The 2G spectrum scam in India involved the issue of 1232 licenses by the ruling Congress-led UPA alliance[1] of the 2G spectrum to 85 companies[1] including many new telecom companies with little or no experience in the telecom sector at a price set in the year 2001.
The scam involved allegations regarding the under pricing of the 2G spectrum by the Department of Telecommunications which resulted in a heavy loss to the exchequer, 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 677,190 crore (US$151.01 billion) to the exchequer.[2] A report submitted by the Comptroller and Auditor General based on the money collected from 3G licenses estimated that the loss to the exchequer due to under pricing of the 2G spectrum was 176,379 crore (US$39.33 billion).[3]
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),Case No:10, Year:2011].[4]All the accused have been booked under sections 120(B) (criminal conspiracy), 468 (Forgery for purpose of cheating), 471 (using as genuine a forged document or electronic record), 420 (cheating and dishonestly inducing delivery of property) and 109 (abetment if the act abetted is committed in consequence, and where no express provision is made for its punishment) of the Indian Penal Code.[5]
Politicians, Ministers and Parliamentarians involved:
Andimuthu Raja, Union Cabinet Minister for Communications and Information Technology : The Comptroller and Auditor General holds Raja personally responsible for the sale of 2G spectrum at 2001 rates in 2008, resulting in the previously mentioned loss of up to Rs. 1.76 lakh crores (US$40 billion) to the national exchequer.In August, 2010, evidence was submitted by the Comptroller and Auditor General (CAG) showing that Raja had personally signed and approved the majority of the questionable allocations.
Kanimozhi Aravindhan, Member of Rajya Sabha : On April 25, 2011 Kanimozhi was named as a co-conspirator in the supplementary chargesheet filed by the Central Bureau of Investigation (CBI) in connection with the 2G spectrum case. The chargesheet 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.She has been charged with section 7 and 11 of the Prevention of Corruption Act. The sections deal with acceptance of alleged gratification.
Bureaucrats involved:
Siddhartha Behura, Civil Servant (IAS officer of 1973 batch UP cadre) : He was the Telecom secretary who served in the DOT at the time of the 2G allocation.
Pradip Baijal, Civil Servant (IAS officer of 1966 batch MP cadre) : He is alleged to have recommended policies that favored certain Telecom companies when he was heading the TRAI. Post retirement, Baijal joined Noesis, a consulting firm.Raja has made references to Baijal's decisions in 2003 as the basis for his decisions in 2008; something which has been attacked by Arun Shourie and several media pundits. The houses and offices of the bureaucrat were recently[when?] visited by the Central Bureau of Investigation as part of their investigations.However, Baijal is expected to get a clean chit in this issue.
R K Chandolia, Civil Servant (IES officer of 1984 batch cadre) : He was private secretary of Raja during UPA-I when the licences were awarded. When Raja became the Telecom Minister once again in UPA-II, Chandolia had been promoted to the Joint Secretary rank. Raja re-designated him Economic Adviser, that gave him the charge of all important policy-related work. Chandolia interacted with all the licensees. It is said that it was Chandolia who, from DDG-access services A K Srivastava's room, had handed out letters of intent to representatives of various companies.
Corporations involved:
Allianz Infra
Aircel
Dishnet Wireless
Loop Mobile
Sistema Shyam Mobile (MTS) – Sistema Mobile Russia
Reliance Communications
S Tel
Swan Telecom
Tata Tele Services
Unitech Group
Videocon Telecommunications Limited
Vodafone Essar
Virgin Mobile India
Corporate personalities involved:
Anil Ambani - Reliance Group (ADAG)
Ratan Tata
Shahid Balwa - Swan Telecom (now Etisalat DB)
Vinod Goenka - Swan Telecom (now Etisalat DB)
Venugopal Dhoot - Videocon Group
Prashant Ruia - Essar Group
Sanjay Chandra, Managing Director of Unitech Ltd and Unitech Wireless
All of them have either been questioned by the CBI or are prospective suspects in the scam.
Media persons and lobbyists involved:
Nira Radia, a former airline entrepreneur turned corporate lobbyist whose conversations with politicians and corporate entities were recorded by the government authorities. The contents were later leaked by unknown parties creating the Nira Radia tapes controversy.
