'No good deed in govt goes unpunished': Ex-Telecom Secretary's memoir makes rare revelations on BSNL, 2G

Former Telecom Secretary JS Deepak has come out with a memoir, I Dared to Dial Differently. The book traces his 44-year career in the IAS. The 1982-batch Uttar Pradesh-cadre IAS officer held several senior positions in the state, including District Magistrate of Varanasi, as well as Secretary-level assignments before moving to the Centre.

At the Centre, Deepak first served as Joint Secretary in the Department of Telecommunications (DoT), where he designed and conducted the 3G spectrum auctions in 2010. He later served as India's chief negotiator at the WTO and was involved in the RCEP and India-EU trade negotiations.

"The government did the right thing by not joining RCEP," Deepak tells Business Today Digital in an exclusive conversation on his book. "It was a good decision that saved our industry."

At BSNL, the former telecom secretary says he blocked a "wasteful procurement" bid that could have resulted in an Rs 8,000 crore scam. In the 2G spectrum auction case, he argues that the CAG miscalculated the loss to the exchequer. According to him, the actual loss would have been somewhere above Rs 2 lakh crore, rather than the Rs 1.76 lakh crore estimated by the CAG.

Edited Excerpts 

Q - The title of your book is I Dared to Dial Differently. But dialing differently is not always easy. Were there any moments when you felt that, or any pressure?

JS: The title actually reflects how my career progressed over four decades in different capacities. As I say, life was always difficult, sometimes dark, but never dull in the IAS. What it alludes to is that I tried to look at transformational change rather than incremental change. And when push came to shove, I did try to stand behind certain principles. That is how the title comes in, looking at the steel frame from inside and doing it in one's own unique way.

Q - Your book description refers to the "steel frame" and says it has both strengths and vulnerabilities. Could you elaborate on what some of those vulnerabilities are?

JS: When Sardar Vallabhbhai Patel conceived of IAS, it was felt that it should have constitutional protection, and it would have the ability and the strength to give fair and honest advice, without fear or favour. For a long time, the service has fulfilled this expectation, but there have been exceptions as well. And many times, civil servants have buckled under pressure and not been true to the calling of the service. But it is not as if the service has melted away or the 'steel frame' does not stand. As I say, often the actions that IAS officers take during their service careers, they're not allowed to talk about them. They're not allowed to put them in the public domain. So, very often, the world does not know what they said or did to prevent mischief or wrongdoing. IAS officers or civil servants act like stones in the foundation of a building, which remain unseen, but on which lofty structures are built and proudly stand.

Q - You have mentioned an incident when you were asked by the then chief minister to withdraw FIRs against ministers involved in the subsidy scam in Uttar Pradesh. And you refused because that was not possible legally. Describe that moment. What happened when you said no?

JS: This is a case where we primarily found that government subsidies to schools were being misused. Many schools were doing it. And at a fairly large scale. And when we delved deeper, we found that some of the schools belonged to very powerful people, including cabinet ministers. But we filed an FIR. Then there was tremendous pressure to withdraw it. But I realised that once you do an FIR, both legally and ethically, it is not possible to go back. It did lead to action against me, but that had to be taken in stride. The basic point is that telling the truth to power, or being firm to principles, or standing by difficult decisions, is not always easy. There's unpleasantness if you're fighting for a cause with a boss or with someone else. And it can lead to potentially career-limiting situations. But one has to realise that when principles are involved, or where corruption is involved, one has to take it on the chest.

Q - You write in the book that Manmohan Singh did not have his way on the 2G and BSNL issues. Had he prevailed, the country might have been spared the 2G and missed the BSNL finds itself in. What exactly did he want to do?

JS: As you see in the chapters related to telecom, there was a difference of opinion within the government. The Prime Minister and the Finance Ministry, in the matter of the 2G spectrum auction, wanted to have a price for the spectrum that was higher than what had been decided when there were 5–10 million users. A price for spectrum had been set when there were 10 million users, way back in 2001. In 2008, when the 2G spectrum was to be sold, there were 350 million users. So, the Finance Ministry and the Prime Minister felt that the price should be changed. And that is what they were suggesting to the Department of Telecom.

