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February 18, 2012

Never any 'agreement' with Raja not to revise entry fee

Union Minister of Home Affairs P. Chidambaram responds to the report Chidambaram may not be out of 2G thicket yet, that was published in The Hindu on February 16, 2012:

Your correspondent appears to have missed the crucial point that proceedings under section 200 of the CrPC are exparte proceedings. In proceedings under section 200 CrPC, at the initial stage, there is no opposite party or defendant. The Judge will examine the complainant and the evidence that the complainant may produce. Such evidence is usually selective, self-serving and only what may support the case of the complainant. That is what happened in this case too. Nevertheless, the Special Judge found no merit in the complaint and dismissed it. The observations in the order of the Special Judge must be understood in the context that the proceedings were ex-parte proceedings.

However, since your correspondent has interpreted the order of the Special Judge as well as some other documents, I wish to place a few facts so that the record will be complete.

The two acts attributed to me by the complainant were (i) allegedly agreeing to non-revision of the entry fee and (ii) allegedly permitting two companies to issue new shares to foreign investors. The relevant facts are as follows (and they are in the public domain):

(i) On the entry fee charged for the LoIs issued on 10.1.2008, the

Supreme Court in its judgment dated 2.2.2012 in WP No.423 of 2010 has concluded that the Department of Telecommunications (DoT) ignored the concerns raised from various quarters including the Prime Minister, Ministry of Finance and also some of its own officers. The Supreme Court has also concluded that as the Minister of C&IT was very much conscious of the fact that the Secretary, Finance had objected to the allocation of 2G spectrum at the rates fixed in 2001, he did not consult the Finance Minister or the officers of the Finance Ministry. The Supreme Court has also noted that the meeting of the full Telecom Commission scheduled to be held on 9.1.2008 was postponed by the DoT and the LoIs were issued on 10.1.2008. Thus, it will be clear that the LoIs were issued on 10.1.2008 without the knowledge of the Ministry of Finance.

What happened after 10.1.2008 is a matter of record. After 10.1.2008, notes and discussion papers were exchanged between the Ministry of Finance and the DoT during January to April, 2008. These discussion papers reflect the consistent stand of the Ministry of Finance that auction was the best method to discover the price and it was legally possible to do so. However, DoT declined to accept this view. Hence, various alternatives were explored to raise additional revenue. The final discussion paper that was prepared by Secretary, Finance and Secretary, DoT was considered at a high-level meeting on 4.7.2008. Decisions taken at that meeting were the decisions of the government. One of the decisions was to revise and update the entry fee by adopting one of two methods (GDP growth rate or SBI PLR) and to charge the said amount upfront when the licencee applied for additional spectrum. This decision would apply to all licencees who had been allocated spectrum up to 31.3.2008, including the 122 licencees. The decisions are recorded in the minutes dated 6.7.2008. Therefore, there was never any agreement between the Minister of C&IT and me not to revise the entry

fee. On the contrary, a decision was taken by government at the high-level meeting on 4.7.2008 to revise and update the entry fee.

(ii) Regarding issue of fresh shares by the two Indian companies to their foreign investors, the FDI policy allowed up to 49 per cent equity under the automatic route. The records will show that until I demitted office as Finance Minister on 30.11.2008, the position was that M/s. Telenor had subscribed to new shares amounting to 33.50 per cent of the equity of the Indian company through the automatic route and M/s. Etisalat had subscribed to new shares amounting to 44.73 per cent of the equity of the Indian company through the automatic route. The funds brought in by the foreign investors accrued to the companies and not to the promoters. There was no question of the Finance Minister permitting the Indian companies to issue fresh shares to their foreign investors. No such permission was required and no such permission was given.

Shalini Singh, Deputy Editor, The Hindu, responds: (i) I am aware that Section 200 CrPC proceedings are ex parte and no contrary claim has been made by me. The article compares Judge Saini's order with Mr. Chidambaram's public statements (obviously made outside the court) and notes how Judge Saini's observation that Mr. Chidambaram agreed with Raja not to revise or revisit the entry fee or spectrum charge as discovered in 2001 runs contrary to Mr. Chidambaram's public position. As does the Prime Minister's statement in the Rajya Sabha on February 24, 2011, which I had also referred to, wherein he had said: The two ministers had agreed on this [i.e. pricing of spectrum] because of legacy considerations and I accepted their recommendations. This is the agreement I spoke about when I asked, If there is indeed an agreement, when was it struck and is it on the files?

(ii) On the issue of offloading of equity, my article pointed out that the government failed to charge its share of premium from the huge profits earned by firms in case of M&As, which had been specifically agreed and documented in notes, including during his own meeting with Mr. Raja on January 30, 2008. Mr. Chidambaram does not contest my claim but notes that no permission was required and no such permission was given by the Finance Minister in the context of the Swan/Unitech M&As as they were within the automatic approval limit of 49 per cent for FDI in telecom. In fact, my article never alluded to the word permission or suggested that the same was given by the Finance Minister. I simply questioned why the government never got a share of the premium from the profits made (in the face of documented agreements).