CAG will now audit Defence canteens

After more than two years of wrangling, the Defence Ministry has finally permitted the Comptroller and Auditor General (CAG) to audit 3,600 unit run canteens (URCs), which act as retail outlets of the Canteen Stores Department (CSD) of the ministry.

With an annual sale of around Rs 7,000 crore in 2010, CSD sells more than 3,000 consumer items to 44 lakh beneficiaries.

CSD reaches out to consumers through the URCs, most of which are run by the Army, though the Air Force and the Navy also run a few URCs.

Auditing of the URCs remained a bone of contention since 2008, when CAG began auditing CSD.

In its 2010 report on CSD, CAG blamed the Army headquarters for not providing access to URC accounts. Subsequently, the audit watchdog took up the issue with the Defence Ministry, which requested the Army headquarters in December 2009 and February 2010 to arrange for inspection of the URC records for audit. However, the Army Headquarter turned a deaf ear to the requests by the ministry.

The denial happened notwithstanding the fact that significant amount of money is transferred from the Consolidated Fund of India to URC every year. Besides, these units are built on government lands and often use government transport.

“Lack of oversight has enabled the services to continue the arbitrary separation of finances of URC and CSD despite transfer of considerable funds from public fund to run the URC, which in turn enabled the services to transfer profit earned from operations funded by the consolidated fund of India to non-public funds of the services,” CAG said in its report.

Sources in the armed forces said CAG has now been given permission to audit only the profit earned by the URCs under the quantitative discount (QD) scheme. Between 2002-03 and 2007-08, as much as Rs 883.46 crore was transferred in the form of quantitative discount from the Consolidated Fund of India to the URCs.