SC nod for telco audit may open Pandora’s box

Apr 18 2014, 00:41 IST
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SC said service providers are bound to provide all the records and documents called for by the CAG. Reuters SC said service providers are bound to provide all the records and documents called for by the CAG. Reuters
SummarySC said service providers are bound to provide all the records and documents called for by the CAG.

TELECOM operators like Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications Ltd must now submit their books of revenue receipts for examination by the Comptroller and Auditor General, with the Supreme Court upholding the Delhi High Court’s January order in this respect.

A bench comprising justices KS Radhakrishnan and Vikramajit Sen said this would not be a statutory audit of accounts, but conducted for the limited purpose of ascertaining whether the Union is getting its legitimate share by way of “revenue sharing”.

“Service providers are, therefore, bound to provide all the records and documents called for by the CAG,” the bench stated.

The verdict may have wide-ranging implications as government departments can now examine the books of private firms if they are part of any PPP or pay a revenue share licence fee in lieu of any kind of resources leased to them by the government.

In short, any money which flows to the government exchequer from a private party can be examined by the CAG.

The verdict is sure to impact the ongoing case in the Delhi High Court where private power distributors have challenged former Delhi chief minister Arvind Kejriwal’s order for a CAG audit of their books.

The court passed the order on a batch of petitions filed by telecom companies’ associations, including Association of Unified Service Providers of India (AUSPI) and Cellular Operators Association of India (COAI), challenging the Delhi High Court verdict which had okayed CAG audits of the firms’ accounts.

The immediate impact of the order would be to deal with multiple audits. The licence condition binds companies to a statutory audit of books. In addition, the department of telecommunications has powers to audit their books and if it feels so, it can get a special audit also done. Now, they would have to be ready for a CAG audit as well.

Telecom firms pay a revenue share licence fee to the government which is currently 8% of their adjusted gross revenue. They also pay a spectrum usage charge which is now at 3% of AGR for firms having only auctioned spectrum and around 5% for the ones who have a mix of allotted and auctioned spectrum. For BWA operators who won spectrum in the 2010 auctions, the levy is 1% of their AGR.

Analysts said the judgment will only add to the complexity of the current operating environment in the telecom sector. “The

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