2G Scam

The 2G spectrum scandal involved officials in the government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money which the law mandated to be collected is estimated to be 176,000 crore (US$33.44 billion) based on 3G auction prices. The issuing of licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department was investigating political lobbyist Nira Radia. The government's investigation and the government's reactions to the findings in the investigation were the subject of debate, as were the nature of the Indian media's reactions. The discussion around the reactions to the 2G spectrum scam became known in the media as the Nira Radia tapes controversy.

Parties accused of involvement

The selling of the licenses brought attention to three groups of entities - politicians and bureaucrats who had the authority to sell licenses, corporations who were buying the licenses and media professionals who mediated between the politicians and the corporations. [edit]Politicians

involved

A. Raja - the Minister of Communications and Information Technology who sold the licenses M. K. Kanimozhi - Rajya Sabha MP

P. Chidambaram - The Then Minister of Finance and current Minister of Home Affairs - alleged to be involved with A. Raja in spectrum pricing and equity dilution by telecom operators that received spectrum [3][4] [edit]Bureaucrats involved Siddharth Behura - Former Telecom Secretary RK Chandolia - Raja's private secretary

[edit]Corporate

Executives involved

Gautam Doshi - Managing Director of Reliance Anil Dhirubhai Ambani Group Surendra Pipara - senior vice- President of Anil Dhirubhai Ambani Group and Reliance Telecom Hari Nair - senior vice-president of Anil Dhirubhai Ambani Group Sanjay Chandra - Managing Director of Unitech Wireless (Tamil Nadu) Ltd Shahid Balwa - Swan Telecom promoter Vinod Goenka - Swan Telecom promoter Sharath Kumar - Managing Director of Kalaignar TV Rajiv Agarwal and Asif Balwa (younger brother of Shahid Balwa) - chief executives of Kusegaon Fruits and Vegetables

[edit]Film

and Entertainment persons involved accused

Karim Morani - Cineyug Media and Entertainment Ltds Director Unitech Group a real estate company entering the telecom industry with its 2G bid; sold 60% of its company stake at huge profit to Telenor after buying licensing[5]

[edit]Corporations

Swan Telecom sold 45% of its company stake at huge profit to Emirates Telecommunications Corporation (Etisalat) after buying licensing[5] Loop Mobile Videocon Telecommunications Limited S Tel Reliance Communications

[edit]Media

persons accused

Niira Radia, a corporate lobbyist whose conversations with politicians and corporate entities were recorded by the government and leaked creating the Nira Radia tapes controversy Barkha Dutt, an NDTV journalist alleged to have lobbied for A. Raja's appointment as minister Vir Sanghvi, a Hindustan Times editor alleged to have edited articles to reduce blame in the Nira Radia tapes

[edit]Shortfall

of money

A. Raja arranged the sale of the 2G spectrum licenses below their market value. Swan Telecom, a new company with few assets, bought a license for 1,537 crore (US$292.03 million).[6] Shortly thereafter, the board sold 45% of the company to Etisalat for 4,200 crore (US$798 million). Similarly, a company formerly invested in real estate and not telecom, the Unitech Group, purchased a license for 1,661 crore (US$315.59 million) and the company board soon after sold a 60% stake in their wireless division for 6,200 crore (US$1.18 billion) to Telenor.[6] The nature of the selling of the licenses was that licenses were to be sold at market value, and the fact that the licenses were quickly resold at a huge profit indicates that the selling agents issued the licenses below market value. Nine companies purchased licenses and collectively they paid the Ministry of Communications and Information Technology's telecommunications division 10,772 crore (US$2.05 billion).[6] The amount of money expected for this licensing by the Comptroller and Auditor General of India was 176,000 crore (US$33.44 billion).[7] The report on the details of the financials involved framed by CAG could be found at the website of Comptroller and auditor general of India (Supreme audit institution of Government of India).[8]

3GScam FDI in India

The government recently came out with a concept note on foreign direct investment (FDI) in multi-brand retail trading. This is an emotional issue, and has been placed on the back burner by successive governments in response to fears about its impact on small retailers, who are large generators of employment. This fear is worthy of examination. Trade constitutes around 15% of our gross domestic product, of which retail trade makes up at least half. The retail sector is the second largest employer after agriculture, providing job opportunities to at least 33 million people. Few can underestimate the importance of being circumspect with regard to any legislation that will affect so many jobs. The main driver for this policy seems to be the recognition that the Indian economy faces serious supply-side constraints, particularly in the food-related retail chains. The government would like to

improve back-end infrastructure, and ultimately reduce post-harvest losses and other wastage. There is also a general concern, highlighted by the persistence of food inflation, that intermediaries obtain a disproportionate share of value in this chain and farmers receive only 15% of the end consumer price. In its concept note, the government has asked 12 questions, which relate to the regulatory framework that ought to be in place to protect farmers and small retailers. The intent of this article is to ask a few more questions that may in turn enable a response to those 12. A crucial argument against foreign investment in retail is the belief that small retailers will suffer. This, in some sense, suggests that low price is all that counts in the retailing industry. Small retailers offer of personalized service, home delivery and credit seems to have been given little importance. One question is whether customers, used to these services for long, will give them up easily. Second, large retail has typically succeeded where consumers have been willing to buy in large quantities to avail volume-related discounts. In a country where the marketing ethos has been dominated by the paisa pack, and marketeers obsess about the fact that the unit outlay for a commodity must be small for it to be attractive, another question is whether there is a willingness to make large outlays. There is also the so-called car problem in retail: Only if large parts of the population own cars would they be able to carry 24 cartons of orange juice and 2kg tubs of ice cream conveniently. If only car owners are targeted by big retail, one wonders if there would be a material impact on the small store. Undoubtedly, lower prices psychologically propel buyers to spend more than they otherwise would. The resulting growth in private consumption creates jobs. It is not clear if this aspect has been considered. What we must avoid is a situation similar to the one in the US, where increased consumption does take place, but actually creates jobs in China. If we can ensure that procurement from large-format retail takes place within India, it may have a beneficial impact on jobs. India has had several retailers with deep pockets and access to skills. That they have not been able to swamp the domestic small retailer says something about consumer behaviour and small retails resilience. Answers to these questions will suggest that FDI in retail could have a profound impact, but not necessarily on small retailers. One should also examine whether greater benefits to farmers due to greater consumption, and the consequent impetus to manufacturing, can offset a marginal impact on the small retailer. Most importantly, we should not write off the inherent entrepreneurship of small retail in India. Hence, it should be possible for the government to manage this FDI in a calibrated manner, ensuring that its benefitsthrough development of infrastructure, provision of rural employment, and support for local sourcingbalance potential risks to the retail trade.

EURO Crisis Sub Prime Crisis Rs Depreciating Inflation Equity dailution B/S

P&L Cash Flow