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Shortchanged!

The CAG claims the DoT went by estimates quite different from what cellular operators actually earned, thus denying the govt up to Rs 3.54 billion.

The comptroller and auditor general of India has pointed out that there are four times the estimated number of mobile phone subscribers in the four metros. And that by calculating the licence fee on the basis of the estimate, the department of telecommunications may have lost Rs 3.54 billion.

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This matter gains significance since cellular operators have been claiming that they are facing a crunch and that it's difficult to meet the government's current demands of them.

The CAG observation could have its effect on a DoT plan not to charge licence fees based on the subscriber base. Some operators, like the Max group, cashing in on the low licence fee and large number of subscribers, have made a killing and sold the licences off at high prices. The group sold its 41 per cent stake to a Hutchinson-Kotak Mahindra joint venture for Rs 5.63 billion. According to the CAG, by not including a provision to hike licence fees when the demand rose, the DoT had shortchanged the government.

Currently, cellular operators had to pay a licence fee of Rs 5,000 per subscriber per annum from the fourth year of operation on the basis of a Rs 1.10 unit call rate. And with the current unit call rate of Rs 1.40, so, the licence fee will be Rs 6,023 per subscriber.

According to the CAG, the method of calculating licence fees on the basis of demand projections made by the bidder had riven with lacunae. The DoT had fixed the annual licence fee for the first three years at Rs 5,000 per subscriber and on the number of subscribers from the fourth.

But in the first year itself the actual number in Bombay was two-and-a-half times the estimated, over five-and-a-half times in Delhi and two times in Madras. In Calcutta too, the subscribers exceeded the estimated number. In the second year, there were over four times the estimated number in Bombay, over nine times in Delhi, over three times in Madras and over two-and-a-half times in Calcutta.

-Compiled from the Indian media

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