NEW DELHI, May 17: In what appears to be a gross violation of existing norms, Videsh Sanchar Nigam Ltd (VSNL) has paid Rs 50 crore last October to Mumbai-based Iridium India Telecom Ltd (IITL), a joint venture between several Indian financial institutions and Motorola of USA, for a global communication technology through satellites which has yet to be proven and for which the Department of Telecommunications (DoT) has not yet issued licences to IITL.

The DoT has launched an internal inquiry into the matter to establish how VSNL could have made this ``investment'' since it requires prior permission from both the DoT and the cabinet. Besides, as a telecom commission member points out, since no licence has been issued so far, it was difficult to understand how VSNL could have made the ``investment''. All that VSNL was authorised to do in the project was to operate and maintain the gateway through which all international telecom traffic would enter/leave the country.

VSNL has shown its contribution to the project as ``equipment purchase'' for which it will be paid fees as well as operation and maintenance (O&M) costs. It has also ensured that its contribution remains within the Rs 50 crore limit that its board is authorised to use for equipment purchase (any figure over this has to be cleared by the government). Its agreement with IITL documents of which are in possession of The Indian Express however, makes it quite evident that the money given to IITL is in the nature of equity participation. This is clear from the formula which will be used to calculate the fees that are to be paid to VSNL (this is given in Article X of the O&M agreement between VSNL and IITL).

Under the terms, apart from O&M charges, VSNL will be given a fee, but only in the years in which IITL pays it shareholders a dividend.

Second, VSNL's fee is to be calculated on the basis of IITL's total equity capital which would include VSNL's contribution of Rs 50 crore. The US-based $ 4.5 billion iridium system is a satellite-based wireless personal communications network designed to permit any type of telephone transmission voice, data, fax or paging to reach its destination anywhere in the world through a wireless hand-held set with the same number worldwide. The system is expected to have 66 low earth orbit satellites which will help improve telecommunications across the world.

When contacted, Annie Moraes, a member on the VSNL board, stated that there was nothing irregular about the VSNL investment in the project. She stated that the PSU had invested Rs 50 crore in the gateway in order to ensure control over it since ``unless you own the gateway, how can you monitor it''. When questioned if VSNL had any bank guarantees against which it had advanced the entire sum of Rs 50 crore in October last, she stated that these were not considered necessary as these were customised equipment purchases and the nature of business did not merit any such safeguards. She also stated that since the government approval in principle was already there, licences would be obtained in due course of time.

Enquiries with the site office at Pune revealed that so far civil work was in progress and there has been no equipment supply from US even though VSNL paid the entire amount of Rs 50 crore as advance more than seven months ago.