MTNL deal rings in Rs 450-cr scam

Alarm bells first rang way back in September 2004 about foul play in a Rs 460-crore deal between Mahanagar Telephone Nigam Limited and Motorola for the purchase of GSM equipment for MTNL's Dolphin mobile network.

Two years later, CNN-IBN's Special Investigation Team has unearthed key details of a Rs 460 crore scam with documentary evidence revealing how MTNL relaxed key tender conditions to favour the multinational firm in the deal.

On top of it, investigations have also revealed that MTNL even misled the Prime Minister's Office on this issue in its attempt to cover up the scam.

Mahanagar Telephone Nigam Limited is a cash-rich Navratna PSU serving India's biggest metros.

MTNL has 19 lakh Dolphin users across Delhi and Mumbai. But when it comes to services, it is in the shambles now and this has something to do with the MTNL-Motorola deal.
In January 2004, Motorola won a Rs 466-crore MTNL contract to supply GSM equipment to serve 8 lakh Dolphin users. Deliveries followed, but so did complaints that Motorola was violating the contract.

In September 2004, RJD MP Sita Ram Yadav first alleged irregularities in the contract. In response to allegations, the PMO directed the Department of Telecommunication to do cross-check on the same. J S Sarma, then Additional Secretary in the DoT, sought comments from RSP Sinha, CMD, MTNL Delhi.

MTNL did reply. In its response, it said no relaxation of any mandatory clauses had been given in the tender. The equipment was inducted in MTNL network after thorough testing. MTNL sent its response in December 2004.

Now, documents available with CNN-IBN show that MTNL did relax the mandatory condition of the order three months before they responded to the PMO and that the PMO was misled on at least two crucial points.

In two key clauses, the imported equipment, which implies equipment supplied by Motorola, is exempted from inspection.

MTNL also told the PMO that validation tests were in progress and that tests conducted on various sub-systems had not indicated any major deficiencies.

But an interim report submitted by senior MTNL officials in January 2005 listed a number of crucial tests, which had actually not been conducted.

Meanwhile, Motorola has already received 80 per cent of its Rs 466-crore deal. When contacted MTNL's CMD RSP Sinha refused to comment.

It's a Rs 400 crore scam at the very least and documents do hint at the involvement of top officials of MTNL in this scam.