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States suffers no losss in 2G: Subbarao
Last Updated : 19 Nov 2012 07:35:33 PM IST
RBI Governor D Subbarao
File Photo


"It is correct that while determining policy, Government has to make a balance between welfare maximisation and revenue maximisation.

RBI Governor D Subbarao on Monday told a Delhi court that it cannot be said that the state had "suffered a loss" in the 2G spectrum allocation in 2008 as in a policy decision the government has to make a balance even at the cost of sacrificing some revenue.

However, in the beginning of his deposition, he said that he had questioned, in 2007, the fixing of around Rs 1600 crore as spectrum fees by the DoT for pan-India telecom licence.

"In this case if there was a sacrifice of some revenue, it cannot be said that Government suffered a loss," Subbarao, who was depositing as a prosecution witness in the 2G case, told the court while being cross examined by defence counsel.

Subbarao, who was the Finance Secretary from April 2007 to September 2008, told the court that by June 2008, it was agreed between the Department of Telecom (DoT) and the Finance Ministry that start-up spectrum would not be charged and only
spectrum beyond start-up spectrum would be charged.

"It is true that by June 2008, the position as indicated in the question was agreed upon between Ministry of Finance and the DoT. This agreement was reached after a series of discussion between the DoT and Ministry of Finance," he told Special CBI Judge O P Saini.

Subbarao further said that initially, the Finance Ministry had argued that entire spectrum, including start-up spectrum, should be charged but during the discussions, the DoT had said that charging for the entire spectrum would be problematic and "legally questionable" on a number of grounds.

Later, during his cross examination by A Raja's lawyer Sushil Kumar, Subbarao  said that in a meeting held on July 4, 2008, the then Finance Minister P Chidambaram and the former Telecom Minister had conveyed to the Prime Minister about an
agreement between the DoT and the Finance Ministry.

During the recording of the statement, which concluded on Monday, Subbarao said that the view of Finance Ministry on the
issue of spectrum pricing was that price must be "rediscovered" as it would be inappropriate to give licences on the price fixed in 2001-2002.

"The view of Ministry of Finance on the pricing of spectrum was that for licences being issued in 2007/08, the price must be rediscovered. It would be inappropriate to give licences and spectrum on prices discovered in 2001/02, in view of the increase in revenues of the telecom operators and also inflation in the intervening period," he said.

He said the "endeavour" of Finance Ministry was to maximise the revenues to the government but "since DoT had already issued letters of intent (LoIs) on January 10, 2008, the effort of Ministry of Finance was to see if the price for spectrum could be enhanced to reflect the current market prices."

"We also negotiated an increase in spectrum usage charges."

On being asked by the defence counsel about whether the government suffered any loss due to the issuance of 122 new
Unified Access Service Licences (UASL) after the DoT and the Finance Ministry arrived at an agreed position on entry fee,
Subbarao said, "there was certainly sacrifice of revenue."

He told the court that after issuance of LoIs, there were several rounds of discussion between the Finance Ministry and DoT on the issue of spectrum pricing and discussions took place between Raja and then Finance Minister P Chidambaram on
May 29, 2008 and June 12, 2008 respectively.

Subbarao said  he had written a letter to the then DoT Secretary D S Mathur on November 22, 2007 in wake of the presentation by Mathur in the Cabinet Secretariat on November 20, 2007 on the issues of spectrum policy and pricing.

"I wrote this letter to confirm if proper procedure was followed with regard to due financial diligence. I also questioned as to how the rate of Rs. 1600 crore, determined as far back as 2001, could be applied for licence given in 2007 without any indexation, let alone current valuation," he said.

He further said that during the discussions with the DoT, the Finance Ministry was told that auction of spectrum was not "feasible" for a number of reasons.

"The question then was how to maximise the revenue in a fair and transparent manner. It was then agreed that way of
doing this would be to index the price discovered in 2001/02 to the changes between that year and 2007/08," he said.

He deposed that the Finance Ministry had argued that the methodology to be followed for allocation of spectrum and its pricing are issues that impinge on revenue as well as on the ultimate price paid by the consumer and therefore, these issues need to be discussed at the Group of Minister (GoM) level.

"Since DoT had earlier got these terms deleted from the original terms of reference, Ministry of Finance requested for inclusion of these two vital issues in the terms of reference of GoM," he told the court.

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