Chapter 17 The S-Band Scam – Indian Economy

17

The S-Band Scam

Introduction

The S-Band scam pertains to the allocation of the so-called S-Band spectrum, a precious resource to a private sector company by name Devas Multimedia for a 20-year period by the Indian Space Research Organization (ISRO) without any covert bidding. The  Comptroller & the Auditor General (CAG) smelt a scandal thus at become public knowledge. Under the deal, Devas Multimedia is to get access to 70 MHz of broadband spectrum in the 2500 MHz band. This was once used by Doordarshan to deliver programmes by satellite to all parts of the country but is now considered to be of enormous commercial value for high-speed, terrestrial mobile communications. In 2010, ‘the Union Government got nearly Rs 67,789 crore from the auction of just 15 MHz of similar airwaves for 3G mobile services’, The Hindu says. This allotment of S-Band spectrum has aroused widespread and strident criticism all over the country with the Bharatiya Janata Party (BJP) spearheading it, targeting Prime Minister Dr Manmohan Singh under whose portfolio was included the Department of Space, the parent organization of the ISRO. The BJP-led opposition had alleged that the loss to the public exchequer due to the spectrum allotment has been estimated to exceed Rs 2 Lakh crore even dwarfing the over Rs 1.76 lakh crore 2G Spectrum scam.

What exactly is the S-Band spectrum? It is the ‘entire range of wavelengths of electromagnetic radiation’ having a band of colours as a seen in a rainbow arranged in a progressive series according to wavelength and produced by separation of light by their different degrees of refraction.1 How did the scam come to light? The CAG was alerted since unlike previous contracts ISRO placed no restrictions on Bangalore based Devas Multimedia for onward leasing of spectrum. This would allow the private sector company make huge amounts of money by sub-leasing its right as a spectrum keeper.

The Hindu Business Line, the Chennai-based economic and business daily from the House of Hindu, which broke the story said that it was the first time that the S-Band which ranges from 2500 to 2690 MHz, has been opened up to the private sector. It was reported that the ISRO chief, Kasturirangan was earlier associated with Devas Multimedia Private Ltd. He has been associated with the ISRO. The CAG was concerned that ISRO’s internal procedures were given a go-by while the PMO, the Cabinet and the Space Commission, the normal proper channel were not consulted and not even fully informed about the contract, including the under estimation of ISRO’s costs.

The crucial S-Band is vitally needed for national needs including defence, paramilitary and railways and as such cannot be entrusted to the private sector for commercial use.

While the ISRO chief defended his decision on S-Band, the Cabinet Committee on Security decided to scrap the contract with ISRO’s commercial wing Antrix. The then Defence Minister A. K. Antony was not even consulted on this strategic decision. Government was also confident that even if Devas Multimedia took the Government to an international court their stand against Devas would be vindicated, and if the worse come to the worst, Government was prepared to meet the challenge. The Law Ministry while expressing its opinion on the issue in 2008 made it clear to the government that if the agreement was terminated with Devas it would have to reimburse the company all the upfront capacity reservation fees and corresponding service taxes received till date.

The Communist Party of India (Marxist) (CPM) politburo member Brinda Karat posted the question ‘How was this deal permitted in the first place? The second question, who are the investors in this?’ The allotment of the year of contract also implies that the government has erred in okaying it in the first place. Beyond that damage control, the issue of spectrum is likely to dominate the political space for sometimes to come.

Postscript

In the aftermath of the controversy, empowered group of Ministers (EGoM) on spectrum settled for a reserve price around Rs 15,000 crores and 5 per cent usage/exchange for 5 MHz of Pan India airwaves, which is about 20 per cent less pricy compared to the regulator’s suggestion. Once cleared by the Cabinet, the reserve price will be lower than the Rs 16,750 crore recovered during the 3G  Auction. The higher spectrum usage charge will offset the potential loss from a lower reserve price. As per DOT’s estimate bigger than 2G, CAG suspected scam in S-band allocation, a one per cent increase in the spectrum usage charge meant an additional outgo of Rs 761 crores for operators using GSM technology. The Hindu quoted: ‘Hard on the heels of its explosive investigations of the 2G spectrum allotment made in 2008 by the Department of Telecommunications, the Comptroller and Auditor General (CAG) has started inquiries into 2005 agreement between the Indian Space Research Organization’s commercial arm Antrix Corporation Ltd., and Devas Multimedia Ltd.’2

Key Terms

Antrix international usage charge count 166

CAG 165

Competition bidding 165

Devas multimedia 165

ISRO 165

MHz 165

PMO 166

Proper channel 166

S-Band 165

Space commission 166

Spectrum 165

Discussion Question

17.1. Discuss in your own words the S-band scam that rocked the Parliament in 2008–09. Do you agree with the Government’s stand on the issue?

Footnotes

1 The Concise Oxford Dictionary of current English, Ninth Edition, edited by Della Thompson (1995), Delhi Oxford University Press.

2 The Hindu Business Line, cited by Yahoo News in.news.yahoo.com/bigger-than-2g-cag-suspects-scame-in-s-band-allocation.html.