CAG slams Raja move to buy back non-operational spectrum

In a rare pre-emptive intervention, the office of the Comptroller and Auditor General of India (CAG), the public accounts watchdog, has warned the telecommunications ministry against bailing out mobile phone companies in violation of rules.

The injunction was issued by the director general of audit (post and telecommunications), a department of the CAG. It wrote to the Department of Telecommunications (DoT) on 15 September saying that the department had granted new unified access service licences (UASL) to certain companies without proper verification of their eligibility and other credentials.

Its objection is that such companies might have been holding on to spectrum, and allowing an exit route would amount to permitting them to get away with hoarding the scarce resource without any revenue for the exchequer.

Recently, telecom minister A Raja, who is under fire for selling mobile licences and wireless spectrum to a clutch of new operators in 2008 at rates fixed in 2001, held out hopes of a bailout for these firms, risking a fresh storm of corruption allegations against him and the government.

The DoT, under the direct control of Raja's ministry, was contemplating permitting new operators to return 2G spectrum with the government returning the Rs1,650 crore they paid for a pan-India licence. The current licence conditions do not have any such provision, but stipulate a three-year lock-in period for mergers and acquisitions.

Many of the new entrants are battling for survival as tariff wars in India's ultra-competitive mobile market have significantly lowered average revenues per customer, making their businesses unviable.