PAC wants PPP projects under CAG, to sound out audit watchdog

The Public Accounts Committee strongly favours empowering the Comptroller and Auditor General to examine investment, expenditure and profit aspects in public-private partnership (PPP) projects and has decided to call the full CAG before it soon to discuss how to technically empower the audit watchdog in this regard.
The move is significant as it comes in the backdrop of corruption allegations in various PPP projects in the past.
The private sector has so far been resisting the move but the committee's argument is that since public money is being spent even in PPP projects, it needs to be safeguarded.
The PAC headed by Congress leader K V Thomas has decided to call a meeting of the full CAG, most likely this month, after which it will also be calling representatives from ministries.

"The stand of private parties is that the CAG has no business to look into their transactions. PAC, however, strongly feels that wherever the government money is involved, the CAG indeed has a role to play. Since government money is also involved in PPP projects, the entire transaction has to be examined by the CAG," a PAC member told PTI on the condition of anonymity.
The issue was vigorously debated at a recent meeting of the PAC.

Under the PPP mode, the project is implemented based on a contract or concession agreement between a government or statutory entity on the one side and a private sector company on the other side for delivering an infrastructure service on payment of user charges.

PAC's view that the CAG should also start examining public-private partnership (PPP) projects is not a new one.
Former PAC Chairman Murli Manohar Joshi, a veteran BJP leader, had earlier also said that the CAG hould be given powers to look into the functioning of PPP projects, societies and NGOs.
His argument was that every single paisa going through the budget should be looked into by the CAG.
The PAC headed by Thomas has now decided to discuss in detail the manner in which the CAG can examine transactions in PPP projects and how the CAG can be technically assisted to do so.

The member said that one argument from the private sector
is that the CAG can at best only look into the profit part.
"They also argue that only the ministry can look into the PPP projects and not the CAG. There is also a view that the move to involve CAG into the scrutiny of PPP projects will discourage foreign investment. That is why we have decided to call a full CAG meeting to discuss all these aspects," the source said.
In a report presented in the Lok Sabha in 2014, the CAG had made a case for comprehensive audit of public-private partnership projects by it. The auditor wanted the government to insert relevant clauses in PPP contracts for this purpose.

The report had maintained that under PPP projects, private players use assets or funds held by the government and render services within a pre-set revenue-sharing agreement and hence a comprehensive audit was necessary in order to ascertain the project's performance in delivery of services and its adherence to contractual obligations.
The same year, the CAG had made some adverse comments about PPP projects in some key infrastructure sectors including the Mumbai airport and several railways projects.
In 2011 earlier, the then Planning Commission had, however, voiced reservations against CAG scrutiny on the role of private sector players implementing the Public Private Partnership (PPP) projects.

A bill seeking to expand the scope the Comptroller and Auditor General of India to scrutinise PPP projects besides regulators, including SEBI, TRAI and IRDA, was also under the consideration of the Finance Ministry then.
The bill sought to replace the CAG Act, 1971 and expand its scope. However, it could not take off.