Better scrutiny

The Delhi high court’s order allowing the Comptroller and Auditor-General (CAG) to audit the books of private telecom companies has expanded the ambit of the national auditor to new areas. It also makes a fresh definition of public goods and services but leaves some doubts about the applicability of the order in some areas which are not clearly outlined. There were some concerns over the correctness of the accounts rendered by telecom companies about their revenues.

 Correct accounts are important for the national exchequer because the companies are in a revenue sharing arrangement with the government and they use national resources, in this case spectrum. The telecom regulator had found that some operators were under-reporting revenues and so the CAG had initiated an audit some time ago. The high court’s judgment has come in a petition by the operators challenging the CAG’s audit plan.

The  court has entered a caveat that the audit should pertain only to the receipts of companies and “no more.” This is important because it seeks to protect the independence and autonomy of private companies. The audit cannot embrace aspects like the wisdom and economy of expenditures which are the concern of the company and its shareholders. Since spectrum is a national resource and since government revenues are involved in their operations, there is a justification for a public audit of their accounts. Though the companies have their own accounting systems and even independent auditors scrutinise the books, a public audit would make the scrutiny more transparent and credible. The companies do not like the scrutiny and are intending to appeal the verdict. But there is no convincing reason for this because only the revenue side is being examined by the auditor.

It is not clear whether the court order will facilitate the scrutiny of  the accounts of companies in other areas like highways and power distribution where work is undertaken on a  private-public partnership basis. The AAP government has announced a CAG  audit of power companies in Delhi. There is a case for audit of the accounts of companies using public resources like mines, ports, air ports and oil and gas. An exercise by the CAG to audit the accounts of the Delhi airport or  the production sharing contracts between the government and Reliance in the KG basin cannot be faulted on this ground. The only condition is that the audit should be limited to the extent of public interest in these areas.