After telecom companies, PPP players could face CAG audit

SC said that Comptroller and Auditor General can carry out the audit to examine whether the companies are giving proper share of their revenue to the govt

Private companies, involved in Public-Private Partnership Project (PPP), have termed the Supreme Court ruling to allow the Comptroller and Auditor General (CAG) to audit the books of Private telecom companies as fearsome since the ruling could also pave way for an audit into their books since they share revenue with the government.

The Supreme Court on Thursday allowed the CAG to audit the account books of private telecom companies which share revenue with the government for using spectrum. A bench comprising justices K.S. Radhakrishnan and Vikramajit Sen said the CAG can carry out the audit to examine whether the companies are giving proper share of their revenue to the government.

Industry experts and company officials of infrastructure companies have said that the move could have wide reaching implications on the Public-Private Partnership framework since the sector is already burdened with policy regulations and the fear of audit could deter many from partnering the government.

"This has created another hurdle for us to cross. Across developed nations, the public auditors do not interfere with the books of private companies and the PPP model has succeeded well there. We are in the midst of a slow down and private companies are not willing to partner the government and this additional layer of regulation will only take away the interest in such projects", a senior official of a private infrastructure company said.

The ruling comes nearly four years after Prime Minister Manmohan Singh suggested that the Comptroller and Auditor-General be permitted to look into the books of PPP Projects. "There is need to improve the structure of private-public partnership arrangements to ensure that they are transparent, ensure competitiveness, and adequately safeguard the public interest", Singh had said.

"I think the CAG can assess the various aspects of PPP projects such as the policy framework, the impact of various projects and the policy of awarding projects to private players. But they should not interfere in the books of private companies and the Chartered accountants are paid to ensure quality audit", Vinayak Chatterjee, Chairman of Feedback Infra said.

In January this year the Delhi government had ordered an audit of the books of power companies in Delhi and the matter is currently being heard at the Supreme Court. "We welcome any independent audit within the purview of law. CAG's powers do not extend to Delhi Discoms. We are already audited for past 10 years by CAG empanelled audit firms. DERC (the regulator) has already conducted multiple special audits on Delhi Discoms", a spokesperson for BSES had earlier said.

A spokesperson for Delhi Airport International Limited (DIAL) declined to comment on the Supreme Court judgement as the company had in June 2012, questioned the jurisdiction of CAG since it had detected a loss of Rs 1.63 lakh crore in the leasing of land to GMR-led private operator. "At the outset we would like to state that DIAL, being a public-private partnership, does not come under the purview of CAG audit," DIAL had said in a statement.

"Private players are not always fair and transparent in their dealings. Inflated costs are often shown to substantiate claims of money that was spent. If CAG audits them, we can expect greater transparency and accountability from the private players. While most of them are there to make money, it should not be done in a dishonest way", said a senior bureaucrat working with a leading metro project speaking on condition of anonymity.

Meanwhile, Prashant Bhushan, Senior Supreme Court Lawyer and founder member of the Aam Admi Party has welcomed the move and pointed out that the public exchequer had lost money due to various PPP projects and that the CAG's audit is needed to ensure greater transparency.

"Private companies have been getting away with inflated invoices and have been openly involved in causing loss to the private exchequer. This needs to stop. Companies involved in sectors such

as roads, power and airports do not show correct accounts and the CAG audit is necessary", Bhushan said.