A

PROJECT REPORT
ON

2G SPECTRUM SCAM
By

1. Piyush Jain
2. Reema Choudhary
3. Syed Faiz

Department of Computer Engineering

ARYA INSTITUTE OF ENGINEERING & TECHNOLOGY

KUKAS, JAIPUR

[2010-2011]

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 A
PROJECT REPORT
ON
2G SPECTRUM SCAM
In partial fulfillment of requirements for the degree of
Bachelor of Engineering

IN

Computer Engineering

Submitted By

Reema Choudhary
Piyush Jain
Syed Faiz

Under the Guidance of

DEEPAK SHARMA SIR

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 CERTIFICATE

This is to certify that the project entitled “2G SPECTRUM SCAM” has been carried out by the team
under my guidance in partial fulfillment of the degree of Bachelor of Engineering of “RAJASTHAN
TECHNICAL UNIVERSITY, Rajasthan” and is being submitted to ARYA INSTITUTE OF ENGENNERING
AND TECHNOLOGY, Jaipur. During the academic year 2010-2011(Semester-II) .
Team:

1. Piyush jain
2. Reema Choudhary
3. Syed Faiz

Date:

Place: Jaipur

Submitted To: Head, Computer Department

Mr. Deepak Sharma Mr. Deepak Demla

I/c Principal

(Mr. M.L GUPTA)

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 PROJECT APPROVAL SHEEET

Following team has done the appropriate work related to the “2G SPECTRUM SCAM” in partial
fulfillment for the award of bachelor of Engineering in Computer Engineering of “RAJASTHAN
TECHNICAL UNIVERSITY, Rajasthan” and is being submitted to ARYA INSTITUTE OF ENGENNERING
AND TECHNOLOGY, Jaipur
Team:

1. Piyush jain
2. Reema Choudhary
3. Syed Faiz

Submitted To: Mr. Deepak Sharma (Lecturer- Humanities)

External Examiner:

Date:

Place: ARYA INSTITUTE OF ENGENNERING AND TECHNOLOGY, Jaipur

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TABLE OF CONTENTS

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 S. No. CONTENT Page number

1. INTRODUCTION

2. CIVIL SERVANTS, POLITICIANS AND CORPORATIONS

INVOLVED IN SCAM

2.1 Politicians, Ministers and Parliamentarians

involved

2.2 Bureaucrats involved

2.3 Corporations involved

2.4 Corporate personalities involved

2.5 Media persons and lobbyists involved

3. Petitioners to 2g scam

4. Loss to Exchequer

5. Relationship between media and government

4.1 Ratan Tata petitions over leak

6. Response to scam

7. Arrests and Chargesheets

8. P.A.C. (Public Accounts Committee)

9. Impact on stock markets

10. Conclusion

11. References

INTRODUCTION
The 2G spectrum scam in India involved the issue of 122 licenses of the 2G spectrum to 85 companies
including many new telecom companies with little or no experience in the telecom sector at a price set
in the year 2001.

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The scam involved allegations regarding

 the under pricing of the 2G spectrum by the Department of Telecommunications which resulted
in a hefty 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 67,719 crore
(US$15.03 billion) to the exchequer. A report submitted by the Comptroller and Auditor General based
on the money collected from 3G licenses found that the loss to the exchequer due to under pricing of
the 2G spectrum was 176,379 crore (US$39.16 billion).

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]

Civil Servants, Politicians and Corporations Involved in scam

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.

Politicans, Ministers and Parlimentarians involved

Name of the
Occupation and
Person Allegation and Charges
Designation
involved

The Controller and Auditor General holds Raja personally

responsible for the sale of 2G spectrum at 2001 rates in
2008, resulting the previously mentioned loss of up to
Union Cabinet Minister
Rs. 1.76 lakh crores (US$40 billion) to the national
for Communications
A. Raja exchequer.
and Information
Technology
In August, 2010, evidence was submitted by the
Controller and Auditor General (CAG) showing that
Raja had personally signed and approved the
majority of the questionable allocations.
Kanimozhi Member of Rajya Sabha On April 25, 2011 Kanimozhi was named as a co-
Karunanidhi conspirator in the supplementary chargesheet filed by
the Central Bureau of Investigation (CBI) in connection
with the 2G spectrum case. The chargesheet, which was
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

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 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
Name of the
Occupation and
Person Allegation and Charges
Designation
involved

Civil Servant
Siddhartha (IAS officer of He was the Telecom secretary who served in the DOT at the time
Behura 1973 batch UP of the 2G allocation.
cadre)

He was the Secretary of the Department of Telecommunications.

Civil Servant
On September 7, 2010 he was appointed as the Chief Vigilance
(IAS officer of
P. J. Thomas Commissioner. Thomas later stepped down after the Supreme
1973 batch
Court questioned his track record as a civil servant in the wake of
Kerala cadre).
investigations into the 2G spectrum allocation scam.

