THE committee headed by B K Chaturvedi, Planning Commission member to review the controversial deal on S Band spectrum between Antrix Corporation and the Bangalore-based Devas Multimedia Private Ltd, has submitted its report, though its conclusions are yet not public. Nor are we aware what further steps the government intends to take, apart from the cancellation of the deal. Going by the response of ISRO to an RTI application, the report will blame Antrix for the deal while claiming no one in IRSO or Space Commission was aware of the nature of the deal. This, despite key people from ISRO and the Space Commission being on the board of Antrix!
While the scam nature of the Antrix Devas Multimedia deal for S Band spectrum has drawn major attention, there are larger issues at stake here. How are commercial deals being undertaken by corporations such as Antrix, which are wholly owned companies of various departments of the government? How is spectrum allocation between various departments being managed? Can each department, which has been allocated spectrum for its specific needs, reach its own commercial deals treating this spectrum as its “private” property?
The Antrix Devas shows failure on all these counts. It was commercially a bad deal, even without taking into account the value of the spectrum. Antrix was making the up-front investment for the two satellites, while Devas was paying Antrix virtually from the revenue it would earn from leasing them. This is apart from the value of the spectrum. The spectrum issue is even worse. The spectrum that ISRO was giving away through this deal is a valuable one which is increasingly being used for land-based wireless broadband services. DoT and TRAI had been asking the Department of Space (DoS) to release a part of this spectrum for this purpose. DoS was not only the most recalcitrant in releasing spectrum, but also claimed that this S Band spectrum was vital for security and strategic reasons. They never disclosed to DoT and TRAI that they were commercially selling this spectrum to private parties for the same services.
The PMO and the Congress party have gone in an overdrive that the deal was somehow only known to Antrix and ISRO and not disclosed to the “government”. This makes strange reading as ISRO is a government body and the distinction between ISRO and the government is difficult to understand. The members in the Space Commission, the policy-making body of space, were all a party to this Antrix Devas decision. Various officials in DoS and the PMO were fully aware of this deal and if they did not understand what this deal was about, they should certainly not be sitting in those positions. Looking at this deal, it has all the hallmark of a sweetheart deal, struck between ISRO and some of its past senior personnel.
MAKING A KILLING
Let us look at the Devas Antrix deal first. It was a deal for leasing 90 per cent of capacity of transponders on two satellites – GSAT 6 and 6A – for 12 years from Antrix, the corporate arm of ISRO, at a total cost of $ 300 million (or about Rs 1,200 crore). For all practical purposes, the two satellites were being launched almost exclusively for Devas use. Leasing these transponders would provide 70 MHz of spectrum for Devas. Devas was proposing to use these transponders and the 70 MHz spectrum for providing broadband services to consumers through the two satellites. Given the broadband spectrum cost as shown by the BWA license sale – which gave about 12,000 crore for 20 MHz – the Devas leasing of 70 MHz spectrum for a fraction of this cost has obviously caused a major stink. The 2G scam is an obvious reference point, and even if we do not take mobile services but only broadband services as the bench-mark for spectrum prices, Devas has paid only 1/40th the current cost of the spectrum for similar services. Not surprisingly, Devas sold a part of their shares to Colombia Capital, Deutche Telecom and Telecom Ventures at a huge premium – Rs 10 share being sold first at Rs 21,445 in 2006 and later at Rs 1,26,821 on September 29, 2009, thus making a killing. As in the 2G case, the primary asset that Devas had was its agreement with Antrix and the 70 MHz of spectrum. Till 2006, they had made virtually no investments. Even by 2009, the only substantial investment that Devas made was paying Antrix Rs 58.37 crores as upfront capacity reservation fee for the two satellites.
Madhavan Nair, the then chairman of ISRO has claimed that spectrum in space should somehow not be seen in the same way as spectrum for mobile or other terrestrial services. Let us examine first the Devas deal without taking spectrum prices into account.
ISRO was sending up two satellites GSAT-6 and 6A satellite, at a cost of Rs 269 crores for GSAT 6 and GSAT-6A at a cost of Rs 147 crores. The launch cost of the satellites was Rs 350 crores. The total investment that ISRO and the government were making was Rs 766 crore. Against this, Devas was to make up-front reservation fees of $40 million, of which Rs 58.37 crore has been paid till date. The rest – an amount between $216 to $260 million – was to be paid over a period of 12 years. If we convert this to Rupees, Devas would pay anything between Rs 1000 crore to Rs 1,200 crore over the 12 year of the contract.
