On December 13, 2010, Government had appointed a One Man Committee (OMC) comprising of Justice (Retired) Shivraj Patil, a former judge of the Supreme Court. The OMC was constituted to go into deficiencies in the formulation and implementation of internal procedures by the DOT in the issuance of 2G licenses and allocation of spectrum during the period 2001-2009.
The OMC submitted its report on January 31 ,2011.
The major finding of the Report is that since 2001, the internal procedures adopted by DoT /Government have not been in tune with extant policies and directions of Government. It has held that the decisions taken by DOT in respect of grant of UASL licenses (bundled with spectrum), right from 2003 onwards and including the actions in 2007-2008, were neither consistent with the decisions of the Union Cabinet dated October 31, 2003 nor the recommendations of TRAI.
Term of reference-wise findings of OMC
Regarding TERM OF REFERENCE 1
(To study the circumstances & development in Telecom Sector that led to formulation of New Telecom Policy (NTP),1999 and subsequently, introduction of 4th Cellular Telecom mobile Service (CMTS) Licence in 2001:
Para 1.1 to 1.42: NTP 1994 was formulated to achieve goal of Telecommunication services of World class and also to provide Telecommunication for all, at affordable and reasonable prices covering all villages.
However it didn't yield desired level due to realization of low revenue by cellular and basic operators. Realizing this, NTP 1999 was approved by Union Cabinet with principal objective being to make available affordable and effective communications. NTP 1999 brought in revenue sharing regime, which contemplated payment of one time entry fee and licence fee based on revenue share.
Based on NTP 1999 and TRAI recommendations, 4th Cellular operators were introduced by following multi stage bidding process in the year 2001.
Regarding TERM OF REFERENCE 2
(To examine intra departmental procedures adopted by DOT during 2001-2009 for issuance of Telecom access services and allocation of spectrum to all Telecom access service licencees during the above period):
Para 2.1 to Para 2.120: Internal procedures adopted by DoT during 2001-2009, the organizational structure and business / functioning of different wings and hierarchy have been examined by OMC, besides taking note of the Ninth and Tenth Five Year Plans.
The procedure adopted for grant of Basic service licence during 2001-2003, CMTS licence during 2001-2003, Unified Access Service Licence (UASL) during 2004 to 2007, UASLs during 2008-2009, allotment of CMTS,BTS and UASL have been also deduced.
Regarding TERM OF REFERENCE 3
(To examine whether these procedures were in accordance with extant policies and directions of DoT/Government)
OMC has noted that ...
".. the internal procedures adopted by DoT to the extent brought out have not been in tune with the extant policies and the directions of DOT/Government..." (Para 3.3/Page 89)
"..In a suo moto recommendations dated 27.10.2003 .. TRAI had also recommended that .. additional players could be introduced through multi stage bidding process, which was also accepted by the Union Cabinet on 31.10.2003. However, in deviation with said requirements, the Secretary DOT, on the contrary, on 17.11.2003, approved formulation of procedure of accepting the applications for grant of UASLs by adopting procedure similar to the procedure adopted for grant of BSL..." (Para 3.2(i)/Page 84)
"..Further, on 24.11.2003, the Minister approved the formulation of procedure for grant of UASLs on the basis of "First Come First Served" as against through Multi stage bidding process. All this was clearly in deviation of extant policies..." (Para 3.2(i)/Page 84)
"..DoT contrary to said recommendations formulated the procedure on 24.11.2003 to collect entry fee from new operators at the rate paid by 4th operators thus deviating from the policy framework of NTP 99.." (Para 3.2(ii)/Page 85)
"..If the said recommendations of TRAI (dated 27.10.2003) to follow the multi stage bidding process were not acceptable to DoT or it desired to formulate a procedure to the contrary, it ought to have referred recommendations back to TRAI. This was not done. This was not even considered by Telecom Commission.." (Para 3.2(iii)/Page 85)
".. application of FCFS principle, without the restriction on the number of UASLs is also a deviation from the extant policies.." (Para 3.2(v)/Page86)
"..Procedure having been formulated for grant of access licences whereunder allotment of spectrum is assured, without revising entry fee, was opposed to extant policy.." (Para 3.2(viii)/Page 86)
"..Between the period 2004 and 2008, if the entry fee was not to be revised to reflect the opportunity cost and when the competitive bidding for determining entry fee was not followed,....concurrence of Finance Ministry ought to have been taken.." (Para 3.2(ix)/Page 87)
"..DoT itself having sought opinion as to procedure to be followed for grant of UASLs, ignored the opinion of Ministry of Law and Justice.." (Para 3.2(x)/Page 87)
"..Procedure formulated whereby the processing of applications for grant of UASLs was restricted to only such applications, which were received upto25.09.2007, when the last date of receiving an application was stipulated as 1.10.2007 is not traceable either to powers vested in terms of any procedure laid out or satisfies the requisites of law, in particular, the principles of objectivity, fairness of transparency.." (Page 3.2 (xi)/Page 87)