However, they were not able to get their way. And the spectrum was allotted at the same prices as it was in 2001-2002, evidently on a level-playing-field argument. The argument was that it should be given at the same price so that incumbent and new operators get it at the same price. The Finance Ministry and the Prime Minister raised this to the Department of Telecom, but they were not able to enforce it. And the 2G spectrum was given at old prices at a very odd first-come-first-serve basis, which resulted in the scam.

Q - Is it possible for a ministry to override the PMO and the Finance Ministry?

JS: The PMO, on the advice of the Finance Ministry, made suggestions to the Department of Telecom through a letter written by the Prime Minister to the Telecom Minister. Now, if they wanted to enforce it, they should have insisted that this matter become part of the terms of reference of the EGoM (Empowered Group of Ministers), or brought it to the Cabinet, where their views would perhaps have prevailed. But that was not done. They pointed out what should be done to the Department of Telecom, but they did not enforce it. They also did not insist that this matter should come to the Telecom Commission. So, pointing out a good practice was done, but it was not followed up by ensuring that it happened. That is why there was, I would say, a shadow between what the Prime Minister's Office wanted and what was finally done in the spectrum policy and regulations.

Q - And what happened in the BSNL case?

JS: In the BSNL case, the problem was threefold. It had been doing well when it was a monopoly. When private sector players were given licenses, it did not transform itself into an agile organisation that handled competition. It could not compete with private players. Secondly, the government, while privatising the Department of Telecom Services and Operations, transferred all the personnel of the DTS (Department of Telecom Services) and DTO (Department of Telecom Operations) to BSNL. As a result, BSNL's staff cost rose to 50% of revenue. The industry norm and that for private players was about 3-4% of top line. This put a big handicap of thousands of crores on BSNL. The third issue was corruption. The way procurement was done and the way decisions were taken were harmful to BSNL. Due to these, an organisation, which had 18-20% market share, started going down; and today, it has 4-5% of the revenue market share in the telecom business.

Q - You also write of a potential scam that you blocked. But you make a very serious charge that 'the government had willfully let BSNL continue with the mischief involved in wasteful procurement.' Had that procurement gone through, it would have been an Rs 8,000-crore-plus scam. What was the whole saga?

JS: This was a large-scale procurement of telecom equipment, more than Rs 30,000 crores. It was being done through a single vendor. Now, that is extraordinary. One of the two-three large international companies that supplied equipment had been disqualified. So, it had been converted into a single bid. The rules for negotiations with single bidders, as laid out by the CVC, had not been followed. Lots of equipment that was being procured was not required and was being purchased at prices higher than those in earlier BSNL contracts.

Now, the government, which is the 100% owner, and the Department of Telecom should have been institutionally able to prevent this by writing to BSNL and guiding its members on the BSNL board to act accordingly, but they did not.

So, we had to, on our own, government directors on the BSNL board took a decision that we would not agree to this tender. And that is how it was prevented. Later, both the CVC and the Sam Pitroda committee agreed that our action was right, and it supported the validity of what we had said and done. If the tender had gone through, it would have resulted in wasteful procurement of equipment that was not required and at higher prices, leading to a loss of about Rs 8,000 crore. This is one example of what I call a mischief nipped in the bud through the efforts of civil servants and IAS officers, which no one knows about because the scam was prevented. And civil servants did not talk about it since no loss had ultimately been caused. The then CAG had pointed out that it is not easy to protect the government from itself. And his words basically were, "Protecting the government's interest does not often find favour with the government itself."

Q: Why did the PMO not take stronger action in relation to the Telecom Ministry? These are incidents that must have reached the PMO, but the response appears to have been less firm than it could have been.

JS: Those were the days when ministries were very powerful. Very few decisions went to the Cabinet. While the papers moved, the ministries were almost autonomous. Taking a decision of this kind and scale without the approval of the Finance Department, as in the 2G case, is like celebrating Mass without the presence of the Pope. The most important person is missing, and you are taking a decision. There is a mechanism provided in the form of the Telecom Commission, where Finance and every other ministry were represented. But it was not consulted in the case of the 2G prices and allocations.

