A slippery slope

SC judgment on CAG audit of private telcos raises questions: What will it achieve, where will it stop?

By: Express News Service | Published:April 19, 2014 12:22 am
a CAG audit of their books was also initiated, which has now been shown the green light by the SC. A CAG audit of their books was also initiated, which has now been shown the green light by the SC.

SC judgment on CAG audit of private telcos raises questions: What will it achieve, where will it stop?

A division bench of the Supreme Court, comprising Justices K.S. Radhakrishnan and Vikramajit Sen, upheld a January 6 judgment of the Delhi High Court on Thursday, holding that the Comptroller and Auditor General (CAG) could audit the books of private telecom companies to ascertain whether their revenues have been shared with the government as per the licence agreements.

In 2009, the department of telecommunications had engaged private auditors to scrutinise the books of certain telecom companies, and discovered the underreporting of revenue (this has been disputed by the companies). Following this, the department moved to recover the dues owed to it. But in the meanwhile, a CAG audit of their books was also initiated, which has now been shown the green light by the SC. A private telecom operator can already be subjected to DoT, Trai and income tax department audits. It has to comply with audit rules under the Companies Act and, if it is listed, Sebi norms. So the question arises, what exactly does a CAG audit add to this multi-level scrutiny?

The SC judgment, in fact, clears the path for the CAG to demand to audit a wide range of private companies involved in public-private partnership projects across sectors — because the court has accepted its right to audit funds that accrue to the Consolidated Fund of India. Not only will a variety of natural gas and petroleum producers, highway concessionaires etc be eligible to be audited by the CAG, but stretched to the extreme, any taxpaying individual or company will also come in the net. The CAG’s remit has been widened enormously. This begs the larger question: is this really what the government auditor was originally envisioned to do in the Constitution?

While audits have their place, the government needs to systematically scotch any incentives to fudge revenue records — such as, by introducing uniform licence fees across services, which has largely been done now. Indeed, this was where the original problem stemmed from. This is the only way forward.

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