Tue, Apr 05, 2011 - Page 5 News List

Tata faces Indian telecoms probe

COSTLY:The corruption scandal centers on violations relating to lucrative 2G mobile phone licenses and the fallout might threaten the stability of the government

Reuters, NEW DELHI

Iconic Indian tycoon Ratan Tata appeared yesterday before a parliamentary panel probing a multibillion US dollar telecoms graft scandal that has badly dented the Indian government’s credibility and alarmed investors in Asia’s third largest economy.

The questioning of one of the foremost titans of Indian industry came two days after police made the first indictments in the case, naming a former minister, a unit of Reliance ADA group and the Indian partners of Etisalat and of Telenor among the accused.

Neither Tata, ranked No. 61 in the Forbes list of the world’s most powerful people as head of -autos-to-software conglomerate Tata Group, nor his telecoms firm Tata Teleservices, have been charged in the case.

However, an independent lawmaker has said the firm gained from a 2007 policy change in the manner radio spectrum was granted. Tata was to answer questions, including those related to the allocation of spectrum, his spokesman has said.

Tata has denied his company received any undue benefits.

The graft scandal, potentially the nation’s largest, has tarnished the stature of Indian Prime Minister Manmhohan Singh and fueled doubts that he will not serve a full term.

It is one of the several corruption scandals that have emerged during Singh’s second term, hobbling policymaking and diverting the government’s attention from pushing forward economic reforms.

A dispute between the government and opposition about whether a parliamentary panel should investigate the scandal paralyzed parliamentary proceedings for weeks late last year, until Singh caved in to the demands of his political opponents.

The scandal has also led to several official decisions being scrutinized or reversed, raising regulatory risk.

Shares in DB Realty, Reliance Communications and Unitech, whose units were charged on Saturday, all fell yesterday morning, lagging a broader market that was in positive territory.

Andimuthu Raja, the telecoms minister during the license allocations, was forced to resign and has been arrested. He was charged on Saturday with abuse of official position, cheating and criminal conspiracy.

Tata had earlier backed Raja and the policy changes he made, saying they “broke the powerful cartel which had been holding back competition.”

Ahead of Tata’s appearance before the panel yesterday afternoon, lawmakers questioned powerful lobbyist Niira Radia, who has represented Tata Group companies as well as Tata himself.

India may have lost as much as US$39 billion in revenue because of violation of rules when lucrative 2G mobile cellphone licenses were granted in 2008, the state auditor has estimated, a sum equivalent to the country’s defense budget.

The Public Accounts Committee, the panel which questioned Tata, scrutinies the accounts of the government and is chaired by Murli Manohar Joshi, an independent-minded lawmaker from the main opposition Bharatiya Janata Party.

Anil Ambani, the billionaire chairman of Reliance ADA group, is due to appear before the panel today.

Apart from the committee, the scandal is also being investigated by a special cross-party parliamentary committee.

The police investigation is being monitored by the Indian Supreme Court, which earlier reprimanded Singh for not moving quickly enough to act against his minister.

Several corruption scandals, which include charges of graft in the run-up to last year’s Commonwealth Games and allegations officials at state-run banks took bribes for corporate loans, have undermined Singh’s image as a clean and effective leader.

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