Q: In the 2G scam, the CAG estimated the loss of Rs 1.76 lakh crore for the exchequer. But you write that this figure was more than 2 lakh crore.

JS: Yes. The CAG calculated the loss using four methods. The figure of Rs 1.76 lakh crore came from comparing the price of 2G spectrum with that of 3G spectrum auctions. As far as I can see, what the CAG did was compare the amount of spectrum, measured in megahertz. If the price paid for a particular amount of 3G spectrum was applied to the spectrum allocated for 2G, it would result in a loss of Rs 1.76 lakh crore. But what it did not take into account was that the 2G spectrum, being in the lower-frequency and 1800-megahertz band, was of better quality than the spectrum in the 2,100- and 2,300-megahertz bands that was auctioned for 3G. Therefore, it compared the quantity but not the quality. It is like comparing 22-karat and 24-karat gold and assigning them the same price. If the methodology used by the CAG is taken to its logical conclusion, the loss would be more than Rs 2 lakh crore.

Q - Moving on to CWG. You write that the infrastructure was not ready for the games till August 20, 2010. The games were to be held from October 3 to 14. You say that if it were not for the then Cabinet Secretary's intervention, India would not have been able to host the game. What exactly had happened?

JS: India was allotted the Commonwealth Games for Delhi in 2003. There was enough time to build the infrastructure, but it was a huge task. There were 31 agencies involved, and more than a dozen venues had to be put together. In 2009, the CAG came out with a report, saying the project should be speeded up. Instead of waking up, government ministers started attacking the CAG, saying that "he had no business to point this out now. His job was post-facto to hold audits."

Finally, when the matter came to a head in August 2010, just months before the Games were to begin on October 3, the task force realised that it was not going to happen. The matter was taken to the Prime Minister, who assigned it to the Cabinet Secretary. He got a dozen special officers to take charge of different venues and try to speed up the work for timely completion.

When I saw the state of the Commonwealth Games village around August 20, about a month before the teams were to arrive, it was in a shabby state. From then until the teams started arriving, every other day, I felt that it might not be in a position to house the teams. The apartments were in bad shape, and the kitchen was not ready for 5,000 people. I do feel that if not for the intervention of the then Cabinet Secretary, KM Chandrasekhar, at the behest of the Prime Minister, the Games perhaps would not have taken place.

Another problem was that the Games village was in the Yamuna floodplain. That year, there was a lot of rain, and there was almost flooding. The electrical systems were in the basement. There were three feet of water, and the equipment automatically, as a safety precaution, switched off. As a result, 87 lifts that were to serve the apartments where the athletes and delegations were to stay were not working. This was just a week before the teams were to arrive. The Delhi Chief Minister, the MCD, and the special officers and teams working with us were able to get everything ready in the nick of time.

And believe me, the quality of our Games village was much better than that of Glasgow or Melbourne because these apartments were to be converted into high-end housing after the Games. There was granite and good-quality fittings. In Glasgow and Melbourne, the facilities were used for low-cost housing. Instead of being able to showcase our infrastructure, the last-minute completion led to a great deal of criticism, and India lost an opportunity to showcase itself. It was a great failure in terms of holding an event like this.

Q: You were involved in the RCEP negotiations, and you write that you gave a note to the then FM arguing why India should not join RCEP. The fear was that cheap Chinese products would destroy our industries. But even though we are not part of RCEP, our trade deficit with China continues to rise. 

JS: You raise a number of points. One is that we did not join RCEP. It was a good decision that we ultimately took at the level of the Prime Minister, and it saved our industry. The government was taking inputs through committees of ministers.

Ultimately, it was the view of the group of ministers, chaired by the Home Minister, Amit Shah, and including the Finance Minister, Commerce Minister, and External Affairs Minister, which perhaps advised against joining the group. That move has saved our industry as well as our agriculture.

