Four CPSEs extended Rs 2,609 cr worth undue benefits to execs: CAG report

The Comptroller and Auditor General (CAG) of India has unearthed Rs 2,609 crore worth “undue benefit” extended to executives by four central public sector enterprises (CPSEs), such as Indian Oil Corporation (IOC), Oil and Natural Gas Corporation (ONGC), GAIL (India), and ONGC Videsh (OVL).

In a compliance audit report tabled in Parliament, the CAG said by paying “running and maintenance” of vehicles to its executives based on their position, CPSEs have violated Department of Public Enterprises (DPE) guidelines.

IOCL, ONGC, GAIL, and OVL kept a fixed amount of Rs 800 per month as transport allowance, which was included under the so-called “cafeteria approach”, out of total Conveyance Maintenance Reimbursement Expenditure (CMRE).

A cafeteria approach is personalised plan allowed by employers to accommodate employees’ preferences for benefits. In 2017, the DPE issued guidelines stating that perks and allowances admissible to different categories of executives under ‘cafeteria approach’ would be subject to a maximum ceiling of 35 per cent of the basic pay.

The CAG held that the payment of “running and maintenance” expenses of vehicles over and above the 35 per cent ceiling of cafeteria approach was in violation of DPE guidelines and thus has resulted in the extension of undue benefits to executives.

“The employees are paid CMRE for personal vehicles on the basis of their level in organisation and not on actual basis and, therefore, does not qualify as reimbursement. As such the payment of CMRE falls under the category of allowance rather than reimbursement and should have been included in the cafeteria approach,” the CAG stated.

The CAG recommended that these CPSEs should discontinue reimbursement of “running and maintenance” expenses of vehicles as it violates DPE guidelines.

The CPSEs claimed that CRME is more economical and administratively convenient than hiring vehicles for conveyance.

“The company’s contention that it is making the payment of CRME purely for operational activities could not be justified as it has also been making additional payment on account of local conveyance charges to its executives for their local movement beyond 15 km apart from hiring vehicles on annual contract basis for all its departments/ locations for day-to-day activities,” said the CAG in the report.

From April 2009 to October 2021, IOCL paid Rs 1,447.72 crore and GAIL paid Rs 414.66 crore towards CRME to its executives over and above the transport allowance.

During 2018-19 to 2020-21, ONGC paid Rs 732.93 crore towards CMRE to its executives. OVL paid Rs 14.16 crore towards CMRE to its executives during 2017-18-2021-22 (October 21).

These CPSEs cited the Gujarat High Court judgment that stated reimbursement or actual amount incurred by the employer on the vehicle of an employee, used for official purposes, can’t be treated as taxable perquisite.

However, the CAG said that the argument by these CPSEs need to be viewed as per income tax rules which require that a certificate to the effect that the expenditure was incurred for the performance of official duties, for the amount to qualify as reimbursement. “The same is not being maintained by the Company as well as there is no instruction from the company to its executives for maintaining the same,” it added.