following individuals: 1. Reliance Anil Dhirubhai Ambani Group 7. It said the wrongful acts of the accused deprived the government exchequer of possible revenues amounting to INR Rs 30. arrested former Telecom minister 2. Group MD. Director. Surendra Pipara. the CBI filed its first 80. The CBI also arrested R. 2011. Gautam Doshi. Reliance Anil Dhirubhai Ambani Group and Reliance Telecom Ltd 9. On March 29. Vinod Goenka. the CBI arrested former Telecommunications Union Minister A.K Chandolia are heard in conversation with Niira Radia in the released Radia tapes. and Siddharth Behura. Both A. The CBI has evidence from the Income Tax department that Shahid Usman Balwa. Raja's arrested former personal secretary 4. R. A. Managing Director of Unitech Ltd and Unitech Wireless 6.Arrests and Chargesheets On February 2. arrested former Telecom Secretary 3. Shahid Usman Balwa.322. arrested former Director of Swan Telecom (now Etisalat DB) 5. 2011. Senior Vice-President. Siddharth Behura. On February 8. Raja. Shahid Balwa) and Rajeev Agarwal for their alleged involvement in money transfer to the Dravida Munnetra Kazhagam's (DMK) Kalaignar TV channel. A. the CBI arrested Asif Balwa (younger brother of the arrested former Managing Director of DB-Etisalat Group. Chandolia. Sanjay Chandra. 2011. Swan Telecom and Managing Director of DB Realty Page | 12 .983. Chandolia. considered close to A. in Delhi. the former Telecom Secretary.

On 25 April 2011. Sharad Kumar of Kalaignar TV 3. Asif Balwa of Kusegaon Realty 5. Reliance Telecom In the first chargesheet.Rajya Sabha Member of Parliament (DMK) and daughter of Tamil Nadu Chief Minister M Karunanidhi 2. Rajiv B Agarwal of Kusegaon Realty Page | 13 . the CBI had named lobbyist Niira Radia and 124 others as witnesses. in its second chargesheet in the scam.The three companies named are: 1. the Central Bureau of Investigation (CBI) named five more accused individuals: 1. Karim Morani of Cineyug Films 4. Kanimozhi . Swan Telecom 2. Unitech Wireless 3.

(Public Accounts Committee) Public Accounts Committee. He alleged that on 28-042011. was formed to investigate.P. UPA members' claimd that the report had been "rejected". independent of other committees like JPC.C. A minister reportedly commented that the PAC draft report will be thrown in the Page | 14 . Attorney General and CBI director for questioning.A. that said trouble started when a decision was taken to call top officials of the PMO. ministers passed on "chits" and called up PAC members to speak and behave in a particular manner. The chairman submitted a draft report on 2G scam to Lok Sabha Speaker on Saturday 30-04-2011. during the last meeting of the committee. with chairman as Murli Manmohar Joshi. and insisted that it be tabled in the Parliament. and 11 MPs of same committee(majority out of 21) had "rejected" the report .which was termed as "unconstitutional" by MM Joshi pointing out that such a possibility does not exist till the report is "read" by members and "discussed" para by para. Cabinet Secretary. a 21-member committee. Joshi said it was the duty of the PAC to "trace and examine the way the money of common man is spent". Defending his action of calling witnesses from diverse fields in connection with the 2G scam probe.

Spicejet stocks went down after reports of investigation on Maran's recent takeover of Spicejet . 20% fall in the stock prices of DB Realty. Sun TV had its shares fall by 10%. Swan Telecom Chief Balwa was arrested on Feb 8 and this led to rumours of links with Anil Ambani's Reliance ADAG and it led to 20% fall of his stocks . Its reported that nearly 2 Billion USD was eroded from his stocks . Page | 15 . Sun TV COO refused the allegations. to which the chairman regretted and questioned if Parliament's proposals and then Supreme Court orders would be given the same treatment.dustbin. Impact on stock markets The first casualty in Stock Markets once Raja was arrested was DB Realty.

