A constitutional impropriety

SENSATIONAL: Though the CAG kept explaining the rationale behind each of the three figures for the national loss from 2G allocations, the figure 1.76 lakh crore became a real one in the minds of the public. Picture shows Vinod Rai, former Comptroller and Auditor General of India who was behind the 2G audit reports. Photo: V.V. Krishnan   | Photo Credit: V_V_Krishnan

At a Conference of Accountants-General, K.V. Thomas, Chairman of the Public Accounts Committee, is reported to have observed that the Comptroller and Auditor General (CAG) should report on financial improprieties, but should not talk about notional losses or report large figures and sensationalise the report.

There has always been a close relationship between the PAC and the CAG. The PAC is an august Parliamentary body that enforces the accountability of the executive, and the CAG as the constitutional instrument of accountability has repeatedly been referred to as the friend, philosopher and guide of the PAC. One is therefore somewhat surprised at the admonition that the Chairman, PAC, has chosen to address to the CAG.

Constitutional responsibility

In the observation made by Mr. Thomas, assuming that the report is correct, there is a constitutional impropriety. This lies in telling the CAG what to do and what not to do in the discharge of his constitutional responsibility. The Constitution lays down his functions in very general terms, to be spelt out by an Act of Parliament, and Parliament has done so — again, in rather broad terms — in the CAG (Duties, Powers and Conditions of Service) Act 1971. Within that broad framework, it is for the CAG, as a constitutional authority, to determine the scope of his audit.

The cancellations of licences and allocations of 2G spectrum and coal blocks by the Supreme Court vindicates the CAG’s audit reports

The PAC proceeds on the basis of the report of the CAG; it cannot say how the report should be written or what its contents should be. It may ignore some reports of the CAG, treat certain objections as relatively less important, fail to discuss certain reports, or even disagree with some of the observations in the Reports; but its point of departure is the Report produced by the CAG.

Secondly, it is fallacious to regard the idea of ‘notional loss’ as an impermissible extension of the audit function; there is also a fallacy in the very term ‘notional’. Consider the following cases: a decision based on wrong or inadequate premises or facts or numbers; a decision arrived at by following a patently wrong route; or a decision based on a choice of one of several possible routes. In all these cases the decision can have financial consequences which may be different from those that would have arisen if different premises or facts or numbers had been the starting point, or if a different route or method had been followed. It is not only legitimate but obligatory for the CAG to indicate those financial consequences. There is nothing ‘notional’ or ‘presumptive’ here. In so far as choice ‘A’ and choice ‘B’ are bound to have distinct outcomes, the CAG has a constitutional duty to point this out.

The problem here is of two kinds. Firstly, the quantification of the different outcome (forgone revenue or extra cost incurred or an unintended benefit, i.e., state patronage or largesse, conferred on particular parties) is extremely difficult and fraught with uncertainty; and secondly, the choice that the government in fact made in a certain case might have been a deliberate one on certain grounds, in which case, the CAG cannot say that the government could have made a different choice.

Where the quantification is problematic and might involve different assumptions, the right course for the CAG would be to make calculations on different assumptions and by different methods and give different numbers with the caution that none of them is definitive. That does not mean that there has been no financial consequence; it only means that a precise number cannot be put on it. This is what the audit report on 2G spectrum allocations said.

If the government chose a certain path deliberately for policy reasons, one would expect contemporaneous evidence to that effect: a note or other document setting forth the alternatives and their implications and a governmental decision deciding on one alternative for stated reasons. If there were any such documentation, it would not be for the CAG to question the decision. In the absence of any such documentation, the presumption is that the Government was unaware of the implications of their decision. If so, the CAG must, in terms of his constitutional responsibilities, point this out.

Charge of ‘sensationalisation’

Thirdly, there is the charge of ‘sensationalisation’. The audit reports do not sensationalise anything; the media do. The figure of 1.76 lakh crore in the 2G report was not put forward as a definitive figure; it was one of three different figures calculated in three different ways, and it was not privileged over the other figures.

The three different routes through which the quantification was attempted are as follows: by comparing the actual revenue received by the government with the revenue that might have been received by inference from such relevant data as were available, i.e., 3G prices; the high prices at which a few of the allottees resold a part of their equity soon after the grant of licences; and a higher offer which was received by the government but was not accepted for certain reasons. The three routes gave a wide range of values from Rs.57,666 crore to Rs. 1.76 lakh crore, but it was clear that in all three cases a large loss of potential revenue was indicated.

Rationale of the numbers

However, the figure was large and the media pounced on it. The CAG kept explaining the rationale of the numbers but the figure of 1.76 lakh crore captured the public imagination and became a real figure in the minds of the public. Does it follow that the CAG should have avoided that figure, when he was clearly stating his three different calculations? Is it fair to accuse him of deliberately sensationalising the case?

Let us suppose that he had refrained from mentioning that large figure; he would also have had to refrain from mentioning the other two numbers. The report would then have talked about the financial implications of the route followed by the Government but without any numbers. What impact would such a report without any numbers have had?

Think of all the consequences that the CAG’s Reports on 2G and coalmine allocations have had, and the final denouement of cancellations of large numbers of licences and allocations by the Supreme Court. Does that not vindicate the audit reports and establish that the CAG was indeed drawing attention to major lapses?

Would such a denouement have followed if the CAG’s reports had not made a stir, and would they have made a stir if the figures had not been large? Would it have been adequate for the reports to say blandly that there were procedural lapses in the 2G and coalmine allocations, without any indication of the magnitude of the lapses? How could that indication be given without numbers? All that one can ask for is that the figures be given with due caveats, and the reports do so.

The point made here is not that large figures must be mentioned to secure attention to the report, but that large figures must not be refrained from to avoid the charge of sensationalism.

( Ramaswamy R. Iyer is a former Secretary, Water Resources, Government of India.)

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Printable version | Apr 19, 2021 12:41:12 PM |

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