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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 .

Computer Department Mr. Deepak Demla I/c Principal (Mr. Syed Faiz Date: Place: Jaipur Submitted To: Mr. Jaipur.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. Deepak Sharma Head. Piyush jain 2. M.L GUPTA) Page | 3 . During the academic year 2010-2011(Semester-II) . Reema Choudhary 3. Team: 1. Rajasthan and is being submitted to ARYA INSTITUTE OF ENGENNERING AND TECHNOLOGY.

Jaipur Team: 1. Jaipur Page | 4 . Piyush jain 2. Syed Faiz Submitted To: Mr.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. Deepak Sharma (Lecturer. Reema Choudhary 3.Humanities) External Examiner: Date: Place: ARYA INSTITUTE OF ENGENNERING AND TECHNOLOGY. Rajasthan and is being submitted to ARYA INSTITUTE OF ENGENNERING AND TECHNOLOGY.

1 Ratan Tata petitions over leak 6.2 Bureaucrats involved 2. No.C. involved Ministers and Parliamentarians Page number 2. 5. 7.5 Media persons and lobbyists involved 3.1 Politicians. Petitioners to 2g scam Loss to Exchequer Relationship between media and government 4. 8.A.3 Corporations involved 2. References Page | 5 . (Public Accounts Committee) Impact on stock markets 10. 2. 1.4 Corporate personalities involved 2. 9. Response to scam Arrests and Chargesheets P. 4. CONTENT INTRODUCTION CIVIL SERVANTS. Conclusion 11. POLITICIANS AND CORPORATIONS INVOLVED IN SCAM 2.TABLE OF CONTENTS S.

471 (using as genuine a forged document or electronic record). 2010. 468 (Forgery for purpose of cheating). 2011 Kanimozhi was named as a coPage | 6 Kanimozhi Member of Rajya .379 crore (US$39. 1.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. Year:2011] Civil Servants. Ministers and Parlimentarians involved Name of the Person involved Occupation and Designation Allegation and Charges A. Raja The Controller and Auditor General holds Raja personally responsible for the sale of 2G spectrum at 2001 rates in 2008. 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. Politicans. and Information Technology In August.16 billion). 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. 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. resulting the previously mentioned Union Cabinet Minister loss of up to Rs. evidence was submitted by the Controller and Auditor General (CAG) showing that Raja had personally signed and approved the majority of the questionable allocations. 420 (cheating and dishonestly inducing delivery of property) and 109 (abetment if the act abetted is committed in consequence.03 billion) to the exchequer. and where no express provision is made for its punishment) of the Indian Penal Code. 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).719 crore (US$15.76 lakh crores (US$40 billion) to the for Communications national exchequer. Politicians and Corporations Involved in scam All the accused have been booked under sections 120(B) (criminal conspiracy). On April 25.Case No:10.

a consulting firm. Raja re-designated him Economic Adviser. On September 7. 2010 he was appointed as the Chief Vigilance Commissioner. Chandolia had been promoted to the Joint Secretary rank. 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. He was the Secretary of the Department of Telecommunications. that Page | 7 RK Chandolia . She has been charged with section 7 and 11 of the Prevention of Corruption Act. He is alleged to have recommended policies that favored certain Telecom companies when he was heading the TRAI. The chargesheet. Baijal joined Noesis.Karunanidhi Sabha conspirator in the supplementary chargesheet filed by the Central Bureau of Investigation (CBI) in connection with the 2G spectrum case. Post Civil Servant retirement. 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). When Raja became the Telecom Minister once again in UPA-II. Civil Servant (IES officer of 1984 batch He was private secretary of Raja during UPA-I when the licences were awarded. cadre) Civil Servant (IAS officer of P. The sections deal with acceptance of alleged gratification. Shourie and several media pundits. J. 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. The houses and offices of the bureaucrat were recently raided by the Central Bureau of Investigation as part of their investigations. something which has been attacked by Arun cadre). 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.

