Monday, August 20, 2012

Review of Coal blocks allocation ----- CAG's mandate

In its report No. 7 of 2012-13, which is a Performance Audit of Allocation of Coal Blocks and Augmentation of Coal Production (Ministry of Coal), the Comptroller & Auditor General has concluded that " The process of bringing in objectivity and transparency in the allocation process of coal blocks, which commenced from 28 June, 2004, got delayed at various stages and the same is yet to materialise (February, 2012) even after a lapse of seven years. In the meantime, 194 net coal blocks with aggregate GR of 44,440 million tonne were allocated to different Government and private parties upto 31 March, 2011. The financial impact of the benefit to the private allottees has been estimated to the tune of Rs 1,85,591.34 crores as on 31 March, 2011  for Open Cast (OC) mines/OC reserves of Mixed mines. The Government could have tapped a part of this financial benefit by expediting decision on competitive bidding for allocation of coal blocks."

The report has been presented in Parliament, even while the Union Government has launched an offensive against the CAG, with the  Minister of State in the PMO V Narayanasamy stating that “CAG has no authority or right to comment on the policy of the government but unfortunately it has questioned its authority, which is totally unwarranted and against the mandate given to them”, and that “CAG has to work within a certain mandate given under the Constitution. Policy framing is the domain of Government of India, which is the elected government.”

Has the CAG commented on Government policy? It appears not. What the CAG has commented upon is the  delay in decision making (on allocation of coal blocks through competitive bidding) which has led to a loss to the public exchequer . The CAG has merely pointed out that the Government itself had initiated the process of 'bringing in objectivity and transparency" in coal block allocation, but did not take a decision thereon, resulting in substantial pecuniary benefit flowing to the allottees in the meantime.

Does the CAG exceed its mandate if it comments upon the Government's policies? 

To answer that question, lets look at Article 149 of the Constitution, which says  that the Comptroller and Auditor-General shall perform such duties and exercise such powers in relation to the accounts of the Union ----------  as may be prescribed by or under any law made by Parliament ----". 

The Parliament has prescribed these duties under  THE COMPTROLLER AND AUDITOR-GENERAL'S (DUTIES, POWERS AND CONDITIONS OF SERVICE) ACT, 1971 and Section 16 of the Act says
"It shall be the duty of the Comptroller and Auditor-General to audit all receipts which are payable into the Consolidated Fund of India and of each State and of each Union territory having a Legislative Assembly and to satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon." 

Obviously, the CAG has BOTH the legal authority  to examine the design of the rules and procedure governing the receipts which are payable into CFI and whether such rules and procedures are being observed. Also implicit here is the authority to state the deficiencies in design that lead to inefficient collection of receipts or collection of receipts less than what another design would have yielded. What does this amount to if not examination/review of Government policies that have a bearing on receipts? The Parliament itself having entrusted the CAG with the duty/authority to review rules/procedures that govern receipts, how can  the CAG now be accused of exceeding its mandate? 

Moreover, such audit has not taken place for the first time in the history of the nation. Every time the CAG carries out a  Performance Audit, a review of the relevant Government policy and its due observance or lack thereof is an essential component of the audit exercise. In its recent Performance Audit Report on Civil Aviation in India, for example, the CAG has pointed to the "liberalised policy on bilateral entitlements for international air travel introduced by GOI" as one of the factors contributing to the 'current critical state" of Air India, and has recommended a freeze on bilateral entitlements to certain countries/airlines.It has even recommended rollback of "excess entitlements". 

So why the hue and cry about CAG allegedly exceeding its mandate vis a vis Performance Audit of allocation of coal blocks?

Sh Sukumar Mukhopadhyay, Member (rtd), CBEC , having concluded that "the Constitution does definitely provide a clear mandate to the CAG to delve into policy" , suggests that the Government "make a Presidential Reference to the Supreme Court under Article 143 of the Constitution for settling the issue once for all. It would be better than publicly debunking the Constitutional post of the CAG." ----- an eminently wise suggestion. 

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