CAG wants govt to insert clause in PPP agreements to audit private partners

The Comptroller and Auditor General of India (CAG) has again made a case for comprehensive audit of public-private partnership projects (PPP) by it. The auditor wants the government to insert relevant clauses in PPP contracts for this purpose.

In a report presented in the Lok Sabha on Friday, CAG said limiting the scope of CAG's audit in projects implemented by PPPs would amount to restricting the scope of oversight by Parliament over such projects, which is neither desirable nor intended by the government.

The report said under PPP projects, private players use assets or funds held by the government and render services within a pre-set revenue-sharing agreement. "A comprehensive audit is therefore necessary in order to ascertain the project's performance in delivery of services and its adherence to contractual obligations."

It noted there are risks in estimation of revenue streams of projects under the PPP arrangement, which could significantly impact the exchequer or users of the services - the public at large. "A private player in PPP cannot be kept outside the Parliamentary oversight as he delivers public services for which he gets paid from public funds or by users (citizens) through payment of user fee, tariff," said CAG.

To buttress its arguments, the CAG referred to its past report on hydrocarbon production-sharing contracts and others, saying these findings raise issues on the use of public assets and resources by private partners. In the said report, the CAG had slammed the petroleum ministry for allowing Reliance Industries to retain its entire eastern offshore KG-D6 block in contravention of the production-sharing contract. The auditor regretted that the government had not enacted any legislation to facilitate Parliamentary oversight in this regard as yet.

Although section 20(1) of the CAG's (Duties, Powers and Conditions of Service) Act, 1971 provides a caveat for CAG to undertake the audit of a private body over a project of public interest, the Act has rarely been invoked by the government, the report noted.

A major thrust to the idea of PPP was given in the Union Budget for 2014-15 with a corpus of Rs 500 crore allocated to setting up an institution called 3P India to provide support to these projects.

Earlier, the Supreme Court had upheld the CAG's right to audit accounts of private companies which are involved in a revenue-sharing contract with the government or in managing public resources.

CAG Shashi Kant Sharma had said the order did not mean that CAG would take up audit of PPP projects routinely. "The mandate does not mean taking up audit in all cases. It would be done keeping in view the risk assessment as well as impact on public interest," he had said.