CAG Points Out Flaws in Spectrum Allocation, Minister Denies

The Comptroller and Auditor General (CAG) of India has found that a set of microwave access (MWA) spectrum was allotted to a telecom operator on ‘first come first serve’ (FCFS) basis in December 2015 by the Department of Telecommunications (DoT), in contravention to its own policies. The CAG revealed that various lapses of DoT in the spectrum allocation process had resulted in the loss of Rs. 560 crore to the exchequer.

However, Union telecom minister Ravi Shankar Prasad has disagreed with the findings of the CAG. Responding on the issue, Prasad said that “every spectrum was allocated through auction” and added that the communications ministry will look into the matter.

The CAG found that the DoT delayed the allocation of MWA spectrum despite 101 applications pending (till November 2016), resulting in huge losses to the government. The report also referred to the response of DoT in this regard as not “tenable.”

“In order to maintain a level-playing field among all telecom operators, the DoT in 2011 decided that future spectrum would be made available only through a market driven process. The DoT had started auction of access spectrum but also continued allotment of MWA spectrum administratively (first come first serve) to telecom service providers,” stated the CAG.

The irony is that the DoT is yet to take a final decision on the method of allocating MWA spectrum. However, the audit recommended that allotment of MWA spectrum to telecom service providers should be made through market related process.

In 2012, the Supreme Court ordered that the spectrum allocation should be done through auctioning and struck down the FCFS policy in 2G spectrum allocation case of 2008-09. The apex court had also cancelled 122 telecom permits that were granted spectrum without auctioning.

MWA spectrum connects cell sites (base transceiver stations) with base station controllers. These carriers are generally in the frequency bands of 10 GHz and beyond.

Charging MWA Spectrum

The CAG pointed out that the DoT method of charging MWA spectrum is flawed and subject to manipulation. It found that the spectrum charges for cellular networks are levied on revenue share basis (as a percentage of their Adjusted Gross Revenue) whereas spectrum charges for NLD (National Long Distance) and ILD (International Long Distance) networks are levied on formula basis, although both types of networks are public commercial service providers.

As per the New Telecom Policy 1999, spectrum charging is to be levied on revenue share basis, whereas, with the formula basis, annual royalty is charged.