As far as the deficit with China is concerned, trade will flow on the basis of competitiveness and comparative advantage. That is the global trading system. If China makes penicillin cheaper than we do, we may be the pharmacy of the world, but we have to be globally competitive. We may have to import penicillin from China, so that the antibiotic and generic drugs we export remain low-cost and competitive with those from other countries. It is simple economics.

Secondly, I don't think the trade deficit is the single metric by which an FTA or trade performance should be evaluated. If a country has a foreign exchange problem, then imports need to be curtailed. Otherwise, imports also have advantages. They create jobs in areas such as insurance, banking, logistics, and services, just as exports create jobs in manufacturing. They provide choice to consumers and, most importantly, cheap inputs for our exports.

All our major exports are based on imported inputs. We import gold and export jewellery; we import basic drugs and export pharmaceuticals; we import steel and export cars. So imports themselves are not bad. China has competitiveness because of its factor costs and the subsidies it provides. It is good for our economy to import from China.

Thirdly, I don't think an FTA with China is a great idea because we don't export much to China. If China reduces its duties under an FTA, how does that help India when we don't export much? We export mainly raw materials and items such as buffalo meat and iron ore. We are importers from China, which would benefit from an FTA.

Lastly, dairy imports from a country like New Zealand may look innocuous, but it controls 30% of the global dairy trade. Removing tariffs on imports of skim milk powder and butterfat could make things difficult for our household and cooperative-based dairy producers. When Europe started exporting dairy products to Africa, countries like Burkina Faso suffered destitution because their farmers could not produce dairy products at the same price, and lost their livelihoods. So it is a very sensitive area. The government did the right thing by not joining RCEP.

As far as improving trade competitiveness with Southeast Asia is concerned, we have FTAs with all the other countries except China, Australia, and New Zealand. We can deepen those FTAs. Our problem is that we enter into FTAs but are not able to utilise them, as has happened with many countries. That is the way to go, rather than jump into an arrangement where we have definite sensitivities and risks.

Q: You have also written about Press Note 3 of 2020. You say India should open up to Chinese investment, subject to certain conditions. Explain that. Several companies moving out of China are going to Vietnam, not India. Where does India fit in the China+1 strategy?

JS: India needs investment. One of the major problems we have is that we are not getting enough investment, especially foreign direct investment. The investment flow into China over the last 25 years is approximately 50 times that into India. You can see what that has done to Chinese infrastructure and manufacturing. We need to get investment from everywhere while simultaneously protecting our sensitive sectors. No one is suggesting that Chinese investments be allowed in sensitive or critical sectors such as telecom or the power grid. But I don't see any problem with China investing in manufacturing and SEZs. If you manufacture pressure cookers in Jabalpur, how is that sensitive?

What we did with Press Note 3 was an overreaction. We prevented investments from coming in from China at a time when American companies and subsidiaries of American companies operating in China wanted to move out. Because they could not come to India, they went to other countries. We lament the fact that when investments started moving out of China, they went to Thailand, Vietnam, and Indonesia, rather than India. But they could not have come because of Press Note 3. The government has realised that. It has softened some elements of Press Note 3, but there is still a long way to go. We need investment. If you need something, you should go all-out to get it.

As far as trade with investment is concerned, there are two ways of doing it. One is not to have regulations like Press Note 3. The second is to have comprehensive investment and trade agreements. Investment rides on trade. Who invests in a country? The person who trades will want to set up an office or expand logistics or marketing facilities. If you have an FTA that provides trade concessions, tariff reductions, or the easing of non-tariff barriers, there should also be investment promotion, protection, and a dispute-settlement mechanism, so that companies from abroad can freely invest.

China+1 has had some successes for us in the smartphone field. In the case of Apple, we have become a China+1 source for supplying smartphones to the US. That is the kind of strategy we need to become part of major global value chains in electronics, high-tech, semiconductors, and other areas.

Q: You also write that the PLI scheme in high-tech sectors such as semiconductors, EVs, and solar should be reviewed. What exactly do you want the government to do?

