CAG gets more power to audit even private firms

Jan 07 2014, 01:20 IST
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The court added a caveat to the order, though: The CAG audit ought to be only on the telcos' receipts and no further. Reuters The court added a caveat to the order, though: The CAG audit ought to be only on the telcos' receipts and no further. Reuters
SummaryHC ruling in telecom case allows scrutiny of revenue, not expenditure.

and V Kameswar Rao said.

Holding that in contracts like the ones between the government and telcos, the latter as licensees are accountants for the government (as far as its revenue-share is concerned), the court said ...any interpretation of a regulatory law must keep in mind that primacy needs to be given to the fiduciary principles of good faith in dealing by the regulated especially when the regulated is the beneficiary of a natural resource and has to pay to the custodian of the natural resource money determined as a percentage of the revenue generated from the licensed activities by the regulated.

Mondays court order could potentially expand the CAGs ambit to cover the accounts of private companies in various sectors using natural resources under contractual agreements with the government. The immediate impact of the order would, however, be on private telecom operators revenue-sharing details, beginning 2006-07. As per a 2009 audit, assigned by the telecom ministry and conducted by private audit firms, five leading operators Bharti Airtel, Vodafone, Reliance Communications, Tata Teleservices and Idea Cellular had understated revenues to the tune of Rs 10,268 crore in 2006-07 and 2007-08. Following these audits, the department of telecommunications had sent a penalty demand notice of Rs 1,600 crore to the five operators.

Telecom companies pay 6-10% of their AGR as licence fee and 3-8% as spectrum usage charges. Reporting lower revenue could bring down the amounts they have to share with the government. AGR is defined as the revenue earned by the telecom operators, excluding interconnection charges and roaming charges that are paid to other operators; and service tax paid to the government.

According to solicitor general of India Mohan Parasaran, the HC has enlarged the CAGs jurisdiction to audit all public utilities discharging essential public functions. After the RTI Act, except for national security, transparency has to be maintained in every sphere, he said.

Senior lawyer Harish Salve said CAG audit for the purposes of ascertaining the governments share of annual gross revenue is fair enough. The CAG can definitely check whether the percentage of gross revenue given to the government has been properly calculated. However, the judgment will not have any bearing on other revenue departments (like those dealing with taxes) as they are being periodically audited, he added.

Former additional solicitor general Vivek Tankha said: Licence agreement will telecom companies and production-sharing contract with private oil companies are

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