CAG’s Rs 1.76 lakh crore ‘presumptive loss’ contestable

Ten years after the alleged telecom scam rocked the Congress government at the Centre, former RBI Governor Duvvuri Subbarao has said that the CAG’s estimate of Rs 1.76 lakh crore presumptive loss in the 2G case is contestable on several grounds. “CAG (Comptroller and Auditor General) did not reckon with the significant spin-off benefits of low spectrum pricing,” Subbarao said in an interview with The Indian Express.

The former governor said that arguably, it was possible to come out with a study that would show a ‘presumptive gain’ to the government — that the overall benefits to the government far exceed the revenue foregone — by making assumptions that would be no less robust than those underlying the CAG methodology.

“The sacrifice of upfront revenue would be neutralized by recurring revenue the government would earn via larger spectrum usage. Also, the CAG did not take into account the substantial equity and efficiency gains that would accrue to the economy via deeper telecom penetration,” Subbarao told IE.

In its report in November 2010, the CAG estimated that the 2G scam had caused an astronomical loss of Rs 1.76 lakh crore to the state exchequer. The CBI, in its charge sheet, alleged there was a loss of Rs 30,984 crore to the exchequer in the allocation of licences for the 2G spectrum.

Subbarao, Union Finance Secretary from July 2007 to September 2008, said it was difficult to quantify the costs and benefits of decisions like this without making heroic assumptions. He said he contested the proposal of the Department of Telecom, then headed by DMK Minister A Raja, to give away these second-round spectrum licences in 2007/08 at the same price as that set in 2001.

“I argued that we must rediscover the price through a fresh auction since experience in India and around the world during the intervening years showed that spectrum was a scarcer commodity than originally believed. It’s only fair that a part of the scarcity premium must accrue to the government,” he said.

The DoT pushed back against this proposal. Later, at a meeting with the prime minister, he said, it was decided that this round of spectrum would be given at the 2001 price but all future spectrum would be allocated only through an auction.

Subbarao said that in the course of his evidence in the CBI court, the judge asked him: “If I believed it was right for the government to incur such a huge loss of revenue.”

“I replied that it was misleading to call it a ‘loss of revenue’ when it was actually ‘a sacrifice of revenue’ and added that it was very much open to a democratically elected government to sacrifice revenue if it believed that the resultant gains, both tangible and intangible, exceeded the forgone revenue,” he said.

In December 2017, a special CBI court acquitted former telecom minister A Raja and other accused in three separate 2G cases, observing that there was no scam. In March 2018, the Enforcement Directorate approached the high court, challenging the special court’s judgement acquitting all the accused. A day later, the CBI too challenged in the High Court the acquittal of the accused persons.

In March this year, the Delhi High Court admitted a CBI appeal challenging the acquittal. The court said that based on the material on record, a prima facie case is made out by the CBI and the appeal needs to be heard in detail. Business Today