Two more

The CAG's latest reports dent govt image further

The government’s troubles mount, with the Comptroller and Auditor General (CAG) coming out with two more damning reports, one on Air India/Indian Airlines and the other on oil and gas. The criticism has been long anticipated (parts of a draft report had leaked), and many of the findings reflect what has been aired earlier in the media. What view Parliament’s Public Accounts Committee (PAC) takes of the reports is, of course, another matter; the PAC has been split down the middle on the telecom spectrum issue, and become more partisan than in the past. Meanwhile, there are elements in the reports that would warrant the criticism once again that the government’s auditor is over-stepping its brief.

Praful Patel, civil aviation minister during the period that the CAG report covers, has tried for the last two years to argue that he did nothing wrong. In brave TV appearances over the past couple of days (to his credit, he is not one to run and hide), his position remains what it has been all along: key decisions were taken either by the Cabinet or a Group of Ministers, opening up the market to foreign airlines has helped the sector to grow in the country, and the responsibility for some of the failures (e.g. making a go of the merger between the two airlines) lay with the airline managements. Perhaps, but the sum total of decisions taken during his tenure as the minister in charge has reduced Air India to the danger of sudden death. It has been established, inter alia, that the key decision to dramatically expand the scale of aircraft acquisition was taken at his behest, shortly after he took charge. Seven years later, Mr Patel is condemned to repeating Lady Macbeth’s role, wringing his hands and hoping the stain will wash away.

Murli Deora’s position in the petroleum ministry is only marginally better, in that some of the criticism is deflected to the sector-regulator, the then director-general of hydrocarbons who is already the subject of a separate criminal investigation. The main charges here are of regulatory failure to enforce contracts, gold-plating of investment because the contract is so structured that the government is the loser, and related party contracts. While Reliance has defended its record, the findings when taken together with the findings on other oil and gas fields in Rajasthan and Gujarat focus attention on the enormous scope that exists for public-private partnerships to go wrong. Also exposed is how poorly equipped and institutionally weak the sector regulators are to prevent regulatory capture. Meanwhile, the original sin might have been in the first United Progressive Alliance government’s Cabinet formation. Mr Deora was made the petroleum minister even though he is a personal friend of the Reliance chairman, and Dayanidhi Maran was given charge of a sector in which his older brother ran a business. No one, it would seem, had heard of conflict of interest.