Monday, Nov 28, 2022

The Consultant and Advisor General

As against the claim of Sagar that the privatization of Delhi Vidyut Board was completely transparent, that it was a model privatization, we...

As against the claim of Sagar that the privatization of Delhi Vidyut Board was completely transparent, that it was a model privatization, we have the letter that the Accountant General was constrained to write to Sagar personally nailing how facts had been concealed from the auditors. That stinging stricture was elaborated.

‘‘Though the audit was conducted over a period of five months,’’ Sagar and the Delhi Government were told, ‘‘the Department failed to provide a number of critical records to audit, which were necessary for formulating meaningful audit conclusions.’’ And again, ‘‘Audit was unable to verify the assets valuation in the absence of the working papers, which were not furnished for audit scrutiny despite being requested for.’’ And yet again, ‘‘The (Government owned) Holding Company [much under Sagar and his senior colleagues] has failed to furnish details of total debts recoverable from different category (sic.) of consumers to discoms as on June 30, 2002. Consequently, the discoms continued to enjoy an undue benefit by way of retention of receivables, which were otherwise to be passed on to the Holding Company.’’

There is much more that I have since learned about this ‘‘model privatization’’. But the point of my article was about the double-standards adopted by the CAG. The facts on which the observations I have recalled were communicated to the Delhi Government in Sep ’03 remained the same when the CAG finalized his report after the elections; the ‘‘explanations’’ advanced by Sagar and his senior colleagues did not cut much ice; but, wonder of wonders, all passages which could have embarrassed the Congress-I Government of Delhi, passages which would have brought home to the lay citizen the import of facts which were kept from the Accountant General, passages which would have awakened the citizen to the changes in concepts and terms — all such passages went missing! Much like those receivables and stores!

For instance, the Accountant General, Delhi, had written, ‘‘There was a difference of Rs 3,107.39 crore between the figure of total receivables depicted in the Balance Sheet ending March 31, 2002 and that worked out by the consultant.’’ This damning observation figures exactly in the same words in a block at the very commencement of the CAG’s report. It is evident that, the explanations of Sagar and co. notwithstanding, the CAG remained convinced of the facts that the Accountant General had nailed. But the Accountant General had followed that statement with the following observation: ‘‘The (Government owned) Holding Company failed to furnish details of total debts recoverable from different category of consumers on June 30, 2002 resulting in undue benefit to private discoms by way of retention of receivables which were otherwise to be passed to the Holding Company.’’ This vital sentence was edited out!

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Similarly, the Accountant General had written, ‘‘The GNCTD (Government of the National Capital Territory of Delhi) carried out modifications in the Transfer Scheme after the receipt of bids without the approval of the competent authority.’’ The CAG reproduces this sentence verbatim, but carefully erases the sentence that followed in the Accountant General’s text, namely, ‘‘Thereafter, bids of two pre-qualified companies were accepted without giving an opportunity to all the other pre-qualified bidders to also submit their proposals on the basis of the modified Scheme.’’

Now, that sentence is at the heart of the matter — for it reveals what was happening, and calls into question the validity of the entire bidding process. Our friend, so vigilant, chooses to erase this incriminating conclusion all together! So helpful an auditor should certainly catch the eye of many a private company! And so on. Indeed, four facts leap out from the record:

After their bids had been rejected, concession after concession was given to the single bidders through private negotiations;


There was a massive and patent illegality in what was done;

The CAG’s report eliminated passage after passage that would have nailed the Congress-I Government;

Not just that, his report eliminated passage after passage that would have nailed the private companies.


Even after he had erased such incriminating passages, the CAG was confronted with the patent illegality — that the deal had been pushed through even though the only authority who had authority under law to approve it had NOT approved it.

Indeed, by the time the CAG was preparing his report this had become a major issue. It was common knowledge that the Lieutenant Governor (L-G) had been deliberately by-passed — as the officers who had engineered the largesse to those single bidders were certain that the L-G would refuse to approve the concessions they had contrived. So major an issue had this become that the Home Ministry at the Centre had been constrained to issue a notification to settle the matter. Instead of nailing the patent and gross illegality, the CAG became the ever-so helpful consultant, and, as part of the cover-up, counseled, ‘‘It is suggested that the Government may obtain post-facto approval of the L-G to the modifications made in the Transfer Scheme …’’. Paper-work to paper-over!

Even a cursory glance at just two passages will give readers a glimpse of what went on. The conclusion that the CAG gives in his report on the privatization of electricity supply in Delhi is as follows — please do read it sentence by sentence; you will then see what all disappeared, and what a thick cover-up was thereby ensured. The CAG’s concluding passage in his report on privatization of electricity distribution in Delhi is as follows:

There was no effort to assess the actual requirement and scope of work before selection and appointment of consultant which would have enabled a systematic and transparent selection. The provisions of the Transfer Scheme were substantially modified to allow additional concession to discoms which exposed the Government and the Holding Company to additional liability. The provisions of the Transfer Scheme and other agreements like the Bulk Supply Agreement were not strictly adhered to. There was also a significant dilution in AT&C loss reduction targets that were originally envisaged.

Damning enough, and not quite the description of a ‘‘model privatization’’. Yet read what the Accountant General had actually written:


Hence, the actual implementation of the privatization process was not in full conformity with the initial Inception Report as approved by the GNCTD. The selection of the consultant as well as the bidding process suffered from major infirmities, which cast additional burden on the DVB. Critical records and working papers relating to the valuation of assets and liabilities, calculation of receivables, etc., were not furnished to audit despite repeated requests resulting in audit not being in a position to verify the assertions and assumptions based on which the distribution of assets and liabilities was made. The private discoms were also afforded substantial undue benefits on account of non-observance of the terms of the Transfer Agreement relating to disposal of unserviceable stores and realization of receivables. More fundamentally, the calculation of T&D losses which are critical to the fixation of reasonable tariffs and for improvement of efficiency were not in consonance with the initial assumptions and resulted in there being no real effort for reduction of non-technical losses which was in fact one of the primary objectives of the entire process of privatization of the distribution system.

In a word, there should be an inquiry into both, this ‘‘model privatization’’ as well as the cover up, to establish:


How and by whom were the terms of privatization so drastically altered?

Who benefited from these alterations?

Who goaded the Chief Minister to so blatantly disregard the law?


How come the CAG, the Comptroller and Auditor General of India, became the Consultant and Advisor General, and that to the very ones who had violated the law so blatantly?

How and at what level were the explicit strictures erased from the CAG’s report?

Even a little pressure from citizens brought delicious facts to light, each of which nailed the specious arguments that Jagdish Sagar and other worthies were pedaling on TV and in the press. Even that little pressure was enough to hurl the participants at each other — the CM at herself; her ex-Minister at her; the CM at the discoms; the Delhi Government at the Regulator; Congress-I legislators at their own Government; the discoms at the Regulator; the Regulator at the discoms . An inquiry will bring out much more, and help ensure that such illegal manipulations are not repeated, and, when they do occur, are not covered up by high constitutional functionaries.


First published on: 03-09-2005 at 12:08:22 am
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