Indian court scraps telecom licences
New Delhi - India's Supreme Court on Thursday scrapped 122 telecom licences awarded in a 2008 sale at the centre of a corruption scandal, further embarrassing the government and causing upheaval in the flagship sector.
Incorrect selling of the second-generation (2G) mobile licences was estimated by the country's public auditor to have cost the treasury up to $40bn in lost revenue.
The minister in charge of the sale, A Raja, is currently on trial accused of fraud and cheating, one of several corruption cases to have buffeted the government of Prime Minister Manmohan Singh.
While the cancellation order re-opens a damaging episode for the government, there was a reprieve for Home Minister P Chidambaram who activists had wanted investigated by a special court trying suspects in the case.
The Supreme Court declined to rule on the issue, saying it was up to the special court to decide if there was evidence against Chidambaram, who was finance minister at the time of the 2008 sales.
Raja, a member of the DMK, a regional party in the Congress party-led national coalition, is suspected of rigging rules over the sale of the licences to favour some firms in return for kickbacks.
Lawyer Prashant Bhushan, who brought the case to the Supreme Court, welcomed the cancellations and fines of up to $1m for the telecom firms involved.
"This is a historic judgement for the reason that now these companies which were the beneficiaries of these illegal licences... will have to effectively refund the benefit," he told reporters.
He added that it would send a "strong signal" to dissuade corrupt corporations and public officials from conspiring together.
Justice GS Singhvi told the New Delhi court the Telecom Regulatory Authority of India would make recommendations about a fresh auction within four months.
Among the companies affected are Tata Teleservices, Dubai-based joint venture Etisalat DB, and Uninor, a joint venture between Norway's Telenor and India's Unitech.
All three companies were handed fines of $1m as they had "benefited by a wholly arbitrary and unconstitutional action taken by the DoT [Department of Telecommunications]", the court ruling said.
Uninor said it was "shocked" at the penalty, adding "we have been unfairly treated as we simply followed the government process we were asked to".
Graft has become a hot political issue in India due to high-level scandals such as the so-called "2G scam" and contracts awarded for the 2010 Commonwealth Games in Delhi, as well as a street-level campaign by activist Anna Hazare.
Hazare galvanised millions of people last year when he held a 12-day anti-corruption hunger strike in New Delhi that triggered huge rallies of supporters across the country.
Many Indians complain that corruption is part of daily life for transactions ranging from getting a driving licence to property sales. Graft is also seen as a major deterrent to international investment in India.
"This decision has multiple ramifications for the telecom sector, India's image as a destination for foreign investment and a political impact for the ruling Congress," said Jigar Shah, head of research with Kim Eng Securities.
The prime minister, who previously enjoyed a blemish-free reputation, has vowed to tackle the problem but his efforts to pass an anti-corruption law failed in December due to political wrangling.
The failure was a further blow to Singh, whose administration also had to withdraw major reforms late last year to allow foreign supermarkets to operate in India.
Kapil Sibal, the current telecoms minister, pinned the blame for the 2G scandal firmly on Raja, who denies all charges, and said the prime minister was "in no way responsible".
Sibal said the court decision would bring clarity to the telecoms sector, which had "greatly suffered because of this period of uncertainty".
But Hemant Joshi, a partner at accountants Deloitte, said the scam would "open a can of worms" and add to industry nervousness.
The latest set-back for the government comes amid a flurry of local elections, including one starting next week in Uttar Pradesh, India's biggest state where Singh's party was hoping to make gains.