JS: The PLI scheme is a success story. The growth of the Indian economy has now put us in a place where we have some fiscal space. The government has used it to provide incentives in the form of PLI for manufacturing and thereby make many sectors competitive. This needs to be expanded, and we need to keep reviewing it. While we are doing well in smartphones, why are we not doing the same in laptops, tablets, and other electronic items? Maybe those are the areas that need a similar kind of scheme.

One major difference with smartphones was that we had Apple as the anchor transnational company. We need similar anchor transnational companies. There may be companies from Korea, Japan, the US, or Europe that could use the advantage of disaggregated manufacturing, which global value chains allow, and make India a hub for manufacturing other items in addition to smartphones, which Apple has so successfully done.

Q: You have also been India's chief negotiator at the WTO. Since we are negotiating a trade deal with the US, if you were heading India's team, what areas do you think are non-negotiable?

JS: India has traditionally been a supporter of negotiations with developed countries in the WTO. That is because the WTO gives you an umbrella, a cover of coalitions of many developing countries that can come together with similar sensitivities and problems and negotiate with larger economies that are giants in terms of both economics and geopolitics. However, the WTO is paralysed, and the US has a major role in that. The dispute-settlement system is paralysed, and the negotiating function is not moving because consensus, which is the way of doing business in the WTO, is elusive.

Now, FTAs are the way forward. India is equipped to do FTAs with everyone else in the world except two countries: China and the US. China is the factory of the world. Imports from China, without tariff protection, can swamp and disrupt our industry in many sectors. The US, meanwhile, is a demander of gold-standard FTAs, which have very problematic rules in some areas.

The US demands market access for agriculture, which is a problem of one kind. It wants reductions in tariffs for soy, corn, dairy, poultry, and so on, which can affect livelihoods. Take poultry. We have a huge poultry industry in Andhra Pradesh, Karnataka, Telangana, and a number of other states. The US has three or four years' worth of chicken drumsticks stored in cold storage, which it considers waste, for dumping into countries like India at very low cost. If we remove tariffs on poultry and non-tariff barriers as part of an FTA, our poultry industry could be at risk of being swamped by cheap poultry imports from the US. The same is the case with dairy.

But a bigger issue is the gold-standard rules the US demands in areas such as intellectual property rights and digital trade. Take the pharmaceutical industry. Our pharma industry depends on generics. We are not great inventors. Very few molecules, if any, have been invented by Indian companies. When multinational companies develop a drug, and the patents expire, we make similar drugs and sell them at a fraction of the cost. We export these drugs to almost 150 to 160 countries and have had major successes. Indian company Cipla created the triple cocktail of antiretroviral drugs, which resulted in the victory over HIV/AIDS in Africa. That's a major success of Indian pharma. But in an FTA with the US, they would like to introduce things like the evergreening of patents, or take away our right to prevent evergreening. That means they try to expand patent life through small innovations, which closes the door for generic formulations. This is a problem.

Digital trade is another area. We benefit from data localisation. We would like India's data to be used for India's development, through processing here and converting it into intelligence, rather than being transferred to other countries, where it is processed and converted into intelligence and sold to advertisers and others. So there is a difference of opinion. If we do an FTA with the US, some of the policy options we have in these areas are likely to become restricted. That is my understanding. The good thing is that the government of India, the negotiators, and the Department of Commerce understand these issues. I'm sure they are working to make sure that whatever trade agreements are done with the US, these core interests are protected.

Agriculture is very sensitive. Ninety-nine percent of our farmers are low-income, resource-poor, small farmers by international standards, with less than 12.5 hectares of irrigated land. If we allow free imports from the US, they are likely to be swamped, and their livelihoods will be at risk. Developed countries provide subsidies that are almost limitless for agricultural products. If they continue to provide subsidies, and we reduce our tariffs under negotiation or condition, our farmers are likely to face a dire situation.

Take cotton. If we allow US cotton to come to India duty-free, our cotton farmers are going to be destitute. As it is, we have a high level of risk from pesticides and suicides happen in cotton farming. These are very sensitive areas, and that is why I have mentioned that India is ready for an FTA with any country except China and the US.

Q: So, how hopeful are you that we will get an FTA with America? Will we succeed in having an FTA?