He is alleged to have recommended policies that favored certain

Telecom companies when he was heading the TRAI. Post
Civil Servant retirement, Baijal joined Noesis, a consulting firm. Raja has made
(IAS officer of references to Baijal's decisions in 2003 as the basis for his
Pradip Baijal
1966 batch MP decisions in 2008; something which has been attacked by Arun
cadre). Shourie and several media pundits. The houses and offices of the
bureaucrat were recently raided by the Central Bureau of
Investigation as part of their investigations.

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
Civil Servant
Secretary rank. Raja re-designated him Economic Adviser, that
(IES officer of
R K Chandolia gave him the charge of all important policy-related work.
1984 batch
Chandolia interacted with all the licensees. It is said that it was
cadre).
Chandolia who, from DDG-access services A K Srivastava's room,
had handed out letters of intent to representatives of various
companies.

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 Corporations involved
 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 (Including land values
properties for towers)
 Swan Telecom sold 45% of its company stake at huge profit to Emirates
Telecommunications Corporation (Etisalat) after buying licensing
 Loop Mobile
 Videocon Telecommunications Limited
 S Tel
 Reliance Communications
 Sistema Shyam Mobile (MTS) – Sistema Mobile Russia
 Vodafone Essar
 Tata Teleservices
 Virgin Mobile India
 Dishnet Wireless
 Allianz Infra

Corporate personalities involved

 Anil Ambani - Reliance Group (ADAG)
 Shahid Balwa - DB Realty and Etisalat DB Telecom(formerly Swan Telecom)
 Vinod Goenka - Dynamix Group
 Venugopal Dhoot - Videocon Group
 Prashant Ruia - Essar Group
 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
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 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.

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.
 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 Comptroller and Auditor General of India used three different methods to assess the
presumptive loss to the exchequer resulting from not auctioning 2G spectrum.
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$14.95 billion)
The second method was based on the price discovered 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$39.07 billion)

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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$12.8 billion) (based on Etisalat's investment in Swan Telecom) and 69,626 crore
(US$15.46 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. 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.

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. 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.
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.

Response to scam

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In early November 2010 Telecom Minister A Raja resigned.
In mid November the comptroller 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. 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.
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. 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.

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 Arrests and Chargesheets
On February 2, 2011, the CBI arrested former Telecommunications Union Minister A.Raja. The
CBI also arrested R.K. Chandolia, Raja's personal aide, and Siddharth Behura, the former
Telecom Secretary. Both A.Raja and R.K 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 A.
Raja, was instrumental in channelling the kickbacks allegedly received by the former telecom
minister.
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.
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:
1. A. Raja, arrested former Telecom minister
2. Siddharth Behura, arrested former Telecom Secretary
3. R.K. Chandolia, A. Raja's arrested former personal secretary
4. Shahid Usman Balwa, arrested former Director of Swan Telecom (now Etisalat DB)
5. Sanjay Chandra, Managing Director of Unitech Ltd and Unitech Wireless
6. Gautam Doshi, Group MD, Reliance Anil Dhirubhai Ambani Group
7. Hari Nair, Senior Vice-President, Reliance Anil Dhirubhai Ambani Group
8. Surendra Pipara, Senior Vice-President, Reliance Anil Dhirubhai Ambani Group and Reliance
Telecom Ltd
9. Vinod Goenka, Director, Swan Telecom and Managing Director of DB Realty

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 The three companies named are:
1. Swan Telecom
2. Unitech Wireless
3. 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:
1. Kanimozhi - Rajya Sabha Member of Parliament (DMK) and daughter of Tamil Nadu Chief
Minister M Karunanidhi
2. Sharad Kumar of Kalaignar TV
3. Karim Morani of Cineyug Films
4. Asif Balwa of Kusegaon Realty
5. Rajiv B Agarwal of Kusegaon Realty

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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' claimd 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

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dustbin, to which the chairman regretted and questioned if Parliament's proposals and then
Supreme Court orders would be given the same treatment.

Impact on stock markets

The first casualty in Stock Markets once Raja was arrested was DB Realty. 20% fall in the stock
prices of DB Realty. Sun TV had its shares fall by 10%. Sun TV COO refused the allegations.
Swan Telecom Chief Balwa was arrested on Feb 8 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 . Spicejet stocks went down after reports of investigation on
Maran's recent takeover of Spicejet .

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 CONCLUSION
1. Drawing upon NTP 99, a policy framework was established in November 2003 to chart the course
for implementation of a Universal Licensing Regime. The Department of Telecommunications of the
Ministry of Communications and Information Technology did not make mid course
review/modifications, based on the collective wisdom of Government. The recommendations of
Telecom Regulatory Authority of India were not followed in spirit, resulting in a transitory phase of
the licensing regime continuing for years together without true value of 2G spectrum being realised,
while 3G spectrum, a similar resource, was allocated at market price discovered through auction,
generating revenues of ` 67,718.95 crore. While targeted growth in tele-density had already been
achieved, and a reduction in tariff in the telecom sector had benefitted the customer, as envisaged
in NTP-99, a policy to ensure optimal utilisation of spectrum and a method to discover its market
price was not considered. Given its scarcity value and increasing demand, a comprehensive
evaluation of available spectrum was required which was not done. With the UAS policy and its
subsequent amendments being implemented in a weak and indeterminate manner and with the
reluctance on the part of the Department of Telecommunications to address the issue of pricing of
2G spectrum, it was only natural that 2G spectrum was not allocated at its correct market value.

