India government sees potential $9.81 billion loss from 1999 mobile concessions

An Indian government body said concessions granted by the erstwhile BJP-led government in its five-year term beginning 1999 in the allocation of licenses for mobile radio bandwidth may have caused the public exchequer a potential revenue loss of INR435.24 billion ($9.81 billion).
The development is likely to boost the government's fight against the BJP-led opposition whose party was in power when the licenses were granted in 1999. The current Congress-led government has been under pressure from the opposition to explain the alleged irregularities in the licenses allotted in 2008. India's federal investigating agency--The Central Bureau of Investigation--has said that the 2008 rigged sale of mobile licenses favored some companies by violating rules and was at below-market prices, causing a potential revenue loss of INR300 billion ($6.77 billion) to the public coffers. A federal auditor had earlier estimated the loss to be as much as $40 billion. Allowing mobile operators to pay the government according to a pre-determined share of revenue instead of auctioning mobile radio bandwidth in 1999 led to the revenue loss, R Gopalan, the secretary of the Department of Economic Affairs testified on Thursday before India's joint parliamentary committee probing the alleged irregularities in the allocation of licenses."Spectrum (radio bandwidth) allocation should have been on the basis of auctioning, particularly where the demand for spectrum exceeded the supply," Gopalan said.
India first liberalized mobile telephony in 1994, initially granting 8 mobile radio telecom licenses in the four metro cities of Delhi, Mumbai, Calcutta and Chennai. Between 1995 to 1998, 34 more licenses were issued. At the time, operators paid a low fixed fee for the licenses to offer mobile telephony and next to nothing for radio bandwidth.
Arrears due to the government by some defaulting operators was adjusted against the entry fee for the second-generation radio bandwidth license leading to a loss of revenue, Gopalan testified. Some mobile operators were also exempted from paying license fees for six months, he said. Further, a waiver granted to the initial mobile operators from paying license fees for a period of four years starting 2004 added to losses, Gopalan added.