JS: My view is that it is not in our interest to do an FTA with America that includes agriculture and gold-standard rules. A limited trade deal with America can be helpful, but a full-fledged FTA, which the US is demanding, may not be good for us - both for industry and agriculture, and for areas such as pharma, dairy, and poultry.

Q: You have referred to a speech by Mukesh Ambani. He once said that bureaucrats, when they work in the private sector, perform better. So it is not about the bureaucrats; it is about the system. There were some criticisms lately that the bureaucracy and judiciary are the two biggest stumbling blocks to India's growth. Is that a fair criticism?

JS: I referred to what Mr. Vittal used to say. He would quote Mukesh Ambani as saying that bureaucrats have done very well in the private sector, while their performance may be mixed when they are in government. Many people believe it is the rules, regulations, and fetters that bureaucrats face that prevent them from giving their best while working in public-sector undertakings or the government itself. There may be many opinions on that, but I've tried to give examples of what I call, perhaps a little provocatively, "no good deed in government goes unpunished."

When we did the 3G auction, it was unanimously hailed as a best practice and a win-win for all. Companies got spectrum at market-determined prices. The government got $24.5 billion in revenue at the time, and consumers got 3G services. But afterward, while the auctioneers we had used were getting promotions and bonuses and being hailed for a good deed, we in the Department of Telecom were facing inquiries. So this is how the government works. It's not easy. There are constraints on civil servants delivering in government. The good news is that with liberalisation, these constraints are being removed. The bad news is that many of us in the civil service are not working with the same kind of diligence, ability, or integrity as perhaps we did 25 years ago.

So those are the pluses and minuses. But there are institutional problems in delivering results in government that perhaps are not there in the private sector. If we can remove the fetters on public servants in delivering good-quality services to citizens, perhaps the services will improve manifold.

Q: So whose job is it to reform the workings of the bureaucracy? Is it the Cabinet Secretary's or the government's?

JS: The job of improving government is that of the government. And the government is, of course, not a monolith. It has layers. But I mention one or two things in the chapter where I ask: Is the IAS a service or a circus? Decentralisation is one, certainly. In a big country like ours, we need to decentralise decision-making. Even in a totalitarian state like China, there is decentralisation. When we set up SEZs, there were three pillars: fiscal concessions, a single window, and state-of-the-art infrastructure. As for the single window, which required decentralisation and delegation of power by different departments to development commissioners, it never happened. We are weak in decentralising. And decentralising doesn't mean doing away with high-level oversight. It means that decisions need to be taken closer to the grassroots, so that entrepreneurs, investors, and others do not have to run from pillar to post. In many areas, these reforms are happening. There is a case for speeding them up.

Q: You have spent four decades in government service. There are many things that you were able to achieve, but I'm sure there were things that you could not. Would you like to mention any of those things you wanted to do but couldn't, and whether you have any regrets?

JS: There are many things in the journey. As long as there are certain things that happen, there will be certain disappointments. There have been failures, disappointments, and lost opportunities. But I look at them with regret and humility. My view is that maybe the job was too big for me or for us to do, rather than that we were not willing or able to do it. That may be it. But I mention specifically the divergence between India and China. It has happened in my lifetime, in my service career. And perhaps the civil service, generally, and I, particularly, should also be held responsible for why we did not advise taking India on the same path as China did earlier than we did, so that we might have had the same outcomes. So there are many areas of lost opportunities. I don't look at it with cynicism. I look at it with humility and some regret.

Q: Which year was it when you were heading the China desk in the Commerce Ministry?

JS: In 2010. When I joined the service, India and China were similar. India had a higher per capita income than China. When I left the service, China's per capita income was five and a half times that of India. So during this period, China moved on a trajectory that was quite different. This includes the time when I was in the Commerce Ministry and heading the China desk, around 2010.

Q: You feel that you could have advised the government differently in 2010?

JS: Yes. We have failed to take the country onto the path that China took. A lot of institutions, individuals, and cadres will be responsible for it. The IAS, including people like me, is all part of that. But 2010 was already too late.