2. The entire process of allocation of UAS licences lacked transparency and was undertaken in an
arbitrary, unfair and inequitable manner. The Hon'ble Prime Minister had stressed on the need for a
fair and transparent allocation of spectrum, and the Ministry of Finance had sought for the decision
regarding spectrum pricing to be considered by an EGoM. Brushing aside their concerns and
advices, the Department of Telecommunications, in 2008, proceeded to issue 122 new licences for
2G spectrum at 2001 prices, by flouting every cannon of financial propriety, rules and procedures.
The DoT did not follow its own guidelines on eligibility conditions, arbitrarily changed the cut off
date for receipt of applications post facto and altered the conditions of the FCFS procedure at
crucial junctures without valid and cogent reasons, which gave unfair advantage to certain
companies over others.

3. The Department of Telecommunications also did not do the requisite due diligence in the
examination of the applications submitted for the UAS licenses, leading to the grant of 85 out of 122

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 UAS licences to ineligible applicants. These companies, created barely months ago, deliberately
suppressed facts, disclosed incomplete information, submitted fictitious documents and used
fraudulent means for getting UAS licences and thereby access to spectrum. Owners of these
licences, obtained at unbelievably low price, have in turn sold significant stakes in their companies
to the Indian/foreign companies at high premium within a short period of time. The premium
earned by these new entrants to the telecom sector was nothing but the true value of the
spectrum, which should have normally accrued to the public exchequer, had the transparent and
fair market mechanism been followed for the allocation of UAS licences.

4. Dual Technology was also introduced by the DoT in October 2007 in a hasty and arbitrary manner
and in-principle approval was given to 3 operators on a day prior to the announcement of the
policy, which gave the perception of discrimination against other players in the field. Further this
decision was in contravention of the Cabinet decision of 2003, resulting in additional spectrum
being allotted to certain operators at 2001 price.
5. The correct value of 2G spectrum allotted to 122 licences in 2008 and the 35 licences under dual
technology, also in 2008, could have been determined only by a market driven process, if adopted.
However, its presumptive value, based on various available indicators has been indicated in the
Chapter 5. In addition, the value of additional spectrum allotted beyond the contractual amount to
existing nine operators, based on various indicators has been shown in the Chapter 4 and 5.

6. In conclusion, it is observed that despite having themselves sought the opinion of the Ministry of
Law and Justice, the Department of Telecommunications decided to ignore the advice received. The
concerns of the Ministry of Finance were also not addressed for reasons which are not convincing.
In fact, the directions of the Hon’ble Prime Minister evoked a response from the Hon’ble Minister of
Communications and Information Technology on the same day. The letter contained assurances
with regard to the availability of spectrum for all applicants as also with regard to the strict
adherence to the FCFS policy for allocation of spectrum. The assurances, however, were not
adhered to. The methodology for allocation of 2G spectrum, a scarce finite national asset and for
which there was an unprecedented demand for allocation, was not deliberated upon by the full
Telecom Commission. Audit is of the view that such discussion with different stake holders
represented in the Telecom Commission would certainly have benefitted Department of

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Telecommunications in arriving at a more credible and transparent procedure for allocation as also
for ascertaining the true value of 2G spectrum. The entire implementation process does not
withstand the test of scrutiny, and hence, the widely held belief that it has benefitted a few
operators and has not been able to maximise generation of revenue from allocation of such a
scarce resource. This has now been confirmed in Audit. The role of Telecom Regulatory Authority of
India would also appear to have been reduced to that of a hapless spectator as its
recommendations were either ignored or applied selectively. The entire process of allocation of 2G
spectrum raises serious concern about the systems of governance in the Department of
Telecommunications which need to be thoroughly reviewed and revamped. The fact that there has
been loss to the national exchequer in the allocation of 2G spectrum cannot be denied. However,
the amount of loss could be debated. To ensure that such lapses do not occur in any Ministry or
Department of the Government, there is an imperative need to fix responsibility and enforce
accountability for the lapses highlighted in the Audit Report.

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REFRENCES
1. Deepak Sharma
2. Rahul Jain(B.tech final year-EC)
3. Anshul Rohilla(B.tech final year-CS)

BIBLIOGRAPHY
[1] Times Of India

[2]“Author Guidelines”, http://en.wikipedia.org/wiki/2G_spectrum_scam

[3] William Stallings, “Cryptography and Network Security: Principles and

Practices”, Pearson Education, Third Edition

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