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Who Is Rai?

Who Is Rai?

The last verdict on the case on distribution of second generation (2G) spectrum to telecommunication companies (telecos) is unlikely to be ready before another decade. By then, Prime Minister Narendra Modi would be close to the retirement age for holding a ministerial post he set for others in his party.

But the special court’s verdict in the 2G spectrum allocation case seems to indicate that the Opposition during the United Progressive Alliance, led by the Bharatiya Janata Party and seemingly motley crowd of Anna Hazare and Arvind Kejriwal, barked up the wrong tree based on presumptions made by then Comptroller and Auditor General Vinod Rai.

I believe there was a scam in the distribution of the 2G spectrum. Corporates tried to influence the Telecom Minister to get out of turn and higher quantum of spectrum. One teleco filed the application for spectrum allotment well past the deadline but managed to have the application in the Department of Telecom’s files with a back date.

The verdict has not denied existence of a scam but said that the CBI failed to prove its charges. Leaders of the Dravida Munnetra Kazhagham were jailed during the progress of the probe. A Raja and Kanimozhi were denied bail for a long period on the presumption that they would be able to influence the probe if they came out of prison. I am not sure why it never occurred to the courts that DMK was in power at the Centre and Tamil Nadu and in a position to influence the probe even if the two were in jail. Did the courts go by ‘popular’ voices of noise channels that Raja and Kanimozhi needed to be punished even before the case reached its conclusion because big politicians do not undergo prison sentences usually?

What was the 2G case about? Air waves acquired value when demand and popularity of mobile telephony went up in India. The Manmohan Singh Government did not create a policy but followed a precedent the Vajpayee Government had created while allotting portions of the airwave frequency for mobile phone service providers to operate.

However, there was something that the UPA Government did a little different. It realised the demand among potential and existing telecos for spectrum exceeded the resource, unlike when the Vajpayee Government which gave CDMA licences at throwaway fees. There was no criterion followed for granting the licences then, except ‘first-come first-served’ (FCFS). There was no assessment on how valuable the spectrum was or how much the telecom sector was poised to grow.

One can easily pass this off as bad judgement on the part of the NDA Government although it had the best market valuation experts at its disposal. Also, the decision to grant CDMA licences was a unanimous decision taken by the Vajpayee Cabinet, with no dissension notes. On the other hand, Prime Minister Manmohan Singh and his PMO objected to the proposal to hand over the 2G spectrum on FCFS because they had recognised auctioning was fairer and profitable way of allocating the spectrum.

However, A Raja and his Telecom Ministry refused to adhere to the instructions given by the PMO. It now transpires from the court ruling that Manmohan Singh was later kept in the dark of a decision of Raja’s ministry to go ahead with FCFS. The court while rapping then PMO officials Pulok Chaterjee and T K A Nair for keeping Manmohan Singh in the dark of Raja’s decision has given a clean chit to Singh over the decision not to hold auctions for allocating the 2G spectrum.

This portion of the verdict is very significant because then main Opposition BJP and the RSS-collated agitators led by Anna Hazare and Arvind Kejriwal targeted Singh and the Congress more than its alliance partner DMK for the 2G ‘scam’. Apart from ‘outsiders’, the RSS had an insider for building the ‘most-corrupt government’ narrative in 2010. He was Comptroller and Auditor General Vinod Rai. Ironically, it was Manmohan Singh’s file noting, objecting to FCFS methodology for allocating the spectrum, which formed the basis for Rai to attack Singh and his Government. Had Singh just said okay to the Telecom Ministry’s proposal and the proposal for FCFS placed in the next Cabinet and passed unanimously, there would not have been any controversy in the 2G allocation because the UPA Government was just following the policy of the NDA Government on spectrum allocation.

Rai would not have realised that the 2G spectrum was precious resources which could earn the exchequer a lot of money if auctioned. However, the ludicrous calculation that Rai made on how much money the exchequer lost seems like a bigger scam now than the spectrum allocation because it seems to have been done intentionally to wreck the UPA Government. It can be called a CAG coup.

This was not the first time that CAG has played a political role. In the 1980s, the BJP was able to get CAG T N Chaturvedi to give an adverse report on the quality of the Bofors gun after news broke out that commissions were paid during the purchase of the howitzers. The party rewarded Chaturvedi with a Rajya Sabha MP position and later made him Governor of Karnataka.

Not to be so blatantly exposed, Rai and BJP did not make the association so obvious. However, the Modi Government last February appointed Rai as the Chairman of Banks Board Bureau. An organisation was newly set up to select top executives of government banks and help lenders raise capital and develop business strategies for employing Rai. To date, I am unaware of any creative strategy Rai and company have suggested for helping the public sector banks to overcome the crisis they face following the huge debt burden created by their non-performing assets.

But Congress insiders say that Rai is the Trojan Horse that administrative genius but political novice P Chidambaram gifted the UPA. According to them, Rai is an RSS sympathiser. If he is honest, he should admit that the 1,76,000 crore loss that he presumed the exchequer had lost was bunkum because the 2G spectrum auctions despite teleco compulsions and hype fetched only Rs 61,162 crore, 1,14,000 crore less than Rai’s presumption. Better market valuation of the spectrum was available when 3G auction fetched less than Rs 66,000 crore.

What’s more the telecom sector is making huge losses after the huge amount paid for the spectrum. Telecos can hardly raise subscriber costs as it would make phones unaffordable to the poor who voted Modi after cheaply sharing social media messages which portrayed his predecessor as ‘Maun Mohan Singh’, using affordable rates because of the FCFS policy.

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(Published on 01th January 2018, Volume XXX, Issue 01)


1) The Modi Government last February appointed Vinod Rai Chairman of Banks Board Bureau. What experience does an IAS officer turned CAG have to recommend to banks how to raise capital and develop business strategies?

2) Despite the hype created by CAG figures and telecos’ compulsions to participate in the 2G auction to remain in business, the auction fetched just a third of the amount Vinod Rai said it would have 4 years earlier.