Politicans, Ministers and Parlimentarians involved:
Dayanidhi Maran, former Union Cabinet Minister for Textiles : The main allegation revealed by Tehelka magazine and followed up in several other reports, is that Maran forced C Sivasankaran, owner of Aircel, to sell the telecom company to Maran's Malaysia-based friend T Ananda Krishnan in 2006. The reports allege that Maran deliberately delayed issuing spectrum licenses to Aircel's sister concern, Dishnet Wireless, when it was owned by Sivasankaran. He issued the licenses soon after it changed hands to Ananda Krishnan who owns Maxis.[16]
P. Chidambaram, current Union Cabinet Minister for Home Affairs : Subramaniam Swamy states that when the 2g Spectrum rate was finalised, P.Chidambaram was the finance minister of India and he had a major role in deciding the spectrum price with A.Raja. Subramaniam alleges that Chidambaram had received kickbacks and undervalued the spectrum cost.[17]
Petitioners to 2g scam:
Subramaniam Swamy, activist lawyer and politician, whose letters to the Prime Minister demanding action and affidavits and cases in the Supreme Court brought the issue into the public limelight.
Paranjoy Guha Thakurta, 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. He is also one of the petitioners in the 2G PIL currently being heard in the Supreme court.[18]
Prashant Bhushan, on behalf of the Centre for Public Interest Litigation.
Anil Kumar, on behalf of the civil society organisationTelecom Watchdog
Others:Several eminent people like former chief election commissioners J.M. Lyngdoh, T.S. Krishnamurthy and N. Gopalaswami and former central vigilance commissioner (CVC) P. Shankar are also petitioners in the suits filed by civil society groups.
Loss to Exchequer:
The Controller and Auditor General of India used three different methods to assess the presumptive loss to the exchequer resulting from not auctioning 2G spectrum.[19]
The first method was based on the fact that S Tel, one of the licensees, explicitly offered to pay significantly higher license fees for the spectrum. Based on the fees offered by S Tel, the CAG estimated the loss to the exchequer at 67,364 crore (US$15.02 billion)
The second method was based on the price recovered by the 3G auction in 2010. The CAG reasoned that since 2G is really 2.75G (EDGE), its price should be comparable to that of 3G licenses. Based on this method, the CAG estimated the loss to the exchequer to be 176,000 crore (US$39.25 billion)
The third method was based on the fact that some of the licensees received FDI in the form of equity, shortly after the spectrum allocation. The CAG reasoned that this equity infusion was entirely due to the value of the allocated spectrum; this can be construed as re-sale of the spectrum by the licensee, and hence was a valid basis for assessing loss to the exchequer. Based on this method, the CAG estimated the loss to the exchequer to be anywhere between 57,666 crore (US$12.86 billion) (based on Etisalat's investment in Swan Telecom) and 69,626 crore (US$15.53 billion) (based on Telenor's investment in Unitech).
For its part, the Congress-party led government has publicly defended itself on this count and Kapil Sibal, who replaced A. Raja as the communication minister, has refuted the CAG reasoning.[20] 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.[21][22]
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. Raja.[23] The critics alleged that Dutt and Sanghvi knew about corruption between the government and the media industry, supported this corrupt activity, and suppressed news reporting the discovery of the corruption.]
Ratan Tata petitions over leak:
The tapes leaked to the public include conversations between Nira Radia and Ratan Tata. Tata petitioned the government to acknowledge his right to privacy and demanded accountability for the leak, with the Minister for Home Affairs, CBI, Indian Income Tax Department, the Department of Telecommunication, and the Department of Information Technology as respondents in the petition.[24]
On April 4, 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.[25]
Response to scam:
In early November 2010 Telecom Minister A Raja resigned.
In mid November the controller Vinod Rai issued show-cause notices to Unitech, S Tel, Loop Mobile, Datacom (Videocon), 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.[26] Some media sources have speculated that these companies will receive large fines but not have their licenses revoked, as they are currently providing some consumer service.[26]
In response to the various allegations, the Govt of India has replaced the then incumbent Telecom minister, A. Raja with Kapil Sibal who has taken up this charge in addition to being the Union minister for Human Resources Development.Mr Sibal contends that the "notional" losses quoted are a result of erroneous calculations and insists that the actual losses are nil.[20][21]
The CBI conducted raids on Raja and four other telecom officials - former telecom secretary Siddharth Behura, Raja's personal secretary R K Chandolia, member telecom K Sridhar and DoT deputy director general A K Srivastava on 8 December 2010.Kanimozhi, DMK MP and Karunanidhi's daughter, was arrested and sent to Tihar jail by a Delhi court which dismissed her bail plea in the 2G spectrum scam, saying there was a possibility of witnesses being influenced considering the "magnitude" of the crime.[27]
Arrests and Chargesheets:
On February 2, 2011, the Central Bureau of Investigation arrested former Telecommunications Union Minister Andimuthu Raja. The CBI also arrested R.K. Chandolia, Raja's personal aide, and Siddharth Behura, the former Telecom Secretary.[28][29] Both Raja and Chandolia are heard in conversation with Niira Radia in the released Radia tapes.
