The Hindu : In defence of the CAG

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Thursday, Feb 21, 2002

Opinion

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In defence of the CAG

By Era Sezhiyan

The main instrument available to Parliament in ensuring accountability of the Executive is the Comptroller and Auditor General.

THE PTI filed a report on February 8 from somewhere in the western sector that "Defence Minister, George Fernandes, charged the Comptroller and Auditor General (CAG) with giving a `deliberately misleading' report on purchase of caskets for Kargil victims." The Defence Minister is reported to have said: "If it can happen to that point where politicians and constitutional authorities are prepared to lie, lie and keep lying and believe that a lie multiplied 100 times will be accepted as truth by the country, it is a very dangerous situation." When the country is facing a war-like situation caused by terrorist activities, the Defence Minister should be more fervid in strengthening the defence preparedness of the country against aggression and terrorisation, overtly or covertly, engineered from across the border. Strangely, at this crucial time, he has chosen to make the CAG the target of his offensive. Let us see how far the Defence Minister has been pertinent in his fulminating attack on the Audit.

The Audit findings on the `purchase of caskets' is in the `Report of the CAG on the Union Government (Defence Services) — Review of procurement for Operation Vijay (Army) — (7A of 2001)'. The Report is available on the website of `cagindia'. Regarding the scope of this audit, Part 2 of the Report says: "In the context of allegations of irregularities in the emergency procurements for Kargil operations, the Government of India requested for special audit of the Kargil-related purchases made during the calendar years 1999 and 2000. Based on this request, the audit decided to (a) assess the efficiency, economy and effectiveness of the defence procurement system in an emergent situation, and (b) identify the major cases of irregularities."

About the contracts scrutinised, the Report states: "As per information furnished by the Government, 129 contracts aggregating Rs. 2,175.40 crores related to Kargil operations for the Army. Of these, files pertaining to 123 contracts entailing an expenditure of Rs. 2,163.09 crores were made available for Audit up to June 2001."

It is the Government which requested for a special audit on the irregularities of procurements for the Kargil operations. Again the particulars of the contracts to be audited by the CAG were also given by the Government. Now that the Audit Report reveals many irregularities in the procedure adopted by the Defence Services, vague charges of `deliberate misleading' and `lying' are unjustly thrown at the Comptroller and Auditor General.

In macro analysis, the Audit gives the following major findings: (1) Audit scrutiny of 123 cases revealed that stores aggregating Rs. 1,762.21 crores constituting 81 per cent of the total expenditure materialised only after January 2002 and beyond, i.e., 6 months after the operation was over (July 1999). These included critical items of special clothing such as woollen socks, multi-purpose boots, gloves, sleeping bags, bulletproof jackets etc. and critical ammunition apart from operational equipment... After excluding confirmed cases of delayed deliveries, receipts before 31 July 1999 could have taken place in another 5 cases of Rs. 7.49 crores. In sum, stores valuing not more than Rs. 17.50 crores, less than one per cent, were received before the Kargil operation came to an end. (2) Analysis of the monthly-wise break-up of conclusion of the 123 contracts shows that only 55 contracts aggregating Rs. 556.83 crores were concluded before the cessation of hostilities. The rest aggregating Rs. 1,606.26 crores, 75 per cent of the total, were concluded only after. (3) Regarding the delivery schedules stipulated in the contracts, almost 90 per cent of the contracts were concluded after the outbreak of the hostilities with a lead time of more than 90 days, which "were unlikely to meet operational requirements".

The Report deals with other cases of high incidence of first time orders, excessive reliance on imports, benchmark prices not available and several deviations from the Defence procurement procedure. Of the major irregularities, it states: "Test Check reveals 24 cases involving an expenditure of Rs. 1,388.91 crores constituting 64 per cent of the total value of procurement audited where material departure was made from the procedure on the grounds of urgent requirement of Operation Vijay. Audit scrutiny, however, revealed that the excuse of Kargil was cited to push through procurement that would otherwise have been scrutinised more closely."

Of the 24 cases dealt with by the Audit Report, Para 12 deals with the caskets for Kargil victims. The irregularities revealed by the Audit scrutiny are: (1) The firm requested for increasing the weight of the casket from 18 kg to 150 kg. While the Government was still deliberating on the result, the firm supplied 150 caskets towards which 90 per cent payment of $3,37,500 was released. The entire lot of caskets was subsequently rejected during inspection on grounds of being overweight and welded rather than die pressed. These have been kept in stock as on June 2001. (2) The supplier had indicated that 75 per cent of cost was towards to material used (aeronautical grade aluminium). The price paid would convert to a rate of Rs. 45.31 lakhs per tonne of aluminium which is at least 10 times more than the rate being paid presently by Hindustan Aeronautical Limited for importing the highest grade aluminium. The rate quoted by the firm was highly inflated.

About the procurement of the caskets, the Audit observed: "The transaction achieved little, other than to benefit the supplier." There are another 23 items of major irregularities detailed in the Report, all of which go to confirm the Audit observation that "the excuse of Kargil was cited to push through procurements that would otherwise have been scrutinised more closely''.

The concept of accountability of the Executive to Parliament and through Parliament to the people is the lynchpin of parliamentary democracy. The main instrument available to Parliament in ensuring accountability of the Executive is the Comptroller and Auditor General. If Audit is decimated and made powerless, it is the Legislature that will suffer in its essential task of ensuring accountability of the Executive.

At the present, the least that the Prime Minister, Atal Behari Vajpayee, could do is to chastise the Defence Minister not to denigrate the CAGMr. Vajpayee himself had been the Chairman of the PAC (1969-70) and knows fully well about the need and functioning of the Audit. The work of the CAG is not mere voucher audit. In defining the purpose of Audit, the PAC in its Fourth Report of the Third Lok Sabha observed: "The Committee are therefore, definitely of the view that it is the function of the Comptroller and Auditor General to satisfy himself not only that every expenditure has been incurred as per prescribed rules, regulations and laws, but also that it has been incurred with `faithfulness, wisdom and economy'."

It is for the Public Accounts Committee of Parliament to consider, at the earliest, this Report on the Defence Services and find out whether the expenditures in the name of Kargil operations were incurred with `faithfulness, wisdom and economy'.

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