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November 4, 2008

Conspiracy of Silence : The Officially sanctioned loot of Rs 60000 crs in the Telecom Sector !

It is chiefly for Virendra Kapoor’s ‘Inside Story’ column that I read Mumbai’s revived afternoon paper ” Afternoon Despatch & Courier” 

His Column in yesterday’s edition (sorry no weblink is available) is titled ‘A conspiracy of silence’

This is a shocking gist of what he highlights of the recent Telecom Policy to sell additional spectrum, by DMK’s A Raja,the Communications Minister in the UPA Government

  • It is atleast a Rs 60000 crs scam,making even the Bofor’s scam a child’s play
  • It is an officially sanctioned loot
  • A Raja has devised a policy in such a manner that it allowed arbitrary allotment of spectrum to hand picked parties,who in turn have already begun to sell it at windfall profits
  • The way A Raja handed over licenses on a so called ‘first come,first served’ basis created grave doubts about the fairness of the whole exercise
  • A Raja even defied the PM when the latter advised him to go for open auctions
  • The PM has virtually closed his ears and eyes to this broad daylight loot as A Raja belongs to the DMK
  • A Raja runs the Ministry independent of the PM and the Cabinet and is answerable only to DMK Boss Karunanidhi
  • Any fair arrangement like an open auction would have netted the Government thousands of crores more than it actually did
  • Successful hand picked winners of the fresh licenses can sell them almost immediately as is happening
  • Unitech,India’s second largest Real Estate Company and with no prior experience in Telecom,offloaded 60% in Unitech Wireless to Telenor of Norway for Rs 6120 crs for all it’s 22 circles,valuing the business at Rs over Rs 10000 crs.It had paid just a few thousand crores for the license
  • Swan Telecom of Mumbai got an even better deal….it paid Rs 1537 crs for the license to operate telecom services in 13 circles…within weeks it sold 45% stake to Dubai based Emirates Telecommunications Corporation valuing the business at Rs 9000 crs !
  • Neither Unitech,nor Swan have begun operations and thus do not have even one subscriber !…they have gone on to make obscene profits at the cost of the Indian exchequer and have been the beneficiaries of A Raja’s largesse

Here are some of my reflections on this

  • The Indo-US Nuclear Policy signed will be an even bigger opportunity than this Telecom Policy
  • It is simply shocking that our PM has allowed this
  • There are many precedents to this sort of shorting the Indian Exchequer….A few Years ago,the Centaur Hotel near the SantaCruz Domestic Airport in Mumbai was sold for just over Rs 40 crs to an entity ,Bajaj Hospitality,who within months sold it for over Rs 120 crs to the Sahara Group…why could the Government not have sold it at a higher and more fairer price so that the Exchequer would benefit ? 
  • These are Crimes being committed against the 1.1 billion people in India,of which 236 million live below the poverty line…that’s nearly 21% of our population…one in every five ! 
  • To be fair,one has to hear A Raja’s defense too…but the way it looks,the odds are stacked against him….it clearly appears to be a premeditated gameplan
  • The Licenses should have a Five Year Lock in…..The allottees should not be allowed to sell these or any stake in ventures that are created to exploit these….if they do so before Five Years,they must remit to the Government a significant portion of the gains on a predecided  fair formula based on reasonable returns and time period elapsed before the sale
  • To borrow a line from Pat William’s prologue in his book ‘Mr Littlejohn’s Secrets To A Lifetime Of Success’….” We live in an age which has lost it’s moral underpinnings” 
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    Took the Inaugural Sessions at the Five Day Financial Markets Seminar of DTRTI for Income-Tax Commissoners from all over India

    It has been a privilege to have been invited thrice to take the pre lunch inaugural sessions at the three Financial Markets Seminars conducted by the Direct Taxes Regional Training Institute in Mumbai…the First one was in September 2007,followed by one in February 2008 and the latest began yesterday…While the Coordinators keep on changing,the DTRTI continues to be headed by a very graceful and full of poise, Lady Commissioner…. The Invitation and the Thank You Letter that inevitably follows the conclusion of the Seminar comes from her desk 

    I go back tomorrow to the Seminar for an Open House Q & A Session…already have fielded some searching ones… when discussing the Ratio, Market Capitalisation to GDP,a very attentive Commissioner queried that while Market Cap may be the Wealth perceived by the Markets,GDP is Not the Wealth of the Nation…in a sense it’s only the Annual National Income as measured by Gross Domestic Product…Wealth of India is much more…we got into interaction on Money and what three things you can do with it…consume or save or invest…it also threw up India’s High Savings to GDP rate of 35% and the relatively higher Equity Exposure rate of over 7%  of Total Savings…With Market Capitulation,expect this Exposure to water down quick

    I have ofcourse forewarned them that those who had sought scrips to buy into, in earlier seminars, are no longer on this planet !

    I spoke for over Three and a Half Hours on Indian Equity : Dimensions and Dynamics…..covering Global and Indian Market Dynamics,Fate of the US Dollar, FII exposures and trends and short sales (see a day or two old blog on this) ,Insider Trading,Sensex performance in the short and long term and likely Sensex by 2010

    I faced some sombre,unlike earlier seminars,and quite smart,alike earlier seminars, Income Tax Commissoners….. perhaps reflecting both the Market Moods and how tough and challenging Direct Tax Collections are likely to be in the near future with the economy slowing down

    Our FM has set a Direct Taxes collection target of Rs 1000 crores a day aggregating Rs 356000 crs in FY 09

    The Collections in the First Half look good…but it was revealed to me that last year many assesses filed returns and paid taxes in October 2007 …this time around thay have paid taxes under self assessment in September itself…if you remove these then there is no significant rise in tax collections  in the first half year on year read more

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