The Rs 19,000 crore mystery: How the CAG figure for "undue benefit" to Mukesh Ambani's Reliance Jio shrank

In a report that was tabled in Parliament on 8 May 2015, the Comptroller and Auditor General (CAG) of India indicted the Department of Telecommunications (DoT) for providing an “undue benefit” to Reliance Jio—a telecom company owned by Mukesh Ambani as part of Reliance Industries Limited (RIL)—by allowing Jio to offer voice services under the Broadband Wireless Access (BWA) spectrum. According to the report, the cost of this “undue benefit” was Rs 3,367 crore. However in a draft report that had been released by the CAG in August 2014, the figure for the undue benefit was Rs 22,842 crore.
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On 8 May 2015, the Comptroller and Auditor General (CAG) of India tabled a report in Parliament that sharply indicted the Department of Telecommunications (DoT) for providing an “undue benefit” to Reliance Jio—a telecom company owned by Mukesh Ambani as part of Reliance Industries Limited (RIL). According to the CAG, DoT did so by allowing Jio to offer voice services under the Broadband Wireless Access (BWA) spectrum it had obtained through the 4G (fourth-generation electro-magnetic spectrum) auction conducted in 2010.

The report stated that the licence the company had acquired at that time did not allow it to include voice telephony among the services it could offer under the spectrum. A Unified Licence—which allowed the transformation of Reliance Jio from an internet service provider into a full services provider—was made available to it quietly, and as the CAG report alleged, at a price that was far below the prevailing market price. The cost of this “undue benefit” according to the report: Rs 3,367 crore.

However, during the press conference that followed the submission of this report, it became clear that there was more to the story. Suman Saxena, the deputy CAG, found herself being pushed to answer a question she had not quite anticipated. The question revolved around the disparity between the report that was tabled, and the one that had been drafted by the CAG nearly a year ago. In August 2014, the CAG had drafted a report in which the original figure for the “undue benefit” was Rs 22,842 crore—seven times higher than the figure stated in the report eventually presented in May. How and why did this happen? Saxena refused to provide any clear answers to this query, and merely said, “A draft is a draft.”

In its draft report, the CAG was highly critical of the government for allowing Reliance Jio to use Infotel Broadband Services Private Limited (IBSPL) as a front company to acquire broadband spectrum. IBSPL was, at that time, a tiny internet service provider promoted by Anant Nahata—the son of Mahendra Nahata, who is the promotor of Himachal Futuristic Comunications Limited (HFCL), a manufacturer of telecom products and a provider of telecommunication services. Interestingly, HFCL came into the limelight in 2011, when it was alleged that Datacom, a company owned jointly by Videocon and HFCL, had been one of the prime beneficiaries in the allotment of 2G spectrum during the reign of A Raja as the telecom minister. Earlier, in 1995, Mahendra Nahata had bid for nine 2G licences and had to be “bailed out” by the then Communications Minister Sukh Ram. The CAG draft report had further claimed that Reliance Jio had acquired the spectrum exploiting loopholes left by the DoT while framing rules for the auction of 4G broadband wireless access (BWA) spectrum. The company then allegedly wangled permission to provide mobile telephone services on this spectrum.

The final report of the CAG that was presented on 8 May, however, has diluted this criticism considerably. It has deleted important references in the draft report to the alleged “rigging” of the auction by two “colluding” parties: Reliance and Infotel.

Paranjoy Guha Thakurta  is an independent journalist.

Jyotirmoy Chaudhuri is among the co-authors of Gas Wars: Crony Capitalism and the Ambanis.

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