In any commercial deal, the money to be considered is the Net Present Value (NPV) of the sums to be paid in the future. This is simply because if I do not spend my money but put it in a bank, its value will appreciate over time due to interest that I will be paid. Therefore, when comparing money now to any future sums, we always have to take this into account. In all accounting practices, this is done by a discounting factor – we discount future money with a discounting factor to bring it to its current value or NPV. If we do this with the Antrix Devas deal, the money that Antrix would receive was less in NPV terms than the amount Antrix is spending on sending up the two satellites. In other words, this deal fails even the most elementary commercial test that can be applied – Antrix was spending more money than it was to receive in NPV terms from Devas. This deal makes no commercial sense whatever, even without taking the value of spectrum into account.
DEEPER MALAISE
The spectrum issue has been murky in the country right from the start. As per spectrum allocation, major departments of the government are sitting on commercially valuable spectrum. Defence, space, information and broadcasting all hold spectrum. For example, one of the charges against Lalli, the former AIR chief, was that he was vacating 106.4 MHz band – the one that FM Gold uses in some of the metros – to a private party and switch to an inferior band. This was again commercially a decision that made no sense for AIR and was obviously driven by extraneous considerations. In today's world, spectrum is extremely valuable and if each department and government entity is free to sell spectrum every which way, we are opening the country to innumerable scams.
The spectrum that was originally allocated to different departments was at a time when mobile and broadband services did not exist. So a number of ministries are sitting on spectrum that is required for such services. The problem with spectrum is that internationally, certain parts of the spectrum are used for certain purposes. If we do a different spectrum allocation than what is extant internationally, there will be no equipment manufacturer available for such services. This means those parts of the spectrum that are used internationally for mobile and broadband services have obviously more commercial value than other parts of the spectrum.
DoS holds 150 MHz of the S Band. When it became clear that the existing broadband services would run into insufficiency of spectrum at some point, DoT and TRAI started discussions with DoS and Defence for releasing some of their current allocation. According to TRAI, the most obdurate about releasing spectrum was DoS. In spite of repeated requests that a part of their current 150 MHz they are holding be released for other services, DoS refused, claiming strategic and other critical applications. All this is on record. It begs all imagination that DoS was completely unaware that 70 MHz of this spectrum had been reserved for Devas for commercial use.
Obviously, spectrum is emerging – along with land and minerals – as a major part of the primitive accumulation of capital. The issue here is not just of corruption – whether laws have been obeyed or procedures followed. What is emerging is policy making to permit theft of nation’s scarce resources on a grand scale for the benefit of the corporate class. That is why while the government is willing to concede violations of procedure, it is not willing to take steps to cancel telecom licenses –in direct violation of the principle that those who made gains due to corruption cannot keep such ill gotten gains.
The problem for the government is once loot of public resources for private gain is accepted as the policy of the government, each department is turning entrepreneurial. Therefore Armed Services are looking at how to “sell” defence land (Adarsh), railways are talking about building malls and other commercial “use” of railway land and Space is “selling” spectrum. All this is a part of the neo-liberal ethos of the current brand of capitalism. This is the “animal” spirit of Indian capitalism that Manmohan Singh extolled in his 1991 budget speech. What he forgot to tell the country is that this animal spirit of capitalism needs a State that allows for larceny on a grand scale. This is what we are seeing today. A huge transfer of nation's scarce resources to the capitalist class, in which politicians and bureaucratic class are becoming prominent.
This is the other part of this picture of animal spirit of India’s entrepreneurs. Today, ripping off State’s resources is the biggest part of capitalism. And in this, we have only to see the new capitalists to understand that under neo-liberalism, this has grown a hundred fold over the earlier license permit raj; with political families like DMK's "own” media, real estate and other companies, the mechanics of this brand of capitalism are not difficult to understand. This is the brand of capitalism that Manmohan Singh is promoting – behind his claim of personal integrity.
That BJP with its Yeddyurappas and Mahajans is not far behind is not surprising. They also subscribe fully to this brand of capitalism. They had also unleashed similar "animal spirits” during the Vajpayee regime and continue to do so in the states they rule.
The issue here is not the integrity of the prime minister, the issue here is the integrity of the system. That is what stands exposed today. Antrix Devas deal is a part of this deeper malaise. This is what we need to address.
Courtesy: www.pd.cpim.org/
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