With the Supreme Court ruling that the Comptroller and Auditor-General of India could audit the accounts of private telecom companies, it’s time for the government to take the matter seriously. This is a serious economic issue as it concerns how the country’s natural resources and wealth are used by the government and the business community dealing in these resources. It is particularly so where the government is in partnership with the private sector, in what is known as public-private partnership model. Besides telecom, these are mostly seen in vital infrastructure sectors such as oil and gas, roads, ports and airlines.
There has been an outcry from the private sector against opening their books to the CAG. As far as they are concerned, this is just another nuisance and can lead to discouraging domestic private and possibly even foreign investment in infrastructure. They argue that the CAG will definitely find something to justify its existence and this could only vitiate the business environment, with India ranking pretty low in the “ease of doing business” category.
The CAG and the government do have a point: that the government should get its legitimate share for letting private telecom operators use valuable natural resources. The CAG and the department of telecom found during an audit of several telecom firms in 2009, for the 2006-08 period, that they were underpaying for spectrum and telecom licences by under-reporting revenues.
As the country’s natural resources belong to the Indian people, and its use need to be monitored, especially where the government has a revenue-sharing agreement as in telecom, it is important for the government and the business community to find a viable solution. There is need for out-of-the box thinking for a solution that can be win-win for all stakeholders. In the case of telecom, it could be a one-time fee or an annual fee.
Since there is a fear that the SC ruling could be interpreted to bring several other infrastructure sectors into the ambit of CAG audits of private companies, it is necessary to find a solution that is applicable. It is perhaps not very commonly known that the PPP model of 60:40 participation in roads, with the government putting in 40 per cent of the project cost, has been quietly jettisoned. Private parties instead invest the entire amount, and in addition give the government a premium of 10 per cent or more, according to the National Highway Builders Federation. So if a project costs '100, the private party would put in '110, with '10 going to the government. If this is the norm, it may be worthwhile to examine the matter closely in order to overcome the situation created by the SC ruling.
