2G Scam: Chidambaram in the Dock

THE United Progressive Alliance (UPA) is sinking deeper and deeper into mire in the 2G case. It is now clear that the then finance minister, P Chidambaram, had indeed given his concurrence to pegging the license fees for 2G in 2008 to the 2001 level. This is the core of the 2G scam that has led to a huge loss to the exchequer. It is not, as Kapil Sibal, the current minister of communications and information technology, would have us believe that the scam is merely of procedural violations in award of the licenses. In Kapil Sibal’s scheme, there has been “no loss” to the exchequer, a claim repeated ad naseum by him and the Congress spokespersons: only some lapse in which some people jumped the queue and got licenses in preference to others.


It is now clear that the finance minister, after initial opposition to awarding license fees in 2008 at the 2001 prices, had finally fallen in line with A Raja and given his consent. This is now public – thanks to an RTI application. The minutes of the Meeting on Allotment and Pricing of Spectrum between A Raja and Chidambaram of January 30, 2008 in its Point 5 states:

“FM said that for now we are not seeking to revisit the current regime from entry fee or revenue share.”

Finally comes the admission that the finance ministry had given its consent to pricing of spectrum at throw-away prices. If Chidambaram’s involvement was in doubt, the note of the finance ministry dated March 2011makes it amply clear that the finance ministry had the possibility of stopping the issuing of licensees on a number of occasions. Though the LOIs were issued to the parties on January 10, 2008, the actual license agreements were signed after the meeting in which Chidambaram had given his consent and the allocation of spectrum took place only in April 2008. The note reiterates in a number of places that though the finance ministry officials disagreed with the Department of Telecommunication (DoT) officers on the spectrum allocation and pricing, there was “consensus at the levels of the ministers concerned.”

On February 16, 2011, in a meeting with TV editors, the PM had stated that the finance ministry and the DoT had “concurred” on the issue of spectrum pricing, consistent with the requirement of the NDA’s cabinet decision of 2003. The cabinet decision on October 31, 2003, while clearing various licensing issues, had recorded that “The Department of Telecom and Ministry of Finance would discuss and finalise spectrum pricing formula, which will include incentive for efficient use of spectrum as well as disincentive for sub-optimal usages.”

The Justice Shivaraj V Patil report, that went in telecom matters, also states, “The spectrum pricing had to be finalised by DoT and MoF as required by the cabinet decision dated 31.10.2003.”

This was also the understanding of the CAG, as borne out by its report.

Even without this explicit reference to the need of finance ministry for concurrence in the cabinet decision of 2003, Rule 4 of the Government of India (Transaction of Business) Rules,  Article 77(3) of the Constitution, clearly stipulates that any decision which  may involve “any abandonment of revenue or otherwise have a financial bearing whether involving expenditure or not,” cannot be done without the concurrence of the finance ministry. In case this is not forthcoming, the decision has to go up to the cabinet.


The key question therefore has been this: Did the finance ministry agree with the DoT that the license fees for 2G licenses must be at the 2001 level as the PM had said? Or was there a difference between the finance ministry and the DoT?

The question assumes importance as there is ample evidence in the files that senior officials of the finance ministry, including the D Subba Rao, the then finance secretary and now the governor of the Reserve Bank, had opposed the allotment of licenses at the 2001 prices. In a letter written on November 22, 2007, Subba Rao had said:

“The purpose of this letter is to confirm if proper procedure has been followed with regard to financial due diligence. In particular, it is not clear how the rate of Rs 1600 crore, determined as far back as 2001, has been applied for a license given in 2007 without an indexation, let alone current valuation. Moreover, in view of the financial implications, the ministry of finance should have been consulted in the matter before you had finalised the decision.”

Was he finally overruled by his minister? Why did the finance ministry not pursue the issue further?

Did the finance ministry have the power to stop this decision that DoT and the ministry of communications & information technology was taking, clearly involving a loss of revenue?

Under Rule 7 of the Government of India (Transaction of Business) Rules, all the cases specified in the second schedule, which include cases involving financial implications on which the minister of finance desires a decision of the cabinet and the cases in which a difference of opinion arises between two or more ministers and a cabinet decision is desired, must be brought before the cabinet.

So there are three clear grounds on which Chidambaram could have stopped the 2G scam. One was the cabinet decision, which clearly stated that on all future spectrum pricing the ministry of finance and the DoT would jointly decide on the pricing; the second was Rule 4 of the Business Rules; the third was the Business Rule 7. To date the picture given is that all that Chidamabarm did was that in spite of his opposition, his only act was one of omission; he did not bring this to the cabinet and allowed Raja to proceed in violation of all the three procedures cited above. Now it transpires that there was something more – he had met with Raja and had agreed that this matter was now closed and Raja could proceed on this matter.


The finance ministry’s note is being used by the media to indicate that this is only a difference between two senior ministers in the union cabinet. This is of peripheral importance to the country. What the finance ministry’s note of March 25, 2011 really does is that it details out all the options that the finance ministry had before it to stop Raja’s 2G scam. It systematically details the finance ministry’s position and how, from a position of opposition to licenses being given at the 2001 prices, the finance ministry finally held consultations with the DoT only on the prices of spectrum beyond the start-up spectrum bundled with the license. On the rest, it had given its consent.

Chidambaram has been extremely coy about his role on the entire issue. For a long time, the only meeting about which people knew was the one held between Raja and Chidambaram in May 2007, in which no minutes were issued. Till the documents came out of the PMO on the minutes of the meeting of January 30, 2008, nobody knew about this meeting, nor was anyone aware of its content. Nor were people aware of the number of meetings held between the finance ministry and the DoT on the 2G issue. The finance ministry’s note to the Prime Minister’s Office (PMO) of March 25, 2011 makes it clear that indeed a series of meetings did take place between the finance ministry and the DoT and that finance ministry was only limiting itself to matters beyond the initial spectrum, the core of the scam.

The standard tactic of the UPA has been to bury the Joint Parliamentary Committee (JPC) and the Public Accounts Committee (PAC) under a mountain of papers while withholding vital evidence. However, it is becoming increasingly difficult to claim, as the Congress has been doing, that Raja was a rogue minister and that the 2G scam was entirely his doing. Now there is ample evidence to show that the finance ministry, the law ministry and also the PMO were fully aware of the issues and about what Raja was doing. There was a statutory obligation of the finance ministry to agree to the license fees being maintained at the 2001 prices, which the finance ministry was fully aware of and had indeed brought this to the notice of the DoT. The finance ministry had ample opportunities to stop the scam at various stages. It was the finance minister who finally gave his consent to the scam, overriding the officials in his ministry.

The fact that Chidambaram as the finance minister gave his consent to the 2G scam does corroborate what the PM had said in February 2011, but does not absolve him either. After all, India has a cabinet form of government, where the entire cabinet is responsible for its actions. On a matter involving 1.76 lakh crore rupees, the argument cannot be that it was the act of only two ministers. The PM as well as his other colleagues knew about what was happening. The PM was the leader of his team and fully in the know, and still he let the scam take place. He may still talk about his honesty; his personal integrity is not the question. The question is of a prime minister allowing a scam to take place with his full knowledge; the fact that he has not benefited in money terms from the scam is hardly the issue. Integrity is not only a question of personal honesty; it must also be ensured that the institution he heads – the union cabinet – remains honest. Unfortunately, today the picture the nation has is that he is heading the most corrupt government ever, where scams worth thousands of crores appear to be mere chicken feed. That is the real tragedy of this country.