Antrix-Devas Deal: CAG Should Expose Scams, Not Manufacture Them

The CAG should enforce accountability while resolving to make charges stick, writes Vivian Fernandes.

During a meeting with staff at his Bengaluru office, former Comptroller and Auditor General (CAG) Vinod Rai reportedly thumped the desk demanding, ’I want scams,’ one of those present told this correspondent. This was around the time the 2G scam was exposed.

A nose for blood is necessary because governance in India has become a business, and political power the best investment for election winners. Our governments reek of covert deal-making. But just because you have a swatter does not mean you see flies everywhere.

The Antrix-Devas contract, which the government cancelled early in 2011, is just that. The CAG in its report says it is a ‘classic case of public investment at private profit.’ It finds conflicts of interest, disregard for rules and procedures and Cabinet apparently being misled into approving the agreement.

The CAG said Devas Multimedia, a company floated by two retired scientists of the Indian Space Research Organisation (ISRO), was allotted S-band airwaves which were reserved for the defence sector. The payment of $300 million over 12 years was much lower than auctions of 2G spectrum and Broadband Wireless Access had subsequently fetched the government.

But the losses are notional. No corruption has been found nor is there criminal culpability.

The CAG had rightly exposed the 2G telecom scam where the telecom minister had changed procedure so his corporate cronies got many times the money they had invested by selling spectrum soon after it was allocated to them.

So when CAG said the Antrix-Devas deal was vitiated, the beleaguered Manmohan Singh government gave in to pressure from the Opposition, baying TV channels to abruptly cancel the contract citing strategic interests.

Ravi Visvesvaraya Prasad, a telecom expert, says S-band airwaves had little value at the time that Antrix, the commercial arm of ISRO, signed the deal with Devas.

S-band, he says, was used in radars during World War II, but was discontinued because rain interferes with the signal. So it was used for weather forecasting, as signal interruption meant the presence of clouds and rain.

The US used it in the Afghanistan battleground to inform its soldiers where the enemy was, but India does not have the technology. In the late 1990s, it was used by satellite phone companies like Iridium but they went bankrupt.

Soon after the deal was cancelled, Kiran Karnik, wrote to the Prime Minister asking him to speak out in support. He said the deal was kosher. Karnik was on the Devas board.

He is a former President of Nasscom and headed the committee of wise men which the government had appointed to nurse the scandal-hit Satyam Computer to health – and sale to the Mahindras. When the contract was signed, he said, there was no queue of buyers for S-band. ISRO did a negotiated deal as it does with private TV channels for transponders.

ISRO was to build two satellites to Devas’ specifications and lease S-band spectrum for hybrid satellite-terrestrial systems and end-user terminals which Devas had developed with a global network of technology players including Alcatel Lucent.

Flawed Auditing

• The CAG’s faulty investigation of the Antrix-Devas deal will cost the government $1 billion, even though no corruption was involved.
  
• The International Chamber of Commerce has told Antrix to pay Devas penalty plus interest for acting in bad faith, which will add up to $855 million.
  
• The Permanent Court of Arbitration is likely to award a considerable amount of damages against the Indian government for ‘expropriation.’
  
• CAG was wrong in 2005 when it faulted the sale of Juhu Centaur and Airport Centaur to single bidders. A CBI probe found nothing.
  
• CAG had also said the treasury was put to a loss of Rs 10.8 lakh crore by the allocation of coal blocks between 2004 and 2009.
  
• The watchdog body is needed to enforce accountability, but it must work to make its charges stick.

Devas commercialised the technology on a small scale in Bengaluru, its President and CEO Ramanathan Vishwanathan said in a conference call. The company also conducted trials at Chengdu in China and Stuttgart in Germany.

It paid fees regularly but in 2010 Antrix said it could not deliver the satellites on one pretext or the other. A few months later, on the basis of the CAG reported, the Manmohan Singh government scrapped the contract without citing how national security was endangered.

Vishwanathan says the company would have delivered high quality telecom services including video. But it had to write off the entire investment.

Where the CAG Went Wrong

The International Chamber of Commerce has told Antrix to pay Devas penalty plus interest for acting in bad faith, which will add up to $855 million by September.

Separately, the Permanent Court of Arbitration at The Hague has ruled in favour of Devas’ American investors and is likely to award a considerable amount of damages against the Indian government for ‘expropriation.’

A similar judgement in favour of Deutsche Telecom, another investor in Devas, has been reserved. The awards will add to be a lot of money. But Devas might settle rather than jeopardise its prospects in a promising market.

The CAG has been wrong earlier too. In 2005, it faulted the sale of two hotels of Hotel Corporation of India – Juhu Centaur and Airport Centaur – to single bidders. It had pointed fingers at Arun Shourie, then minister for disinvestment in the Vajpayee government.

The CAG alleged the government had suffered losses because the company that won the bid for Airport Centaur for Rs 83 crore had sold it a few months later to the Sahara group at a profit of Rs 32 crore. The bidder of Juhu Centaur could not pay the full fee of Rs 153 crore and the hotel was shuttered in 2005.

An investigation by the Central Bureau of Investigation (CBI) was ordered, but in 2008, it told the government it could not find any irregularities.

The CAG had also said the treasury had been put to a loss of Rs 10.8 lakh crore by the allocation of coal blocks between 2004 and 2009. In 2015, the Modi government claimed it earned more than that amount by auctioning 20 of the 204 coal blocks whose allocation the Supreme Court had cancelled.

The claim is misleading because the money will flow in over 30 years if the mines are worked to rated capacity. These cash flows have to be discounted at an interest rate to arrive at their ‘present value’ (because today’s money will not buy the same amount 30 years later).

Of course we need the CAG to enforce accountability in a system where the boundaries between politics and business are blurred. But the CAG should have the resolve of Preet Bharara, the US attorney, who rarely fails to make his charges stick. And while governments should not be brazen, they should keep composure. That can happen when they are not compromised.

(Vivian Fernandes is editor of www.smartindianagriculture.in)