What You Should Know about the CAG

(Published in The New Indian Express, School Edition, dated 23 November 2011, retrieved from http://expressbuzz.com/school/what-you-should-know-about-the-cag/336027.html)


NOTE: This isn't opinion. It's a round-up of the fuss about the CAG, only useful for time-pressed journalists and students of civics.

For several weeks, there has been a heated debate in the papers over the role of the Comptroller and Auditor General of India (CAG) in the anti-corruption mechanism of the country, and what his scope is.

The current CAG, Vinod Rai, is arguably the most familiar name in the history of those who have held the post, with the possible exception of T N Chaturvedi, the CAG who filed a report on the Bofors gun scandal in 1989 – a report that is believed to have led to the defeat of the Congress in the next election. Chaturvedi himself stirred a hornet’s nest by joining the BJP right after.

So, who exactly is the CAG, what is he supposed to do, and what is he allowed to do?

The Institution of the CAG

The CAG is a Constitutional authority who audits all receipts and expenditure of the Government of India, the State governments, and companies and bodies financed wholly, or substantially, by the government. He is the head of the Indian Audit and Accounts Department.

But the role of the CAG is not simply restricted to auditing. The CAG is the authority through which the accountability of any institution spending public funds is kept in check. Parliament votes funds to the Executive, and the CAG makes sure the money has been spent prudently, avoiding waste and frivolous expenses.

It must be noted that the CAG of India, unlike his counterparts in the UK and US, is not an officer of Parliament, but an independent functionary.

In India, the CAG is also the Supreme Audit Institution (SAI), and he plays an important role in international professional organisations, such as the International Association of Supreme Audit Institutions (INTOSAI) and the Asian branch (ASOSAI).

Appointment and Removal of the CAG

The CAG of India is appointed by the President of India, following a recommendation by the Prime Minister. He then takes an oath of affirmation, promising to “uphold the sovereignty and integrity of India”, to “perform the duties of [his] office without fear or favour, affection or ill-will”, and to “uphold the Constitution and the laws.”

He then has a term of 6 years, or up to the age of 65, whichever comes first.

The CAG can only be removed from office through a process of impeachment, similar to that in case of removal of a Judge of the Supreme Court of India. There are only two grounds for his impeachment – proven misbehaviour or incapacity. In that case, the address must be presented in both Houses of Parliament in the same session, and the resolution can be passed only if it is voted for by a special majority.

The Scope of the CAG

The CAG has the authority to audit all expenditure from the revenues of the Central and State governments, whether incurred within India or outside, in a timely manner. He must make sure public funds are being used efficiently, and in the manner in which they were intended to be.

This means that, while the CAG cannot typically question policy decisions of the government, there are still some cases in which he can. For example, if he believes the government has not considered the financial consequences of that decision and that would cause a loss to the exchequer, or if the government’s calculations were either wrong, or based on the wrong reasoning, or if a particular policy goes against the provisions of the Constitution – for example, if some people are unfairly excluded from benefiting from a scheme – it can be argued that it would be within the CAG’s mandate to take it up.

The CAG prepares draft reports, and asks for responses from the bodies he is investigating. He then finalises the reports, after accommodating the responses to his questions and observations from the draft reports, and submits them to the President of India, who then sends them to Parliament. Here, they will be considered by the Public Accounts Committee (PAC) and the Committee on Public Undertakings (COPU), which are special committees in the Parliament of India and the state legislatures. This means, they will look into the government offices or other bodies he has raised objections against, helped by the CAG himself.

The Current Controversy

The CAG of India, Vinod Rai, has been the subject of debate because of his reports on two scandals – the 2010 Commonwealth Games, and the 2G case. His report on the Krishna Godavari Basin gas pipeline project made several people squirm, and caused a fair amount of furore.

In the case of the 2G scam, Rai estimated the notional loss of selling spectrum in 2008 at prices fixed in 2001, to be Rs. 1760000000000, which the government immediately criticised. Union Minister Kapil Sibal went so far as to say there was zero loss, while others argued that the loss was restricted to Rs 2,645 crore. That was the figure put forth as the ‘actual loss’ by the Director General (Post and Telegraph) in the CAG, R P Singh.

The report itself didn’t mince its words, indicting the Prime Minister for arbitrarily giving away as valuable and limited a national resource as 2G spectrum. It also stuck to its figure of Rs 1.76 lakh crore as the presumptive loss. Immediately, questions arose about internal disagreements within the CAG. The CAG said he had arrived at the figure after calculating the loss using three different methods. He also later spoke of other provisions in R P Singh’s letter that he had taken into consideration in arriving at the final figure, and explained that the audit report passes through several stages of examination and review, with the body being investigated having multiple opportunities to explain and correct any figure it might consider erroneous.

When Rai decided to make the audit report public, and hold a press conference in July, Prime Minister Manmohan Singh said he had ‘overstepped his mandate’ by criticising irregularities in government policies, and alleging that the Centre showed favouritism towards oil firms. Singh said the CAG does not have the authority to examine policy issues, and that he should have taken into account the ‘uncertain environment’ under which the government is compelled to make its decisions.

Other conspiracy theories followed, with some people suggesting that Rai had been pressured by the government to whittle down the notional loss figure, but had held firm, and others saying he had been forced to send in the report early by PAC Chairman, Murli Manohar Joshi, a BJP leader.

Finally, the CAG made a power-point presentation to the Joint Parliamentary Committee (JPC) on November 15. Defending the figure he had arrived at, Rai explained the criteria his office had used to calculate the loss. He also said the Union Finance Ministry, and the Prime Minister, had recommended revision of the methodology used by the Department of Telecommunications.

Explaining that there was a three-stage audit, Rai said different figures were projected during its course:

• The Field Audit Report carried figures of Rs 48,000 crore and Rs 26,000 crore.
• The DG’s office, which redrafted it, put forth figures of Rs 2,645 crore, Rs 2,651crore and Rs 36,000, and also incorporated the figures  Rs 1,02,000 crore and Rs 65,000 crore, recommending further audit if needed.
• After the examination of records that had not been available earlier, the CAG pegged the loss at figures ranging from Rs 58,000 crore to Rs 1, 76,000 crore.

He also said he was within his mandate in commenting on the implementation of the policy, as it “does not withstand the test of scrutiny.”