The CAG has suggested cancelling nationwide broadband spectrum allocated to Infotel Broadband Services, now a Reliance Industries (RIL) company, for allegedly rigging the auction and violating rules.

CAG in a draft report sent to the Department of Telecom for comments, said, "the DoT failed to recognise the tell-tale sign of rigging of the auction right from beginning of the auction" in which a small ISP, Infotel Broadband Services Pvt Ltd (IBSPL) emerged winner of pan-India broadband spectrum by paying 5,000 times of its net worth.

RIL, which acquired IBSPL within hours of it winning the spectrum and later renamed it Reliance Jio, said, "There is no final CAG report that we are aware of. That said, we outrightly reject any suggestion whereby spectrum was acquired in any manner other than through a transparent bidding process duly supervised by the Government of India."

According to the draft report, IBSPL, ranked 150th in the list of ISPs, submitted an earnest money deposit of Rs 252.50 crore "through the covert and overt assistance of third party/private bank", bid for Rs 12,847.77 crore (5000 times of its net worth) for pan-India spectrum and then sold the company on the day of completion of the auction. These, according to the draft report, "indicated IBSPL's collusion and sharing of the confidential information with a third party in violation of auction conditions/rules."

RIL spokesperson said the auction for the BWA spectrum was one of the most competitive auction in the Indian telecom history which fetched final bid price more than six times the reserve price for the pan-India spectrum. "This was despite no visible evidence of any eco-system for the BWA spectrum at the time of auction. Any allegations of the so-called collusion, sharing the confidential information or rigging the auction are bizarre and completely rejected," the spokesperson said.

On bank guarantee, RIL spokesperson said that as per NIA, bidders were required to submit bank guarantee for desired amount as earnest money deposit (EMD) along with its application. "EMD was based on specific deposit requirement for each telecom circle. Accordingly, Infotel Broadband Services Pvt Ltd (IBSPL) submitted a bank guarantee of Rs 253 crore in format as prescribed in NIA. Since no money was deposited as EMD, the question of source of deposit does not arise," the spokesperson said.

The draft CAG report said, "Due to inclusion of inadequate eligibility criterion for participation in the auction, the promoters of the IBSPL enriched themselves and made unfair gain".