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www.time4education.comTriumphant Institute of
Management Education P Ltd
Nyayapati Gautam
2G & Coalgate
& JBT &Granite & So
On
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Background
In 1994 there were three incumbents inthe fixed service sector i.e., DoT, MTNLand VSNL.
DoT operated all over the country exceptDelhi and Mumbai.
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MTNL had operations in Delhiand Mumbai and VSNLprovided internationaltelephony.
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In1994 telephone density inIndia was 0.8 per 100 personsas against world average of 10per 100 persons.
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NTP - 1994
National Telecom Policy 1994
Affording telecommunication for all andensuring the availability of telephone ondemand.
Providing certain basic telecom services
at affordable prices to all people &covering all villages.
Giving world standard telecom services;
Creating a major manufacturing base andmajor export of telecom equipment
Protecting the defence and securityinterest of the country.
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NTP - 1994
Additional resources required to achievethe revised targets was over Rs.23,250Crores.
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Private investment andassociation of the privatesector was necessary in a bigway to bridge the resource gapin order to achieve the revisedtargets set in NTP 1994.
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Objectives: NTP - 1999
Objectives of NTP 1999:
to make available affordable and effectivecommunications for the citizens.
To provide universal service to alluncovered areas including the rural areasand also provide high level servicescapable of meeting the needs of thecountrys economy by striking a balance
between the two.
To encourage development oftelecommunication in remote, hilly andtribal
areas of the country.
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Objectives
To convert PCOs wherever justified intoPublic Teleinfo centres havingmultimedia capability
To transform in a time bound manner,the telecommunications sector in bothurban and rural areas into a greatercompetitive environment
Providing equal opportunities and level
playing field for all players.
To strengthen R&D efforts in the countryand provide an impetus to build worldclass manufacturing capabilities.
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To achieve efficiency andtransparency in spectrummanagement..
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pec rummanagement under
NTP 1999 Growing demand - essentialthat the spectrum is utilizedefficiently, economically,rationally and optimally.
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There is a need for atransparent process ofallocation of frequencyspectrum
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Adequate spectrum is to bemade available to meet thegrowing need of
telecommunication services.
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SpectrumManagement
There is a need to have a transparentprocess of allocation of frequencyspectrum:
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Spectrum usage fee shall becharged;
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An Inter-Ministerial Group:
Wireless Planning CoordinationCommittee as a part of the
Ministry of Communications
for periodical review of spectrumavailability and broad allocation
policy should be set up.
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TRAI
An independent regulatorybody set up in 1997 with aview to assure investors that
the sector would be regulatedin a balanced, fair andcompetitive manner.
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The Government proposed toset up an independentTelecom Regulatory Authority.
It also decided to give statutorystatus.
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TRAIPowers &Functions
Need and timing forintroduction of new serviceprovider; (Mandatory for Govt
to seek recommendation)
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TRAI
Terms and conditions oflicence to a service provider;(same as above)
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Revocation of licence for non-compliance of terms andconditions of licence;
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Efficient management ofavailable spectrum.
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3rdOperator
Entry of 3rd Cellular Operator Public Sector Units viz. MTNL and
BSNL were to be given CMTS
licences in the year 1999-2000 as 3rdCMTS operators.
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4thCMTS Licence in2001
In terms of NTP 1999, if new operatorsare to be introduced, the same is to bebased on the recommendations by TRAI.
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The recommendations were:Level of Entry Fee:
DoT/MTNL as third operator as also the fourthoperator to be introduced will be required to
pay licence fee by way of share in theirrevenue at the same rate / percentage asrecommended by TRAI for existing CMSPswho were allowed to migrate to new revenuesharing arrangement in accordance with NTP
1999.
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Fourth operator will also pay an entry fee whichwill be fixed through a process of bidding.
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4thCMTS Licence in2001
Basis of selection of new operators:
All new operators barring DoT/MTNL beselected through a competitive process bymulti stage bidding process preceded by apre-qualification round.
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Prospective operators will be required to meetpre-determined criteria in order to qualify tobid for the licence like financial strength andexperience as Telecom Service Provider,minimum roll out obligation, technical plan,
business plan, payment terms and othercommercial conditions.
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Prospective bidders meeting threshold criteria willbe short listed for bidding for entry fee in nextstage and no weightage be attached to pre-qualification criteria.
