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Don't deride CAG to safeguard Executive from its largely valid criticism

NOVEMBER 15, 2014

By TIOL Edit Team

IT is time to stand up in the defense of Comptroller and Auditor General (CAG) as top politicians, occupying prime positions in the Executive and Legislature, are finding fault with its work.

Their aversion to CAG's reasonable and credible reports came into full bloom at the annual conference of accountants general organized recently by CAG.

Public Accounts Committee (PAC) Prof. K V Thomas (who served as a minister in the UPA Government) said: "I believe audit has to be based on facts, and if on facts, an act of financial impropriety is seen, it would deserve the strongest condemnation. On the other hand, if the facts do not directly point out to loss to the exchequer, it would border on transgression to give out astronomically large numbers adding to the sensationalism of the media."

Finance minister Arun Jaitley reportedly advised CAG to refrain from sensationalizing its findings to get into the headlines. Mr. Jaitley later clarified that his observations are not reported in the spirit of his speech.

At the same conference, Lok Sabha Speaker Sumitra Mahajan said: "CAG's reports should not become an instrument for vilification and public finger pointing."

Mrs. Mahajan was virtually echoing the Prime Minister-elect Narendra Modi's observations made in his thanks-giving speech at Gujarat Assembly on 21 st May 2014. Mr. Modi reportedly said: "CAG reports must not be used for political gains but utilised to find solutions."

The two common elements in all these comments are: the sensationalism of CAG reports by the media and the misuse of the reports by the opposition parties. To the latter charge, one may add misuse by rival corporate houses that obtain draft CAG reports and pass them on the media to achieve their ulterior objectives.

The fault lies not with the CAG but with the media, which is prone to distorted reporting. This is best illustrated by reporting of Prof. Thomas' observations. He did not use the term ‘notional losses' computed by CAG in his speech and yet several mainstream dailies put this term in his mouth.

The headline for this story in the country's largest circulated English daily thus read as: "CAG should not report notional losses: Public Accounts Committee chairman Thomas."

When Prof. Thomas mentioned "astronomically large numbers", he was obviously referring to presumptive losses to the Government computed by CAG especially in the 2G scam and presumptive gains to companies that were allotted coal blocks on case-to-case basis.

There is a big difference between the two adjectives ‘normative' and presumptive.' The latter implies reasonable ground or the basis for some issue, whereas the former suggests something theoretical, imaginary or speculative.

Several media entities and opinion leaders had repeatedly distorted CAG findings by considering presumptive gain as a loss to the Government in the Coalgate and by focusing on the highest presumptive loss in 2G. Most news reports ignored three other lower estimates or failed to mentioned the loss range.

In 2010, CAG had estimated presumed losses against four reference prices in its report on licensing and allocation of 2G spectrum. The presumtive losses to the exchequer thus varies from Rs 57,666 crore to Rs 176,645 crore, depending on the reference price chosen for computation of losses.

CAG cannot be accused of resorting to sensationalism or grabbing headlines just because the media, especially the TV channels, dish out distorted reports. It is the job of both CAG and the Government to hold tutorials for high-profile journalists and analysts who indulge in distortion.

CAG, as a constitutional authority, is well within its right to compute presumptive losses just as the Government is empowered to resort to presumptive taxation. The Government also makes budgetary announcement of presumptive revenue forego due to numerous tax concessions. There are several other instances where the Government has had estimated presumptive losses or gains in implementation of policies, programmes and schemes.

The edifice of entire public private partnership (PPP) is build around the presumed viability gap funding of infrastructure projects by the Government. If the Government is comfortable doling out grants, soft loans and equity to PPP projects on the basis of dubious project cost estimates made by private developers, there is no reason why CAG should not put the entire PPP business under less.

As rightly put by CAG Shashi Kant Sharma, "There is a growing demand around the world for public auditors to intervene during the life cycle of a project rather than restricting themselves to postmortem analysis. As Public services and projects are involving more and more private players, auditing Public Private Partnerships is a new frontier."

This brings to the need for enacting a new law to remove existing hurdles faced by CAG in its operations as submitted in November 2009. UPA regime responded indifferently to CAG's request to enact a new law to replace outdated Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971. NDA has also so far maintained silence on this issue.

The Government has not even taken a decision on recommendation to broadbase CAG as recommended by V.K. Shunglu Committee that probed the commonwealth games scam. In March 2011, it had recommended that CAG should be transformed from one-member to three-member body and its working should be made transparent.


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