Scrap the CAG

Three weeks ago, this column made a strong pitch for doing away with vigilance departments in banks, arguing that while the number of loan officers actually prosecuted was small, there was a sharp fall in overall bank lending following any vigilance activity, and as a result, bankers had become ultra-cautious in fresh lending.

Not surprisingly, the column got a negative response from vigilance officials in banks, and one official protested strongly about the blanket condemnation of vigilance activity.

While I think the lady in question failed to grasp the larger point being made, this week, I'm going to be even more adventurous, and argue in favour of abolishing all forms of vigilance by the government through the office of the Comptroller and Auditor General of India and its affiliates in each state capital.

My argument is a simple one -- the CAG comes up with really meticulous reports, but it's a complete waste of time since even the legislators who are supposed to study the reports and ensure the government takes necessary action, don't read the reports. To prove the point, I picked up the latest CAG reports for just three states -- Delhi, Maharashtra and Karnataka which, by the way, are perhaps the best-administered in the country. I also picked up Delhi's report for last year, only because it is one of my all-time favourites, in terms of the examples it highlights.

Last year's report on Delhi has a section on demolition notices given for illegal construction, and that shows that between 68 and 93 per cent of unauthorised constructions that were ordered to be demolished during 1995-2000 were never touched by the bulldozer! Half those which had to be sealed, needless to say, were not sealed.

While 82 per cent of buildings to be demolished escaped in south Delhi, the figure for the Najafgarh zone was a whopping 93 per cent. I guess it's pretty obvious why this happened. This year's report, sadly, doesn't revisit the demolition drama, but it does tell us that tax arrears have averaged around 150 per cent of actual collections for the last five years, and is full of examples of how tax collectors have under-assessed taxes, and of how excess payments have been made by other departments.

The Maharashtra report, similarly, gives details of Rs 1,656 crore (Rs 16.56 billion) of expenditure in 2001-02 that remains unreconciled, and even a whopping Rs 32 crore (Rs 320 million) of land that was irregularly allotted to private land developers.

The Karnataka report has similar details of huge unreconciled expenditure (amounting to 15 per cent of the total budget), of a 39 per cent increase in tax arrears for the year (in per cent terms, tax arrears in the last five years varied between 13 and 24 per cent of the total tax dues), of guidelines being violated while allotting land, and of allotting land at Rs 6.5 crore (Rs 65 million) below the market rates in one instance alone.

What's interesting, however, is not so much the examples from various reports, as it is the common elements between them. In each case, the CAG itself documents, no one really bothers about the CAG strictures. As far as the Delhi government is concerned, for instance, it did not even bother to tell the CAG what action it had taken on 34 of the 44 points (audit paragraphs, in jargon) made in 2001.

In 2000, it didn't bother about 21 of the 39 paragraphs, and so on. In the case of Karnataka, 1,215 audit paragraphs and 342 inspection reports remain unanswered up to date. In the case of Maharashtra, of the 1,007 audit paragraphs issued till March 2001, only 119 were even discussed by the Public Accounts Committee!

Things for the PSUs owned by the states are even worse, with the PSUs not getting their accounts audited for decades, sometimes. Till it got converted into the Delhi Vidyut Board in 1997, the DESU had its accounts audited last in 1991-92!

In fact, when it became DVB, and the CAG had to first certify its accounts, it issued a disclaimer saying it had no idea if the opening balances in the books were correct. And, DVB's accounts from 1996-97 to 2000-01 were actually finalised only in 2001-02! You can imagine just how accurate they must have been if records for five years had to be verified together.

The Delhi Scheduled Caste Financial and Development Corporation, similarly, has finalised its accounts only till 1992-93, and that was done in 2002-03. Karnataka has cooperatives, like the Karnataka State Coop Marketing Federation that have not been audited since 1996-97.

In Assam, last year's CAG report showed accounts for 1990-91 for the Assam Seeds Corporation were finalised in 2001-02 -- in the same year, the Assam Livestock and Poultry Corporation finalised accounts for 1985-86, and the Assam Government Marketing Corporation for 1982-83. As with the PACs, the Committee on Public Undertakings (COPU) is not too efficient.

Last year, in Andhra Pradesh, the CAG made 18 audit paragraphs, and not even one of them was discussed by the COPU. All 25 paragraphs remained undiscussed in Kerala. In Delhi, this year's report shows, 8 of the 9 paras for 2000-01 have not even been discussed by the Committee on Government Undertakings, though it must be admitted this is better than 1999-00 when not even one of the 7 paragraphs were selected for review.

The CAG, don't get me wrong, does a great piece of work, but if no one's reading its reports, why waste so much money, and cut so many trees to print the reports on?

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