The Comptroller and Auditor General of India (CAG) has rejected the telecom department’s stand allowing Reliance Jio to offer voice services using broadband spectrum.

The CAG, in its draft report, has said that had the Department of Telecommunications (DoT) made it clear that voice service was permitted, there would have been more demand for spectrum during the auctions held in 2010. Broadband spectrum had been sold at a fraction of the price of 3G spectrum. According to Government sources, the CAG has not accepted the DoT’s version that no favour was shown to any specific player.

Undue favour? The auditor said that going by the value telcos paid for spectrum between 2012 and 2014, RJio appeared to have been accorded undue advantage of ₹22,842 crore.

The main issue is a policy that permitted Internet service providers (ISP) with broadband spectrum to start offering voice telephony services by paying an additional ₹1,658 crore.

According to the CAG, the policy may have resulted in a loss to the exchequer. However, the DoT had replied that the CAG’s view was untenable and based on a hypothetical position.

It has also questioned the CAG’s powers to raise policy issues, which it says are not related to the audit.

According to the Department, the fee of ₹1,658 crore collected from Reliance Jio was not for broadband spectrum but only an entry fee to migrate to a unified licence regime.

The DoT had said the contention in the audit report that the entry fee of ₹1,658 crore discovered in 2001 should not be applicable in 2013, was not correct.

RJio’s migration Reliance Jio, a subsidiary of the Mukesh Ambani-led Reliance Industries, acquired Infotel Broadband Services in June 2010, soon after the firm won nationwide broadband spectrum, spending nearly ₹13,000 crore. Infotel had acquired an ISP licence, under which voice telephony is not permitted.

In 2013, the DoT announced the new unified licence regime under which all types of telecom services are allowed.

As part of this new licensing, the Department announced a migration path for existing players with older licences.

While those with a unified access service licence were permitted to migrate to the new regime without any additional cost, those with plain ISP licences (without spectrum) were asked to pay ₹15 crore as entry fee. But ISPs with broadband spectrum were told to pay ₹1,658 crore as an entry fee.

The CAG said it was surprising that the Government did not satisfy itself as to how Infotel Broadband, a company with a networth of ₹2.5 crore, would be able to pay the bid amount of ₹12,847 crore.

The auditor said eligibility conditions for the auction were not stringent enough to keep out “front companies”.

It said that though Reliance acquired Infotel Broadband on June 11, 2010, a few hours after the close of the auction, the Government did not raise a red flag on possible violation of confidentiality conditions by Infotel.

“The Government should get the matter investigated even at this juncture, fix responsibilities on the bidders, which violated the auction rules and cancel allotment of the broadband spectrum,” the CAG concluded in its report.

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