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4thCMTS Licence in2001
Entry of fourth operator
DoT/MTNL, the incumbent in basic services,are to enter the field of cellular mobileservices as the third operator in terms of NTP1999 with the existing availability of spectrum.
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Market considerations indicate that in mostcircles there is a fair case for entry of thefourth operator.
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However, more than market the determiningfactor has to be availability of spectrum and itsoptimal utilization.
Should it be utilized to augment the number ofservice providers or for improving the qualityand coverage of already available services.
th
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4thCMTS Licence in2001
Entry of fourth operator
A fair balance between the two objectives ofincreasing competition on one hand andimproving the quality, coverage and priceefficiency of the service on the other will haveto be struck so that the larger objective ofproviding quality services at affordable pricesis not jeopardized.
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A view can be taken in the matter only aftergetting a full report from DoT on quantum ofspectrum being made available for CMSPs,existing as well as proposed new entrants and itslocation.
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Unified Access ServiceLicence: 2004-2007
TRAI recommendations: Within six months Unified Licensing regime
should be initiated for all services covering allgeographical areas using any technology.
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Existing operators be given option to continueunder present licensing regime or migrate tonew Unified Access Licensing regime in theexisting circles.
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UASL
Chairman TRAI by his letter dated14.11.2003 communicated to Secretary,DoT that entry fee for new UnifiedLicensee would be the entry fee paid by
4th Cellular Operator and in serviceareas where there is no 4th Operator,entry fee paid by the existing BSO fixedby Government.
This was accepted by DOT. It was alsoapproved that such new licences in thecategory of UASL would be issued onFCFS basis on the basis of applications.
No guidelines regarding procedure for
UASL d i 2008
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UASLs during 2008-2009:
The recommendations of TRAI dated28.8.2007, received by DoT on29.8.2007, were examined by an internalCommittee of DoT which was constituted
on 21.9.2007. Pending consideration of the said
recommendations of TRAI, on 24.9.2007the Minister took a decision to fix a cut-off
date for the receipt of applications forUASL as 1.10.2007.
On the same day a Press Release cameto be issued notifying cut off date.
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Procedures vs Policy
DoT was required to seekrecommendations of TRAI as to the needand timing for introduction of a serviceprovider. It did not and DoT, on
17.11.2003, approved formulation ofprocedure for accepting the applicationsfor grant of UASLs. (procedure similar toBSL)
Further, on 24.11.2003, the Ministerapproved the formulation of procedure forgrant of UASLs on the basis of First
Come First Served as against through
Multi Stage bidding process.
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Procedures vs Policy
TRAI had specifically stated that grant ofUASL had to be through multi-stagedbidding process, as followed in the caseof 4thCellular operators.
DoT contrary to the saidrecommendations formulated theprocedure on 24.11.2003 to collect entryfee from new operators at the rate paid
by 4th operators thus deviating from thepolicy framework of NTP 1999.
To be referred back to TRAI if notacceptable.
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Procedures vs Policy
That new licences in the UASL regimewould be issued licences on the FCFSbasis, was not made known to the public.No new guidelines were issued.
Entry fee not to be revised - since thematter had financial bearing, concurrenceof Ministry of Finance ought to have beentaken.
Relating to important Governmentcontracts Ministry of Law and Justice isrequired to be consulted. DOT ignoredthe opinion of Ministry of Law and
Justice.
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Procedures vs Policy
Procedure formulated whereby theprocessing of applications for grant ofUASLs was restricted to only suchapplications which were received up to
25.9.2007 when the last date forreceiving an application was 1.10.2007,is patently unfair.
FCFS as adopted by the DoT was not
consistent with the NTP 1999,recommendations of TRAI and theCabinet decision.
The FCFS procedure was adopted and
applied, that too without consistency.
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C i t
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Consistency vsDeviation
Time was extended for rectifyingdiscrepancies in application of IdeaCellular Ltd. dated 4.8.2005 for grant ofUASL for Mumbai service area for over a
year for Idea Cellular Ltd. and LoI wasissued only on 20.11.2006.
