New Delhi: RBI Governor D Subbarao on Tuesday told the Joint Parliamentary Committee on 2G scam that the government's decision to issue telecom licences at less than market price to increase tele-density does not involve financial loss.

He also said he did not agree with the controversial Finance Ministry note which suggested that Finance Minister P Chidambaram could have insisted on auctioning the 2G spectrum.

Subbarao, who appeared before the JPC as former Finance Secretary, said that there could be loss due to procedure followed in issuance of licences. However, the pecuniary loss depends on what assumption one makes.

He maintained that if the government decides to issue licences at less than market price in order to increase tele-density and maximise welfare then it will not imply financial loss, JPC Chairman P C Chacko said quoting Subbarao.

While conceding that revenue maximisation and welfare maximisation were two different things, Subbarao told the JPC that if the government decides to allocate licences at a particular price, then it is a legitimate decision and does not involve loss.

Subbarao, who was Finance Secretary between April 30, 2007 and September 4, 2008, told the panel that he was in disagreement with the March 25, 2011 note of the Finance Ministry to the Prime Minister which suggested that Chidambaram could have insisted on auctioning the 2G spectrum instead of it being allowed to be allocated on first-come first-served basis.

Chidambaram said in a meeting with then Telecom Minister A Raja on January 30, 2008 that "he was for now not seeking to revisit the current regimes for entry fee or revenue share" of spectrum, the note said.

Subbarao said the Finance Ministry proposed to raise the issue of spectrum pricing in the Telecom Commission meeting which was scheduled to be held on January 9, 2008. But the meeting was postponed and the Finance Ministry did not get a chance to raise the issue before issuance of licences.

He also said that there was no deliberate delay on his part in responding to a Department of Telecom letter of November 29, 2007 in which he was informed that the entry fee was finalised for the unified access regime in 2003 based on the decision of the Cabinet.

The RBI governor said he had appraised the Finance Minister about the letter on January 9, 2008 - a day before the licences were allocated.

When some members, including those from the Left Parties and the DMK, sought to know why he informed the Finance Minister a day before spectrum allocation, Subbarao said that Finance Ministry was not aware that licences would be granted on January 10. Some members questioned the delay of nearly 40 days in informing the Finance Minister.

The November 29, 2007 DoT letter to Subbarao was in response to his November 22, 2007 letter in which he had asked the Telecom department to justify how it was taking entry fee of only Rs 1,650 crore from operators in 2007 as the amount was fixed in 2001.

(Agencies)

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