Telecom permits process likely flawed - Sibal

Kapil Sibal is seen in Davos, January 31, 2009. Sibal said on Friday he disagrees with the Comptroller and Auditor General's (CAG) estimate of potential losses from sale of telecoms licences.

NEW DELHI (Reuters) - India's granting of telecoms licences in 2008 may have been flawed, the telecoms minister said on Friday, but rejected estimates of huge revenue loss that have brought political deadlock to Asia's third-largest economy.

India's state auditor said in November the country's coffers may have lost $39 billion because telecoms licences were given out cheaply, forcing Prime Minister Manmohan Singh's coalition on to the backfoot and putting policymaking into virtual limbo.

But in some of his strongest comments yet, telecoms minister Kapil Sibal dismissed the state auditor's estimate of potential losses as "utterly erroneous."

"We do believe that prima facie there was something wrong in the procedure adopted in the allocation of 2G spectrum," Sibal told a news conference, referring to second-generation mobile telecoms technology.

Sibal said the actual loss of funds was zero because the government had only followed policy framed by the previous administration.

"We do believe that the (auditor's) exercise was fraught with very serious errors which has resulted in the kind of sensationalism which has allowed the opposition to spread utter falsehood to the people of this country," Sibal said.

Opposition parties forced the closure of parliamentary proceedings in December over the row and threatened to disrupt the February budget session unless the government set up a joint enquiry into the scandal.

The government has rejected the opposition calls, saying a separate enquiry was under way.

Sibal's comments were seen as an attempt to regain the political initiative from opposition camp over an issue that saw Telecoms Minister Andimuthu Raja resign in November.

Sibal said a former judge and federal investigators were investigating if there were any irregularities in the 2G process.

Raja, who denies any wrongdoing, has been questioned by the federal Central Bureau of Investigation (CBI) over his role in the sale of telecoms licences. He is a member of the DMK party from south India which is part of the the ruling coalition.

The telecoms ministry has asked five companies, including local units of Telenor (TEL) and Etisalat ETEL, to defend their licences against the state auditor's charges they were not eligible for the 85 licences they received in 2008.

(Reporting by Devidutta Tripathy and C.K. Nayak; Editing by Krittivas Mukherjee and David Cowell)