CAG can't be used everywhere, should be limited to government dues only

The Delhi High Court order allowing the Comptroller and Auditor General of India (CAG) to audit the receipts of telecom companies to ascertain that the government is, indeed, getting its legitimate share of revenues is perfectly fine in principle. The court has explicitly refrained from treating telcos as entities that have to be audited by the CAG and cautioned the government auditor to restrict itself to shareable revenues as defined in the licence agreement and not foray into other areas. There is little to cavil in the court’s interpretation of the ambit of the CAG to include the stream of income arising from telcos’ revenue share with the government.

However, the court says any and every stream of revenue accruing to the government falls within the ambit of the CAG. This, in isolation, could raise multiple hackles. Does this mean that companies that pay corporate tax, a major revenue stream for the government, are open to CAG audit? Given the same judgment’s explicit statement that telcos per seare outside the ambit of CAG audit, such an interpretation would be unwarranted. But what the court order opens up is the possibility of assorted PPP projects being subjected to CAG audit and scrutiny.

This calls for two changes to the existing system. One, the CAG must be strengthened to acquire capability for commercial audit. And, two, there has to be a mechanism, prior to the Public Accounts Committee, before which CAG reports are laid, and Parliament, for companies to seek redressal of any grievance that audited companies might have with the CAG’s findings.

The court order’s overall philosophical stance is of deep distrust of private enterprise in general and of the mechanism of audit by accountants chartered for the purpose, along with touching faith in the integrity of the state and its institutions. This is troubling in a ruling whose authors demonstrate clear eligibility to move up to the highest court. Judges should appreciate that businessmen today wax rich not so much by cutting corners as through fair valuation on the stock exchange.