Essar Group All of them have either been questioned by the CBI or are prospective suspects in the scam. from DDG-access services A K Srivastava's room. gave him the charge of all important policy-related work. had handed out letters of intent to representatives of various companies. Corporations involved y Unitech Group a real estate company entering the telecom industry with its 2G bid.Reliance Group (ADAG) Shahid Balwa . Chandolia interacted with all the licensees.cadre).Dynamix Group Venugopal Dhoot .DB Realty and Etisalat DB Telecom(formerly Swan Telecom) Vinod Goenka .Videocon Group Prashant Ruia . 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 . It is said that it was Chandolia who. Page | 8 .

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

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. Ratan Tata petitions over leak The tapes leaked to the public include conversations between Nira Radia and Ratan Tata. has refuted the CAG reasoning. Tata petitioned the government to acknowledge his right to privacy and demanded accountability for the leak. the CAG estimated the loss to the exchequer to be anywhere between 57. On April 4.666 crore (US$12. the Department of Telecommunication. 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. Indian Income Tax Department. and hence was a valid basis for assessing loss to the exchequer. who replaced A. supported this corrupt activity. shortly after the spectrum allocation. The CAG reasoned that this equity infusion was entirely due to the value of the allocated spectrum.licenses.46 billion) (based on Telenor's investment in Unitech). Raja. CBI. Page | 10 . and suppressed news reporting the discovery of the corruption. this can be construed as re-sale of the spectrum by the licensee. the Congress-party led government has publicly defended itself on this count and Kapil Sibal.626 crore (US$15. Raja as the communication minister.000 crore (US$39.07 billion) The third method was based on the fact that some of the licensees received FDI in the form of equity. Based on this method. For its part. 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.8 billion) (based on Etisalat's investment in Swan Telecom) and 69. the CAG estimated the loss to the exchequer to be 176. The critics alleged that Dutt and Sanghvi knew about corruption between the government and the media industry. and the Department of Information Technology as respondents in the petition. with the Minister for Home Affairs.

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

Raja.322. Raja's personal aide. 2011. considered close to A.985 crore (USD $ 6. On February 8. Chandolia. On April 2. in Delhi. On March 29. A. 2011. 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.Arrests and Chargesheets On February 2. and Siddharth Behura. Swan Telecom and Managing Director of DB Realty Page | 12 . Reliance Anil Dhirubhai Ambani Group and Reliance Telecom Ltd 9. Raja's arrested former personal secretary 4. the CBI arrested Mumbai based Dynamix Balwas (DB) group managing director Shahid Usman Balwa in connection with the 2G spectrum allocation scam. Group MD. Gautam Doshi. Hari Nair. arrested former Telecom minister 2. the former Telecom Secretary. arrested former Telecom Secretary 3. was instrumental in channelling the kickbacks allegedly received by the former telecom minister. Both A. Surendra Pipara.K.983.K. Raja. It said the wrongful acts of the accused deprived the government exchequer of possible revenues amounting to INR Rs 30. Senior Vice-President. The accused include the following individuals: 1. Chandolia. 2011. Raja.000 page chargesheet in the 2G spectrum scam before a Special Court in Delhi naming nine individuals and three companies. Shahid Usman Balwa.K Chandolia are heard in conversation with Niira Radia in the released Radia tapes. arrested former Director of Swan Telecom (now Etisalat DB) 5. The CBI also arrested R. 2011. the CBI arrested former Telecommunications Union Minister A. Reliance Anil Dhirubhai Ambani Group 7. The CBI has evidence from the Income Tax department that Shahid Usman Balwa. the CBI filed its first 80. R. Senior Vice-President. Managing Director of Unitech Ltd and Unitech Wireless 6.Raja and R. Reliance Anil Dhirubhai Ambani Group 8.233). Sanjay Chandra. Vinod Goenka. Siddharth Behura. Director.

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

independent of other committees like JPC. A minister reportedly commented that the PAC draft report will be thrown in the Page | 14 . and insisted that it be tabled in the Parliament. (Public Accounts Committee) Public Accounts Committee.A. Joshi said it was the duty of the PAC to "trace and examine the way the money of common man is spent".P.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. was formed to investigate. 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. He alleged that on 28-042011. Cabinet Secretary. a 21-member committee. The chairman submitted a draft report on 2G scam to Lok Sabha Speaker on Saturday 30-04-2011.C. with chairman as Murli Manmohar Joshi. UPA members' claimd that the report had been "rejected". Defending his action of calling witnesses from diverse fields in connection with the 2G scam probe. Attorney General and CBI director for questioning. during the last meeting of the committee. and 11 MPs of same committee(majority out of 21) had "rejected" the report .

