Who'll Bell The Rats?

RESIDENTS of 36,000 villages in UP may have got a public telephone sometime next year. Now they can't. The Asian Development Bank (ADB) would have injected $169 million into the cash-starved rural infrastructure sector. Now it won't. Two consortia led by public sector companies would have participated in providing world-class WLL (Wireless in Local Loop) technology. Not any more.

Because of intense closed-door lobbying by rejected telecom MNCs. And delaying tactics by some DOT officials that led to the lapse of the ADB loan and a commitment charge of $16 million: that's a drain of Rs 62 crore from the national exchequer.

This story begins in October 1996 when DOT, in keeping with the National Telecom Policy objective of providing each village with at least one public phone, invited a tender (No. MM/RN/101996/000075) for supply of WLL equipment for 36,000 villages in eastern UP. Every major global telecom company bid. On technical evaluation in July, however, all were disqualified. Either they did not match the frequency band specifications or offered mixed analog-digital systems, against tender specifications.

Two bidding consortia fitted the technical bill. One was a consortium led by the Bharat Electronics Ltd (BEL) in collaboration with Hughes Network Systems of the US. The second was Punjab Communications Ltd (PCL) in collaboration with Kokusai Electronics of Japan, Diva Technologies of US and Witel Communications of the Cad-ila group. The DOT shortlisted the two consortia. However, the rejected MNCs mounted a campaign to get the bids re-evaluated and DOT set up a review committee headed by its advisor (technology). In September, it submitted its report endorsing the recommendation of the tender evaluation committee.

All seemed well. For the first time, two PSUs had qualified in a global tender, beating world-class telecom giants. They should have got the trial order for setting up 50 lines at a DOT-decided site—the ADB loan had already been approved in November 1996.

But then trouble started brewing. Reports appeared in a section of the press that BEL and PCL were too small to handle a $169-million rural communication project. This was patently false—BEL is a Rs 1,100-crore company, and the turnovers of Hughes and Kokusai run into billions of dollars.

In October 1997, the shortlisted companies were called by DOT for discussions. It ended up being more of a summary trial. Only one official from each consortium was allowed in. And was asked to answer questions with either a 'Yes' or a 'No'. Clarifications were sought which were submitted by the companies on November 10.

By this time, the successful bidders were jittery, and the ADB impatient—by November 26, the loan would lapse. On November 7, a senior US embassy official wrote to communications minister Beni Prasad Verma urging him to ensure that DOT's technical recommendations be sent to ADB without further delay. "I assure you," he wrote, "that your doing so will increase my ability to promote the Indian telecom sector as a destination for US investment." But the mandarins of DOT had other plans. In October, DOT in an unprecedented move, had changed the generic specifications to supersede the ones issued in May 1996. In November, it made three recommendations negating everything that had been decided till then. The issues raised:

Unproven Technology: DOT claims the technology offered by the two consortia was not proven. This is ridiculous on three counts.One, the technical evaluation review committee's report dated September 29 admitted that "the fully digital system offered by PCL and BEL could be considered technically and commercially nearest to our specification." Two, both consortia had given documentary evidence of the provenness of their technologies. The PCL system has been functioning in China for 18 months and the Hughes Network system is operational in Czechoslovakia and CIS countries. Third, the tender documents provide for safeguards against a technically unsound qualification. Clause No. D2 says the successful bidder has to prove the technology through a field trial of over five months. Clearly, there's more here than meets the eye.

India Does Not Need the ADB Loan: DOT has recommended to the Telecom Commission that it does not require the ADB loan and will do the project on its own. This is strange. The DOT has no budgetary allocation to enable it to take on a $169 million (Rs 650 crore) project on its own. Second, the ADB loan is a soft loan carrying a 6 per cent rate of interest payable over 25 years. Besides, as it is a bilaterally-funded project, it gets a customs duty waiver of 40 per cent, surcharge waiver of 10 per cent and countervailing duty of 2 per cent. This means that even if DOT were to do the project on its own, it would cost 60 per cent more. With this money, experts estimate, DOT could easily set up phones in 3,000 additional villages. Moreover, as the ADB loan expired on November 27, DOT will have to pay $16 million (Rs 62 crore) for not availing the loan. This may also jeopardise future funding—ADB has pledged $1.7 billion to India's infrastructure development programme.

All this is curiouser and curiouser, as ministers and bureaucrats have been crisscrossing the world in the last few years to get infrastructuring investment and funding.

Deadline Insufficient: DOT has written to the Telecom Commission that it was not possible to complete the tender process by November 27—a period of 12 months. There's something fishy in this Rs 650-crore rural communication project. Outlook is in possession of draft letters dated November 21, 24 and 26 to the ministry of finance in which handwritten corrections have been made in the minutes of the review committee meeting. This could suggest a manipulation of records to denigrate the technical prowess of the two successful bidders. Who is behind this? Who are the vested interests? Does not this merit an inquiry by the CBI?