<div>The Supreme Court (SC) verdict that the Comptroller and Auditor General of India (CAG) can audit the revenue receipts of private companies that utilise national resources has literally set the cat among the pigeons.</div><div> </div><div>The SC passed the order on a batch of petitions filed by telecom associations challenging a Delhi High Court verdict which had given the green signal for the CAG to audit the accounts of telecom operators. Currently operators pay between 6 and 8 per cent of their revenues as licence fees. In addition, they pay 3-8 per cent of revenues as spectrum usage charges, depending on how much spectrum they use. The aim of the judgement was primarily to ensure that private companies are giving a correct share of their revenue to the government.</div><div> </div><div>While that is laudable, this could well be the tip of the iceberg. The broad sweep of the SC verdict means that private industry that uses any kind of national resource can now be audited by the CAG. Private companies in oil & gas, power, mining, roads, ports, airports could well be audited by CAG in the future. That could also be extended to cover all projects that come under the public private partnership (PPP) model. On the other hand, tomorrow government could seek to check if private companies are paying their excise duty and income tax as prescribed. That could well be a case of more government, which could in turn make doing business in India all that more difficult.</div><div> </div><div><span style="color: rgb(128, 0, 0);"><strong>Read Also: </strong></span><strong><a href="http://www.businessworld.in/news/economy/india/pvt-firms-including-telcos-now-in-cag-ambit-sc/1333839/page-1.html">Pvt Cos Including Telcos Under CAG Ambit: SC</a></strong></div><div> </div><div>That means some of the biggest Indian corporations, including the Reliance group, Tata Power, Essar Oil, Adani Power, GMR and GVK among others could come under the purview of the CAG. Considering that the decision has been taken by the SC, it is unlikely that this will change. One way out would be to seek a review petition in the SC.</div><div> </div><div>While it puts pressure on industry to clean up, it will be a stress point for the CAG too. According to the CAG website, it “discharges his multifarious duties through the Indian Audit and Accounts Department. The department consists of about 50,000 employees and is functionally organised into 133 specialised formations throughout the country.” How many of these 50,000 employees can be deputed to audit private companies on a quarterly or annual basis remains to be seen.</div><div> </div><div>For that to happen, the CAG would need to streamline its operations to ensure that it can do timely audits where necessary. It remains to be seen whether the CAG actually goes ahead and audits some of the largest corporations or will it be just an eye wash. That clarity should emerge over the next few months.</div><div> </div><div>But for now, private industry and their auditors need to ensure that there are no black spots.</div><div> </div><div>anupjayaram@gmail.com</div>
