Indian Prime Minister Manmohan Singh is facing his first crisis since re-election as the government comes under fire for awarding public phone licenses at below- market prices in deals that may have cost the state $31 billion.
The Supreme Court yesterday gave Singh’s office two days to explain why he didn’t respond to calls for prosecution of his telecommunications minister Andimuthu Raja. The minister resigned a day before India’s chief auditor said the 2008 sale of airwaves “lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner.”
Singh’s personal image has taken a beating after this incident, as this happened right under his nose. More than being a big embarrassment for the government, this incident has highlighted how ineffective the prime minister really is.
The opposition has stalled proceedings in parliament and is demanding a deeper probe. That’s threatening to cripple the Congress Party-led coalition government, whose current term ends in 2014. Political inaction may derail economic growth. There’s no doubt there’s a concern. As India’s influence grows, the world is keeping a closer watch on it. The political administration needs to play a more constructive role.
Political Wrangling:
India’s benchmark Sensitive Index fell 0.4 percent today. It has declined 2.2 percent since Nov. 15, when the Comptroller and Auditor General of India submitted its report on the award of airwaves licenses. The yield on the 7.80 percent note due May 2020 was little changed at 8.03 percent as of 12:06 p.m. in Mumbai, according to the central bank’s trading system.
The main opposition group, Bharatiya Janata Party, led protests that left both houses of the legislature in limbo for a seventh day. The party’s demand for a Joint Parliamentary Committee probe has been rejected by the government.
Singh, a trained economist, has shunned political wrangling. He’s left the task of running the coalition government to Sonia Gandhi -- the president of the Congress Party -- and Finance Minister Pranab mukherjee. That’s allowed Singh to focus on warding off the global economic crisis and forging closer ties with the U.S.
Clean?
The Sensex index has quadrupled since Singh, 78, assumed office on May 22, 2004. The Oxford-educated prime minister presided over an 8.5% economic growth in the past five years and helped India win a place in the Group of 20.
The allegations of corruption may erode the political headway Singh made during President Barack Obama's visit this month, when he persuaded the U.S. to support India’s bid for a permanent seat in the United Nations Security Council.
What everybody realizes is that while he is clean, the party he is in is not exactly known to be clean. The question you should be asking is should Sonia Gandhi resign and not whether Singh should.
Kapil Sibal, the present telecommunications minister, declined to comment after attending a core committee meeting in New Delhi yesterday. Prakash Javdekar, a spokesman for the Bharatiya Janata Party said they only want a parliamentary probe and won’t demand Singh’s resignation.
‘Conscience Clear’
The Indian government collected 123.9 billion rupees ($2.7 billion) from the sale of the second-generation wireless spectrum, the Comptroller and Auditor General of India said in a report to parliament in New Delhi this week. The Department of Telecommunications, headed by Raja, allowed some bidders to “jump the queue” and awarded 85 of the 122 licenses to “ineligible” companies, according to the report.
In contrast, India raised 677.2 billion rupees selling third-generation wireless airwaves in May. Phone companies in Europe paid more than $100 billion for similar high-speed spectrum in auctions across the continent in 2000.
Raja said after resigning on Nov. 14, that his conscience is clear, he will prove he didn’t break any rules. Raja is a member of the Dravida Munnetra Kazhagam, the political party that rules the southern state of Tamil Nadu and is a partner in Singh’s federal governing coalition with 18 seats in the lower house of parliament.
Suppressed Facts:
The auditor calculated the maximum estimated loss based on the prices at which the third-generation airwaves were sold in May. Based on another model, the under-pricing of 2G spectrum led to a loss of 535.2 billion rupees, according to the report.
“These companies, created barely months ago, deliberately suppressed facts, disclosed incomplete information, submitted fictitious documents and used fraudulent means for getting licenses and thereby access to spectrum,” according to the report. Owners of the licenses, “obtained at an unbelievably low price, have in turn sold significant stakes in their companies to Indian or foreign companies at a high premium.”
The nation’s telecommunications regulator recommended canceling almost 70 of the licenses of five companies, the Press Trust of India reported yesterday, without saying where it got the information.
‘Biggest Scandal’
The Central Bureau of Investigation has been examining the role Raja and the Ministry of Communications had in the pricing of the permits since October last year while the Supreme Court has been hearing public interest petitions on the subject.
Singh’s office needs to submit his response to the court tomorrow and the hearing on the case will resume on Nov. 22. Attorney General Ghulam E. Vahanvati said today in New Delhi that he will represent Singh in the apex court, replacing Solicitor General Gopal Subramanium.
This is the biggest scandal in recent times and Singh’s judgment is seriously under question for the first time. What has happened also strengthens the claims of his ineffectiveness.
Source: http://www.bloomberg.com/news/2010-11-18/singh-image-takes-a-beating-as-airwaves-sale-roils-government.html
Thank you,
Minita Aiya
Client Service Associate
DENIP Consultants Pvt. Ltd.
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