Editorial – August 2015

In this issue, our cover as well as lead stories are on corporate corruption involving Sunil Bharti Mittal and HCL. CAG in its draft audit report on Bharti for the period from 2006-2010 found out revenue under-reporting of Rs 8,544 crore. This means lesser payment of Licence Fee and Spectrum Usage Charges (SUC) by Bharti to the government. CAG has also pointed out that Bharti Airtel is enjoying free spectrum in the 3.3 GHz band which is worth Rs 5,781 crore.

CAG has also pointed out manipulation in the transfer of assets by Bharti to other companies within the group that helped jacking-up personal stakes of Sunil Bharti Mittal in his various group companies. For example, Bhart Airtel Ltd (BAL) hived off its existing towers worth Rs 5,739.60 crore to Bharti Infratel Ltd (BIL) at ‘nil’ value. In BAL’s account, this was shown as loss of Rs 5,739.60 crore. So, BAL’s income tax liability was reduced to that extent. In BIL’s accounts, the very same assets were valued at Rs 8,960.10 crore. This valuation helped in the issuance of bonus share in the ratio of 1:9999. BAL’s Rs 5 lakh investment in BIL suddenly became Rs 500 crore without putting any money. Several such transactions took place providing Rs 27,259.30 crore gain to BAL.

Another corporate fraud was noticed in a tender invited by the UP state under the National Rural Health Mission project. For monitoring the implementation of the scheme, 951 computers, printers, etc., were to be procured for installation in the District Hospitals, Primary Health Centre and Community Health Centre. CBI has found that even much before the tender process began the state govt’s PSU released substantial payments to two little known firms. In turn, these firms paid huge bribes to the chief of the PSU. Later when HCL emerged as the lowest bidder in the tender, it (HCL) distributed the work equally among these two firms who had lost out in the bidding. Later, it appeared that the supplies were made at very high price, and the bidding was cartelized. Profits of about 40 per cent were cornered by HCL and the firms, while PSU staff was paid bribe.