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Consistency vs
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Consistency vsDeviation
While priority of Idea for Mumbai areawas retained from date of its application,subsequent transfer of equity by TataIndustries Ltd. was treated as compliance
with eligibility requirement. This amounted to violation of laid down
procedure where in an applicant couldretain seniority though on the date of
application was ineligible and acquiredeligibility only later.
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Fair and Transparent?
At the time of decision taken in the year2003 to consider the applications forgrant of UASL on first come first servebasis, applications from two operators,
namely, Bharati Airtel Ltd. and TataTelecom Services Ltd., were alreadypending.
As such FCFS as the basis for grant of
UASL could have been unfair to otherintending applicants.
There was no provision for extension ofperiod of compliance. Extension of time
for compliance with terms of LoI was
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Fair and Transparent?
After the decision to grant of UASLs to allapplicants who had applied up to25.9.2007 and to reiterate priority fromthe date of compliance with LoI, was
made, the first Press Note dated10.1.2008 was issued at about 1.47 P.M.notifying the same.
It was further notified that DoT has been
implementing FCFS basis for grant ofUASLs under which initially anapplication, which is received first will beprocessed first and thereafter, if found,eligible applicant will be granted LoI.
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Fair and Transparent?
This was never a practice in the past.
Further, the first Press Note dated10.1.2008 was published on the websitesof DoT and PIB only.
The first Press Note dated 10.1.2008contained critical information as to drasticchange in procedure followed by DoT.
The priority already acquired by
applicants by virtue of date of submissionof applications was to change.
It was published on the websites withoutpublications in newspapers and without
individual communications to all the
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Fair and Transparent?
On the same day a second press releasewas issued by DoT at about 2.45 p.m.requiring the representatives ofapplicants to collect LoIs on the same
day between 3.30 p.m. and 4.30 p.m. The second press release requiring the
applicants to collect LoIs simultaneouslyin effect took away the priority acquired
by applicants who had applied earlier. This release was very significant as it
was only after collecting the LoI that anapplicant could comply and the applicant
complying earlier was to get priority.
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Fair and Transparent?
This press release was again publishedon the websites of DoT and PIB.
No record of individual communicationsto all applicants having been sent is
available.
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Fair and Transparent?
The LoI for grant of UASL issued on0.1.2008 stipulated fifteen days as theperiod within which the terms of LoI hadto be complied with by an applicant.
Having stipulated the period forcompliance, there was no justification ingranting priority to an applicant, whocomplied with LoI before the fifteen day
period and/or earlier than otherapplicants.
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Fair and Transparent?
Some of the applicants collected the LOIsand also submitted compliance on thesame day.
Their DD was dated before Jan 10.
In case Unitech Infra, Volga PropertiesPvt. Ltd., Azka Projects Ltd., AzareProperties Ltd, Unitech Builders &Estates Pvt. Ltd., Adonis Projects Pvt.
Ltd., Hudson Properties Ltd. while theLoIs were issued on 10.1.2008 andcompliance was submitted on the sameday, the demand drafts for payment of
entry fee was dated 24.12.2007.
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Fair and Transparent?
In case of Idea Cellular Ltd., while LoIwas issued on 10.1.2008 and thecompliance was submitted on the sameday, the demand draft for payment of
entry fee is dated 8.1.2008. For the first time the procedure for
according priority to those applicants,who complied with the terms of LoI first,
was mentioned in the letter of MoCIT tothe Prime Minister dated 26.12.2007.
The decision in the files of DoT is takenonly on 7.1.2008.
The decision was made public through
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The companies
affectedUnitech Wireless - 22 licences Norways Telenor currently owns
67.3% of the venture.
It paid $1.10 billion for the majoritystake
Unitech holds the remainder.
Videocon Telecommunications - 21 licences
Videocon Telecommunications,formerly Datacom Solutions, is part ofIndias Videocon group.
The companies
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The companiesaffected
Etisalat Db Telecom Private Ltd -- 15licences Formerly Swan Telecom, the company later
merged with itself another firm that had won 2
licences. Abu Dhabis Etisalat (in late 2008) bought
about 45% of the company that was thenrenamed Etisalat DB Telecom.
S Tel Ltd -- 6 licences Bahrain Telecommunications Co owns a stake
in S Tel.
Other major shareholder is Indias Siva Group.