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

while 3G spectrum. generating revenues of ` 67. a policy to ensure optimal utilisation of spectrum and a method to discover its market price was not considered. unfair and inequitable manner. 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. it was only natural that 2G spectrum was not allocated at its correct market value. a policy framework was established in November 2003 to chart the course for implementation of a Universal Licensing Regime. which gave unfair advantage to certain companies over others. The Department of Telecommunications of the Ministry of Communications and Information Technology did not make mid course review/modifications. proceeded to issue 122 new licences for 2G spectrum at 2001 prices. leading to the grant of 85 out of Page | 16 . 2. The Hon'ble Prime Minister had stressed on the need for a fair and transparent allocation of spectrum. as envisaged in NTP-99. Given its scarcity value and increasing demand. The DoT did not follow its own guidelines on eligibility conditions. and the Ministry of Finance had sought for the decision regarding spectrum pricing to be considered by an EGoM. and a reduction in tariff in the telecom sector had benefitted the customer. in 2008. The recommendations of Telecom Regulatory Authority of India were not followed in spirit. was allocated at market price discovered through auction. The Department of Telecommunications also did not do the requisite due diligence in the examination of the applications submitted for the UAS licenses. a comprehensive evaluation of available spectrum was required which was not done. resulting in a transitory phase of the licensing regime continuing for years together without true value of 2G spectrum being realised.CONCLUSION 1.718. the Department of Telecommunications. Drawing upon NTP 99. 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. rules and procedures.95 crore. Brushing aside their concerns and advices. 3. by flouting every cannon of financial propriety. The entire process of allocation of UAS licences lacked transparency and was undertaken in an arbitrary. based on the collective wisdom of Government. While targeted growth in tele-density had already been achieved.

deliberately suppressed facts. could have been determined only by a market driven process. created barely months ago. 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. was not deliberated upon by the full Telecom Commission. 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. In addition. were not adhered to. In fact. however. based on various indicators has been shown in the Chapter 4 and 5. disclosed incomplete information. These companies. 6. resulting in additional spectrum being allotted to certain operators at 2001 price. In conclusion. also in 2008.122 UAS licences to ineligible applicants. The correct value of 2G spectrum allotted to 122 licences in 2008 and the 35 licences under dual technology. the Department of Telecommunications decided to ignore the advice received. submitted fictitious documents and used fraudulent means for getting UAS licences and thereby access to spectrum. had the transparent and fair market mechanism been followed for the allocation of UAS licences. 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 . The premium earned by these new entrants to the telecom sector was nothing but the true value of the spectrum. its presumptive value. which should have normally accrued to the public exchequer. The methodology for allocation of 2G spectrum. The concerns of the Ministry of Finance were also not addressed for reasons which are not convincing. 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. it is observed that despite having themselves sought the opinion of the Ministry of Law and Justice. Further this decision was in contravention of the Cabinet decision of 2003. Owners of these licences. However. 5. 4. the value of additional spectrum allotted beyond the contractual amount to existing nine operators. a scarce finite national asset and for which there was an unprecedented demand for allocation. The assurances. if adopted. obtained at unbelievably low price. based on various available indicators has been indicated in the Chapter 5. which gave the perception of discrimination against other players in the field. have in turn sold significant stakes in their companies to the Indian/foreign companies at high premium within a short period of time.

However. the amount of loss could be debated. 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. 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 fact that there has been loss to the national exchequer in the allocation of 2G spectrum cannot be denied. To ensure that such lapses do not occur in any Ministry or Department of the Government. This has now been confirmed in Audit. Page | 18 . 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. and hence. The entire implementation process does not withstand the test of scrutiny.Telecommunications in arriving at a more credible and transparent procedure for allocation as also for ascertaining the true value of 2G spectrum. there is an imperative need to fix responsibility and enforce accountability for the lapses highlighted in the Audit Report.

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