Thin end of the wedge PDF Print E-mail
Friday, 18 April 2014 01:12
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All PPPs, theoretically, can now be audited by CAG

The Supreme Court, undoubtedly, wanted to secure government revenues when it ordered that the CAG had the power to audit the accounts of telecom companies, a demand being made by the Department of Telecommunications for many years. Indeed, while ruling in favour of the government, the Supreme Court said the issue at hand concerned spectrum, a valuable natural resource, and so the government was right in wanting to ensure the telecom companies paid their full dues to the government. The genesis of the desire to audit telecom companies goes back several years, when a brokerage report pointed out a leading telecom company was reporting one set of numbers to its shareholders and another set to the telecom regulator, and a special audit confirmed this. In this case, the company was taking advantage of different licence fees for different services—internet services, for instance, attracted no licence fees, so there was an advantage to be gained by disguising voice calls as data traffic. In later years, when there were differential charges on local and international calls, a similar disguising of calls took place. The point, however, is that with the telecom ministry finally agreeing to a uniform and flat license fee across services, the likelihood of such false declarations has by and large been taken care of. There is still a problem in that BWA licence-holders continue to pay a different spectrum usage charge than others, and since there is, as yet, no way to segregate BWA and other call traffic, there is still scope for disguising revenues. This is what the telecom ministry needed to fix since an audit by the CAG, or any other expert body, is not going to be able to find out whether voice calls are being disguised as BWA traffic.

The other problem with the Supreme Court judgment is that it opens the door for all manner of firms to have their accounts audited by the CAG. If spectrum is a scarce resource whose revenues need to be guarded, so are the toll collections from a national highway or the revenues from a gas field or an airport. That is, all PPPs can now be audited by the CAG. This, of course, tells us both the government and the Supreme Court don’t think much of the veracity of audits done by private auditors—otherwise, why not believe the audited reports of the telcos? Apart from the fact that another audit, after the statutory one, is a waste of management time, this could be the thin end of the wedge. At some point, the CAG can also be asked to examine whether certain expenses should be allowed, not just whether revenues are properly stated—in the case of telecom firms which pay licence fees on the ‘adjusted gross revenues’, are the dealer margins too high? And since there is conceptually little difference in whether the government gets money through licence fees or taxes from corporate or individuals, a much larger window has been opened up for potential CAG audits.


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