On February 8, 2011, the CBI arrested Mumbai based Dynamix Balwas (DB) group managing director Shahid Usman Balwa in connection with the 2G spectrum allocation scam. The CBI has evidence from the Income Tax department that Shahid Usman Balwa, considered close to Raja, was instrumental in channelling the kickbacks allegedly received by the former telecom minister.[30]
On March 29, 2011, in Delhi, the CBI arrested Asif Balwa (younger brother of the arrested former Managing Director of DB-Etisalat Group, Shahid Balwa) and Rajeev Agarwal for their alleged involvement in money transfer to the Dravida Munnetra Kazhagam's (DMK) Kalaignar TV channel.[31]
On April 2, 2011, the CBI filed its first 80,000 page chargesheet in the 2G spectrum scam before a Special Court in Delhi naming nine individuals and three companies. It said the wrongful acts of the accused deprived the government exchequer of possible revenues amounting to INR Rs 30,985 crore (USD $ 6,983,322,233). The accused include the following individuals:[32]
Andimuthu Raja, former Telecom minister
Siddharth Behura, former Telecom Secretary
R.K. Chandolia, Raja's former personal secretary
Shahid Usman Balwa, former Director of Swan Telecom (now Etisalat DB)
Sanjay Chandra, Managing Director of Unitech Ltd and Unitech Wireless
Gautam Doshi, Group MD, Reliance Anil Dhirubhai Ambani Group
Hari Nair, Senior Vice-President, Reliance Anil Dhirubhai Ambani Group
Surendra Pipara, Senior Vice-President, Reliance Anil Dhirubhai Ambani Group and Reliance Telecom Ltd
Vinod Goenka, Director, Swan Telecom (now Etisalat DB)
The three companies named are:
Swan Telecom
Unitech Wireless
Reliance Telecom
In the first chargesheet, the CBI had named lobbyist Niira Radia and 124 others as witnesses.
On 25 April 2011, in its second chargesheet in the scam, the Central Bureau of Investigation (CBI) named five more accused individuals:[33]
Kanimozhi - Rajya Sabha Member of Parliament (DMK) and daughter of Tamil Nadu ex-Chief Minister M Karunanidhi
Sharad Kumar of Kalaignar TV
Karim Morani of Cineyug Films
Asif Balwa of Kusegaon Realty
Rajiv B Agarwal of Kusegaon Realty
On 20 May 2011, Special CBI Judge O P Saini of the Delhi court ordered the arrest of DMK Member of Parliament Kanimozhi and Kalaignar TV Managing Director Sharad Kumar after rejecting their bail pleas in the 2G spectrum case.[34]
[edit]P.A.C. (Public Accounts Committee)

Public Accounts Committee, a 21-member committee, with chairman as Murli Manmohar Joshi, was formed to investigate, independent of other committees like JPC. The chairman submitted a draft report on 2G scam to Lok Sabha Speaker on Saturday 30-04-2011, and insisted that it be tabled in the Parliament. UPA members' claimed that the report had been "rejected", and 11 MPs of same committee(majority out of 21) had "rejected" the report - 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. Defending his action of calling witnesses from diverse fields in connection with the 2G scam probe, Joshi said it was the duty of the PAC to "trace and examine the way the money of common man is spent". He alleged that on 28-04-2011, during the last meeting of the committee, ministers passed on "chits" and called up PAC members to speak and behave in a particular manner; that said trouble started when a decision was taken to call top officials of the PMO, Cabinet Secretary, Attorney General and CBI director for questioning. A minister reportedly commented that the PAC draft report will be thrown in the dustbin, to which the chairman regretted and questioned if Parliament's proposals and then Supreme Court orders would be given the same treatment.[35]
[edit]Impact on stock markets

The first casualty in Stock Markets once Raja was arrested was DB Realty.[36] 20% fall in the stock prices of DB Realty. Sun TV had its shares fall by 10%.[37] Sun TV COO refused the allegations. Swan Telecom Chief Balwa was arrested on Feb 8 [38] and this led to rumours of links with Anil Ambani's Reliance ADAG and it led to 20% fall of his stocks . Its reported that nearly 2 Billion USD was eroded from his stocks .[39] Spicejet stocks went down after reports of investigation on Maran's recent takeover of Spicejet .[40]