Tata Teleservices -- 3 licences
In 2008, Japans NTT DoCoMo bought 26% of
The companies
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The companiesaffected
Sistema Shyam Teleservices -- 21 licences Sistema Shyam is a joint venture between
Russian conglomerate Sistema and Indias
Shyam Group.
Sistema owns majority stake of the company,while the Russian government also has astake in Sistema Shyam.
Idea Cellular -- 13 licences Idea Cellular is Indias No. 4 mobile operator
by subscribers. It now owns Spice, which was also given 4
licences in 2008.
Idea said it is using seven of the 13 licencesto be revoked.
Loo Telecom Private Ltd -- 21 licences
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TIMELINE
2 February 2012: TheSupreme Court verdict cancels122 telecom licences allocated
to nine companies. Court alsosays first-come-first servedcannot be used to allocate
natural resources.
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12 April 2012: The governmentmoves reference signed byPresident Pratibha Patil with
eight questions. These includejudicial interference in policymatters and whether auction
as the only method that can beused to allocate naturalresources.
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10 July 2012: The SupremeCourt starts hearing onpresidential reference by five-
judge constitution benchheaded by chief justice S.H.Kapadia.
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Sept 2012: SC on PresidentialReference
The apex court said auction
cannot be the only method ofallocating natural resources,maintaining that it should be
considered on a case-by-casebasis.
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On the issue of judicialoverreach, a point raised in thepresidential reference, the
court said all decisions andactions of the governmentwere open to being questioned
by the court for theirconstitutional validity.
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Auctions
Nearly half the spectrumseeing no bids
The government winning
revenues of only Rs. 9,407.64crore, instead of the Rs.40,000 crore revenue target.
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No pan-India bidders forspectrum, which was peggedat Rs. 14,000 crore by the
Cabinet.
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Delhi, Mumbai, Karnataka andRajasthan did not receive anybids at all.
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COALGATE
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From 2004 to 2009, 85 coalblocks were allocated to 137private companie
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Allocation process for coalblocks:
Coal ministry places
advertisements in newspapersseeking applications from thoseinterested in coal blocks.
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Companies apply stating theend-use purpose for the coal,along with recommendations by
state governments.
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IMGCancellation of theAllocation of Coal Blocks.
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A far more criticalconsideration is the policyobjective.
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A critical takeaway from theCAG report in the coal blockallocation relates to the flawed
process of allocating the coalblocks, and the unjustenrichment that the allottees
derived
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CAG report
Only 28 of the 86 captive coalblocks that were to have begun
mining operations by 2011-12did in fact begin mining.
The rest were just squatting on
their allocations.
Balance Sheet
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Balance SheetStrength
NBFCs played a crucial role bylending their net worth to thesmall time coal block
applicants for augmenting theirown.
This was for a fee.
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Later, these NBFCs exited theconsortium.
According to Inside
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gSources
NBFCs give certificates, sign
MoUs and charge money togive credentials. There is no
intent or commitment toinvest,
SPVEligibility of Pvt
ProducersNBFC exits
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Two types of allottees wereable to secure captive coalblocks.
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Essar Power, Jindal Steel andPower Ltd and GMR EnergyLtd
along with lesser-known firmssuch as Pawanjay Steel andPower Ltd
For the blocks that were givenfor free.
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Big CosSecure Fuelsupplies
OthersMonetising assets
Without building the projects theblocks were allocated for.
NO prohibition on change in
Equity
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The investigation agency hasnow included in the probeambit the formation of joint
ventures of private andgovernment companies to getblocks reserved for
government entities.
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Central Bureau of Investigationis set to book atleast 40 privatecompanies soon for allegedly
misrepresenting the facts andjoint venture group companiesfor securing the captive blocks.
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In its enquiry against theseprivate firms, the agency hasfound that they had
misrepresented their net worthand joint venture groupcompanies to secure coal
blocks in states like Jharkhand,Odisha, Maharashtra and fewothers.
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Besides private companies,sources say that some officialsof coal, power and steel
ministry are also under thescanner
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Many secretaries and jointsecretaries in these ministrieshave been questioned over
past few weeks.
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The agency is also planning tocall Congress MP Vijay Dardaand former minister Santosh
Bagrodia for questioning. Darda and his brother and son
have already been booked byagency and there wereallegations that his company wasfavoured by government officials.
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