26.11.12

Of Sacrifice of Revenue....



RBI governor D Subbarao — who was finance secretary in UPA-1 — told the special CBI court that he had in 2007 questioned the telecom ministry’s proposal to fix Rs 1,600 crore as the fee for 2G licences.
Subbarao’s appearance in court as a prosecution witness is significant in view of the CBI’s argument that the government sold 2G spectrum cheap by sticking to 2001 rates while granting licences in 2008, which led to a loss of around Rs 31,000 crore.
The RBI governor told the court that any loss figure needs to be seen in the context of a policy decision. There was a sacrifice of revenue but a policy sometimes needs to strike a balance between a welfare objective and revenue maximization, he said.
Subbarao said the finance ministry’s view on spectrum pricing was that the price must be “rediscovered” as it would be inappropriate to give licences at the price fixed in 2001-2002. Sacrifice of revenue on 2G not loss to govt, says Subbarao
Subbararo said the finance ministry’s “endeavour” then was to maximize the government’s revenues but “since DoT had already issued letters of intent (LoIs) on January 10, 2008, the effort of the 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,” he said. Subbarao had told the JPC much the same recently but his deposition in court has an evidentiary value that can help the CBI make a case of illegal gain.
Subbarao told the court he had written a letter on November 22, 2007 to then telecom secretary D S Mathur. “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 1,600 crore, determined as far back as 2001, could be applied for licence given in 2007 without any indexation, let alone current valuation,” he said.
Subbarao, who was finance secretary from April 2007 to September 2008, told the court that by June 2008, it was agreed between the telecom department and the finance ministry that start-up spectrum would not be charged and only spectrum beyond start-up would be priced.

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