POLITICS IN India have been thrown into further chaos after the Supreme Court ordered the federal government to cancel 122 mobile phone licences granted “irregularly” in 2008 at an estimated cost to the country of $40 billion.
The verdict has not only disrupted the country’s burgeoning mobile phone market but is a further embarrassment for prime minister Manmohan Singh’s coalition government, which is reeling under a series of corruption scandals.
The court ruled yesterday that the sale of a second generation mobile phone spectrum at cut-rate prices in a bewildering “first-come, first-served” process four years ago netted the government only $2.7 billion. Government auditors placed the loss in potential revenue at more than $40 billion – nearly 15 times the amount realised.
Opposition and media pressure forced former telecommunications minister Andimuthu Raja, who presided over the fraudulent auction, to resign last year.
He was arrested and has been in jail for almost 12 months facing charges of corruption and abusing his position, allegations he denies.
Other senior officials and MPs involved with the licence sale have been imprisoned. The court ruled that the 122 cancelled 2G licences be auctioned afresh within four months. Analysts expect this will garner about €20 billion, much less than what they would have earned in 2008 because of the subsequent introduction of 3G technology.
The licence cancellation affects 11 companies – mainly new, smaller firms that were late entrants into India.
They include Unitech Wireless, which collaborates with Norway’s Telenor, and Swan Telecom, which is 45 per cent owned by Dubai-based Etisalat.
The Telenor Group, which has invested more than $1.2 billion in equity and offered more than $1.6 billion in corporate guarantees for its Indian venture based on the 2G auction, says it is being punished for something that occurred before it entered the Indian market.
Telecommunications minister Kapil Sibal yesterday sidestepped questions of collective cabinet responsibility for the flawed sale.
He defended his Congress Party-led coalition, blaming the previous Hindu nationalist-led administration that lost power in 2004 for introducing the “faulty” policy of allocating the spectrum which, he said, his administration unquestioningly followed.