The Department of Telecommunications of the Ministry of Communications and Information Technology did not make mid course review/modifications. and a reduction in tariff in the telecom sector had benefitted the customer.718. 3. which gave unfair advantage to certain companies over others. unfair and inequitable manner. leading to the grant of 85 out of Page | 16 . proceeded to issue 122 new licences for 2G spectrum at 2001 prices. it was only natural that 2G spectrum was not allocated at its correct market value. The Hon'ble Prime Minister had stressed on the need for a fair and transparent allocation of spectrum. a policy to ensure optimal utilisation of spectrum and a method to discover its market price was not considered. The entire process of allocation of UAS licences lacked transparency and was undertaken in an arbitrary. resulting in a transitory phase of the licensing regime continuing for years together without true value of 2G spectrum being realised. by flouting every cannon of financial propriety. Given its scarcity value and increasing demand. a similar resource. arbitrarily changed the cut off date for receipt of applications post facto and altered the conditions of the FCFS procedure at crucial junctures without valid and cogent reasons. 2. in 2008.CONCLUSION 1. The DoT did not follow its own guidelines on eligibility conditions. was allocated at market price discovered through auction. Brushing aside their concerns and advices. The Department of Telecommunications also did not do the requisite due diligence in the examination of the applications submitted for the UAS licenses. rules and procedures. The recommendations of Telecom Regulatory Authority of India were not followed in spirit.95 crore. With the UAS policy and its subsequent amendments being implemented in a weak and indeterminate manner and with the reluctance on the part of the Department of Telecommunications to address the issue of pricing of 2G spectrum. the Department of Telecommunications. as envisaged in NTP-99. Drawing upon NTP 99. based on the collective wisdom of Government. generating revenues of ` 67. a comprehensive evaluation of available spectrum was required which was not done. while 3G spectrum. and the Ministry of Finance had sought for the decision regarding spectrum pricing to be considered by an EGoM. a policy framework was established in November 2003 to chart the course for implementation of a Universal Licensing Regime. While targeted growth in tele-density had already been achieved.

it is observed that despite having themselves sought the opinion of the Ministry of Law and Justice. which gave the perception of discrimination against other players in the field. 6. created barely months ago. if adopted. Further this decision was in contravention of the Cabinet decision of 2003. based on various available indicators has been indicated in the Chapter 5. was not deliberated upon by the full Telecom Commission. In conclusion. had the transparent and fair market mechanism been followed for the allocation of UAS licences. resulting in additional spectrum being allotted to certain operators at 2001 price. also in 2008. The premium earned by these new entrants to the telecom sector was nothing but the true value of the spectrum. Owners of these licences. the value of additional spectrum allotted beyond the contractual amount to existing nine operators. The correct value of 2G spectrum allotted to 122 licences in 2008 and the 35 licences under dual technology. have in turn sold significant stakes in their companies to the Indian/foreign companies at high premium within a short period of time. Audit is of the view that such discussion with different stake holders represented in the Telecom Commission would certainly have benefitted Department of Page | 17 . 5. its presumptive value. The assurances. obtained at unbelievably low price. In fact. a scarce finite national asset and for which there was an unprecedented demand for allocation. Dual Technology was also introduced by the DoT in October 2007 in a hasty and arbitrary manner and in-principle approval was given to 3 operators on a day prior to the announcement of the policy. These companies. However. could have been determined only by a market driven process. which should have normally accrued to the public exchequer. submitted fictitious documents and used fraudulent means for getting UAS licences and thereby access to spectrum. were not adhered to. the directions of the Hon ble Prime Minister evoked a response from the Hon ble Minister of Communications and Information Technology on the same day. 4. deliberately suppressed facts. disclosed incomplete information.122 UAS licences to ineligible applicants. The letter contained assurances with regard to the availability of spectrum for all applicants as also with regard to the strict adherence to the FCFS policy for allocation of spectrum. The concerns of the Ministry of Finance were also not addressed for reasons which are not convincing. based on various indicators has been shown in the Chapter 4 and 5. however. The methodology for allocation of 2G spectrum. the Department of Telecommunications decided to ignore the advice received. In addition.

the widely held belief that it has benefitted a few operators and has not been able to maximise generation of revenue from allocation of such a scarce resource. Page | 18 . To ensure that such lapses do not occur in any Ministry or Department of the Government.Telecommunications in arriving at a more credible and transparent procedure for allocation as also for ascertaining the true value of 2G spectrum. However. and hence. This has now been confirmed in Audit. The role of Telecom Regulatory Authority of India would also appear to have been reduced to that of a hapless spectator as its recommendations were either ignored or applied selectively. The entire process of allocation of 2G spectrum raises serious concern about the systems of governance in the Department of Telecommunications which need to be thoroughly reviewed and revamped. The fact that there has been loss to the national exchequer in the allocation of 2G spectrum cannot be denied. the amount of loss could be debated. The entire implementation process does not withstand the test of scrutiny. there is an imperative need to fix responsibility and enforce accountability for the lapses highlighted in the Audit Report.

Deepak Sharma 2. http://en. Third Edition Page | 19 . Anshul Rohilla(B.REFRENCES 1.org/wiki/2G_spectrum_scam [3] William Stallings. Rahul Jain(B.tech final year-EC) 3. Pearson Education.tech final year-CS) BIBLIOGRAPHY [1] Times Of India [2] Author Guidelines . Cryptography and Network Security: Principles and Practices .wikipedia.

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