Sunil Jain: Restoring the CAG's glory

Are the Comptroller and Auditor General's (CAG's) latest set of reports on the functioning of the NDA government, as former Disinvestment Minister Arun Shourie would have us believe, simply an act of vendetta by a new government?

After all, as Shourie points out, the CAG has adopted different standards in different disinvestment deals.

While it asked why Shourie didn't try to ensure there were more bidders for the hotels and why no logs were kept of why the bidders walked out, nothing of this sort was said by the CAG in the privatisation of the erstwhile Delhi Vidyut Board.

Indeed, while the CAG has said there were procedural irregularities in the DVB case when the Delhi government entered into post-bid negotiations with the two bidders and reduced their obligations by around Rs 5,000 crore, all it said was that the "substantial changes in the terms of the transfer scheme should have been re-submitted to the Lt.

Governor for approval ... It is suggested that the Government may obtain post-facto approval of the Lt. Governor to the modifications made in the Transfer Scheme". That's it""once the Delhi government does this, there are no more problems with the deal! (It is another matter that the CAG's DVB report was submitted when the NDA was in power, and it didn't think it worthwhile to seize upon such a report, which even said there was a Rs 3,108-crore difference between the figure of total receivables depicted in DVB's balance sheet and that worked out by the consultant!)

What lends credence to the vendetta theory is that a series of other recent objections made by the CAG look ludicrous""while objections like the "irregular appointment of chauffeur" in the Singapore Mission, which cost Rs 56 lakh look petty, I'm not referring to these as an auditor's job is to point out everything that is irregular.

But the objections over the Rs 16 crore spent on setting up an office for the Ambassador-at-large in the US, for instance, can hardly be a matter of concern for an auditor, which is what the CAG is, since it involves government policy (to set up a separate ambassador for NRIs/PIOs)""it's a short step to saying the expenditure on the Army in Kashmir is a waste, given the impunity with which terrorists from Pakistan carry out their jobs in India.

The so-called "unauthorised expenditure on media campaign" for the India-Shining advertisements also falls under the ludicrous tag.

While the CAG does not buy the explanation that this was part of an "overall, general and imaginative promotion of India ... with other countries" since the India-Shining ads were placed in Indian newspapers and not in the New York Times, this is the least of the problems.

The fact of the matter is that no one can predict in detail their expenses one year in advance""can you predict exactly what your expenses will be on laundry during the next 12 months? Well, nor can the government.

Which is why, each year, expenses get re-appropriated from one head to another and each year, while presenting his Budget for the year, the finance minister presents appropriation bills for previous years as well, in which "the unauthorised expenditures" of previous years are included.

So, the normal procedure is that after a CAG audit para, there are more discussions with the government, and if the CAG is still not satisfied, this becomes a final para on which the Public Accounts Committee (PAC) takes action.

Let's assume the NDA's explanation that "India Shining" was part of the India's-image-abroad campaign is not bought by even the PAC.

Well, all that is required is for the finance minister to present this as part of the appropriation bill for a previous year""it is done all the time.

So are we then to consign all CAG reports to the trash can? That too would be foolish because it is the CAG's report on Bihar, for instance, that led to the discovery of the fodder scam.

Indeed the CAG report on the Voluntary Disclosure of Income Scheme of Finance Minister Chidambaram was such a masterpiece, and it is truly shocking that the NDA didn't use this to launch a CBI inquiry (perhaps Shourie needs to revert back to his investigative reporter mode to figure out who decided to ignore this report as well).

The VDIS report crystallised what everyone had said when the scheme was drafted, that it allowed people to declare their black money by paying just a 2-3 per cent tax.

Under the scheme, a tax thief could buy Rs 100 crore of gold a day before the scheme, said he bought it in 1961 when the value was, say, Rs 10 crore, and pay the tax on this! The CAG found 113 cases where the gold was valued at the 1961 prices, and in Mumbai and Kolkata property was declared as being worth Rs 5,530 (see Rational Expectations, May 29, 2004).

In more recent years, it is also the CAG that, for instance, did an analysis of just how few private hospitals and nursing homes in each state file tax returns and, based on NCAER's income demographics data, the rampant evasion among the upper income groups.

Clearly CAG V N Kaul needs to spend time figuring out how he is to separate the accountant's-perspective sort of reports (like the "India Shining" and the chauffeur ones) from the really meaningful ones like the ones on the DVB and the VDIS.

Equally important, instead of just waving the reports before TV cameras in and out of Parliament, MPs need to begin to do their work seriously.

Of 40 Action Taken Notes (ATN) due for the pre-1995 period, 35 have not been submitted and for the period after that, 115 of the 220 ATNs required have not been given.

Twenty-seven of 36 departmental undertakings haven't had their accounts audited since 1998 (Doordarshan hasn't finalised accounts since 1977-78!).

If governance in the country has to be reduced (maybe that should be elevated since our MPs only posture) to by the press, for the press and of the press, there's no problem in just shouting each time there's a CAG report and doing nothing later.

But if governance is something more serious, we've a major problem on our hands.

suniljain@business-standard.com