"..Prior to 07.01.2008, the date of receipt of applications in DoT was reckoned for the purposes of FCFS and after 07.01.2008, the date of compliance of LOI was reckoned for purposes of FCFS. This was also not in tune with extant policy.." (Para 3.2(xii)/Page 87)
"..On 22.2.2001, DoT issued an order formulating procedure for allotment of additional spectrum over and above star up spectrum of 4.4+4.4 MHz..subject to availability and justification....was opposed to policy mandate requiring optimum utilization of spectrum.. stipulation as to 'justification' being subjective, was opposed to the principles of fairness and transparency.. " (Para 3.2(xiv)/Page 88)
"..Order to DoT VAS cell dated 12.11.2001, formulating procedure for allotment of additional 1.8+1.8 Mhz over and above startup spectrum ... without there being any recommendation of TRAI and in absence of consideration of Telecom Commission or WPC wing, was opposed to the extant policies and directions..".. (Para 3.2(xv)/Page 88)
"..The procedure formulated by DoT on 1.2.2002...to assign additional spectrum of 1.8 + 1.8 MHz to CMTS operators after reaching prescribed subscriber base, was without consideration and approval of Telecom Commission and was thus opposed to extant directions.." (Para 3.2(xvi)/Page 88)
"..Procedure formulated for allotment of additional spectrum beyond 8Mhz..as approved by the Minister on 18.8.2003 without there being any consideration by Telecom Commission and in absence of independent opinion of WPC, was contrary to extant directions...." (Para 3.2(xvii)/Page 89)
"..procedure was formulated by DoT to collect the same entry fee paid by 4th cellular operator for inducting new UASL operators from 2003 onwards. This had financial bearing and also involved pricing of start-up spectrum. This decision was not only contrary to recommendations of TRAI but also taken without concurrence of Ministry of Finance..." (Para 3.2(xviii)/Page 89)
Regarding TERM OF REFERENCE 4
(To examine whether these procedures were followed consistently and if not, identify specific instances of a) Deviation from laid down procedures, b) Inappropriate application of laid down procedures, c) Violation of underlying principles of laid down procedures):
25 specific instances, during 2001 to 2009, have been identified by OMC, where there appears to have been deviation, inappropriate application and violation of underlying principles of the laid down procedures.
It included, among others, extension of time for rectifying deficiencies as well as time for compliance in grant of BSLs in 2001, delay in processing of pending applications for grant of UASL from time to time, delay in allotment of spectrum, allotment of excess spectrum, issuance of LOI despite violation of various criteria in 2007 as well as inconsistent adoption of FCFS during award of licenses in 2007 etc.
Regarding TERM OF REFERENCE 5
(To examine whether the procedures adopted were fair and transparent and were in keeping with the principles of natural justice and if not, identify the specific instances of lack of fairness and transparency):
16 specific instances of lack of fairness and transparency in procedure adopted by DoT in granting licenses and allotment of spectrum during 2001-09 have also been reported by OMC.
These specific instances include, among other instances, Grant of BSLs in 2001 without clear guidelines for FCFS; adoption of FCFS as the criterion for issuance of licence for UASL on 24.11.2003 with arbitrary guidelines against Cabinet Decision; ambiguity in UASL guidelines of 14.12.2005 regarding inclusion of preferential shares in calculation of substantial equity; issuance of Press note dated 10.1.2008 re-assigning application priority based on compliance of LOI conditions for FCFS purpose, which later became critical for grant of UASL licence etc.
Regarding TERM OF REFERENCE 6
(To identify the deficiencies, if any, in the procedure as formulated and identify the public officials responsible for such deficiencies)
&
Regarding TERM OF REFERENCE 7
(To identify the shortcomings and lapses, if any, in the implementation of laid down procedures and identify the public officials responsible for such lapses):
The Report has pointed out lapses in 17 specific instances wrt TOR-6 and 20 specific instances wrt TOR-7, by way of acts of omission and commission by various individuals including the then Ministers, Secretaries and other public officials in the various decisions taken by the government during the period 2001-2009 in respect of grant of UASL licenses and allocation of spectrum. A very wide range of public officials have been found at fault, most notably in the periods 2003-2004 and 2007-2008.
However, since the OMC did not have the power to record statements or inquire fully into individual culpability, these are in the nature of prima facie findings without any opportunity being given to the officials concerned. It has also been made clear in report that officials have been identified without taking any view as to their criminal culpability or financial implication resulting from such deficiencies.
Appropriate disciplinary action as per established procedures would be initiated by the Department of Telecommunications against the officials named, giving each of them due opportunity to present their point of view.
In so far as criminal culpability of the 'persons' involved is concerned, the Report is being made available to investigating agencies currently probing the issue, who in turn, would take appropriate action.
