CAG rejects criticism, to continue with policy scrutiny

 Rebutting the criticism by Government and the Congress party on coal blocks allocation, the Comptroller and Auditor General (CAG) today said it has the mandate to examine and scrutinise public policies.

"Policies of a government do not emerge from from vacuum but a culmination of a due diligence process that involves faithful examination and analysis of empirical evidence on the ground, higher values of governance, feasibility of implementation, materiality of financial costs and perceivable benefits based on current and reasonably predictable facts", GAG sources said.

As there is a close relationship between development of public policy and its implementability and financial implications, the sources said, "it is unrealistic to expect that...C&AG's audit findings will not cast any shadow on the policy itself. Let us be real".
They were responding to criticism of the official auditor by the government and also an article written by Congress spokesperson Manish Tiwari questioning CAG's mandate to examine government policies.

CAG's findings that allocation of 57 coal blocks resulted in a loss of Rs 1.86 lakh crore to the exchequer evoked sharp reaction from the government and Congress party. Parliament has also seen turbulence over the report.

Prime Minister Manmohan Singh  had questioned the CAG findings on coal blocks allocation describing them as "disputable and flawed".

"The policy of allocation of coal blocks to private parties, which the CAG has criticised, was not not a new policy introduced by the UPA.  The policy has existed since 1993 and previous government also allocated coal blocks in precisely the manner that the CAG has now criticised," he had said.

In a 32-point rebuttal of the CAG findings on the coal blocks allocations Singh said "the observations of the CAG are clearly disputable.

Tiwari in an article in The Indian Express on August 28 had said, "...the CAG does not have the Constitutional or legal mandate to make its own policy prescriptions and then utilise them to compute notional or even mythical loss or gain. Even when it chooses to do so, it ends up getting is grievously wrong. Headline-hunting is a volatile vocation -- perhaps it is time to stop this parody."

CAG sources said  sections 16 and 17 of the CAG's (Duties, Powers and Conditions of Service) Act 1971, uses expressions like "effective check" and "stock" with regard to the exercise of function by the official auditor.

Being effective, they said, "does not mean hiding behind technicalities and overlooking something that was clearly patently opaque exercise of discretionary power...something the honourable President of Indian National Congress (Sonia Gandhi) frowned upon last year".

They said that coal blocks constitute "stock" in the custody of Coal Ministry, "audit of its accounts certainly includes how such stock was disposed off and whether liquefaction of such stock has been done with due diligence..."

Referring to the June 13, 2006 Office Memorandum (OM) of Finance Ministry, which Tiwari wanted to be quashed, the CAG official said, "the OM is a mere clarification. It neither enhances nor impairs the powers granted to the CAG as per the Act, to decide on the scope and extent of audit."

The OM, they added, only gave formal recognition to decades old audit practice at a time when CAG was pleading for amendments to the C&AG (DPC) Act to spell out definition of audit in more clear terms.