Regarding TERM OF REFERENCE 8
To suggest remedial measures to avoid in future: a) Deficiencies in formulation of procedures and b) Lapses in implementation of laid down procedures
The report has suggested remedial measures to avoid in future, deficiencies in formulation of procedures and lapses in implementation of laid-down procedures. It has been advised that a reasonable, fair, transparent and certain procedure for selection based on merits is devised instead of FCFS. (Para 8.1(i)/Page 136)
It has been further recommended that procedures need to be formulated which specify time frame for -receiving / scrutinizing applications, intimating the applications found eligible/ineligible, processing them and intimating the decision to applicant formally in writing. (Para 8.1(ii) & (iii)/Page 137)
Procedures formulated based on policy guidelines/directions of Government should be approved and authenticated by Telecom Commission (Para 8.1(iv)/Page 138)
In case of change in procedures, the same must be notified well in advance before implementation. (Para 8.1(v)/Page 138)
The procedures formulated must not only spell out criteria but also specify documents required to satisfy eligibility (Para 8.1(vi)/Page 138)
Comprehensive checklist should be drawn up based on procedures and must be included in prescribed application form itself. (Para 8.1(vii)/Page 138)
Discontinuation of practice of "Internal Telecom Commission" has been suggested. All important matters must be placed before "Full Telecom Commission". (Para 8.1(viii)/Page 139)
Need for drawing up of procedure making it mandatory for placing recommendations of TRAI before Telecom Commission, within specified time frame (Para 8.1(ix)/Page 139)
Drawing up of self contained office memorandum indicating procedures to be followed relating to grant of Access Service Licences and allotment of spectrum, with approval of Telecom commission, has also be advised. (Para 8.1(x)/Page 139)
Telecom commission should devise mechanism for supervision of the same. (Para 8.1(xi)/Page 140)
DoT should put in public domain, spectrum allocations to various agencies. (Para 8.1(xiv)/Page 140)
All spectrum allocations should be audited to determine efficient and proper utilization of allotted spectrum. (Para 8.1(xv)/Page 141)
Comprehensive spectrum reforms have been recommended for efficient utilization. There is need to incentivize vacation of unutilized spectrum and a penalty on hoarding. (Para 8.1(xvi)/Page 141)
Process of allotment of spectrum has been advised to be delinked from access licences and the entry fee/spectrum pricing needs to be structured accordingly. Auctioning of spectrum by formulating suitable design has been suggested (Para 8.1(xviii)/Page 141)
Need for comprehensive new legislation "Radio Communications Act" has been felt (Para 8.1(xix)/Page 142)
CONCLUSION
We had setup the One Man Committee (OMC) in order to place in the public domain, the genesis of the policy of FCFS in the grant of UASL licences as well as grant of BSL licences and Spectrum allotment and decisions taken from time to time, since 2001, in these regards by successive governments.
The entire report will be shared with investigative agencies to determine culpability of all public servants involved in the grant of licence/spectrum between 2001 to 2009.
Additional Secretary, Cabinet Secreteriat, in his letter D.O. No. 30/CM/2003 dated Nov 3rd, 2003, communicated that Cabinet, in its meeting dated Oct 31st, 2003 considered the note dated Oct 31st, 2003 from Ministry of Communications & IT regarding "Approval of recommendations of the Group of Ministers on Telecom matters" and approved the proposals contained in the Paragraph 4.1 thereof (Flag A).
Para 4.1(iii) of the note dated Oct 31st, 2003 prepared by Ministry of Communications & IT for cabinet, had sought approval of cabinet on Para 2.4.6 (relating to Universal license).(Flag B)
Para 2.4.6 (ii) of said note for cabinet stipulates that - " The recommendations of TRAI with regard to implementation of the Unified Access Licensing Regime for basic and cellular services may be accepted." (Flag C)
Para 7.39 of TRAI recommendations, in context of need for introduction of new service providers, states- "As the existing players have to improve the efficiency of utilization of spectrum and if Government ensures availability of additional spectrum then in the existing Licensing Regime, they may introduce additional players through a multi-stage bidding process, as was followed for 4th cellular operator." (Flag D)
Hence One Man Committee has made following observations-
"..In a suo moto recommendations dated 27.10.2003 .. TRAI had also recommended that .. additional players could be introduced through multi stage bidding process, which was also accepted by the Union Cabinet on 31.10.2003. However, in deviation with said requirements, the Secretary DOT, on the contrary, on 17.11.2003, approved formulation of procedure of accepting the applications for grant of UASLs by adopting procedure similar to the procedure adopted for grant of BSL..." (Para 3.2(i)/Page 84)
"..Further, on 24.11.2003, the Minister approved the formulation of procedure for grant of UASLs on the basis of "First Come First Served" as against through Multi stage bidding process. All this was clearly in deviation of extant policies..." (Para 3.2(i)/Page 84)
"..DoT contrary to said recommendations formulated the procedure on 24.11.2003 to collect entry fee from new operators at the rate paid by 4th operators thus deviating from the policy framework of NTP 99.." (Para 3.2(ii)/Page 85)
####Full text of the Justice Shivraj Patil committee report on 2G spectrum allocation
Annexure(s) to main report
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