PSUs to be out of CAG ambit

New Delhi, Nov 14 | Updated: Nov 15 2005, 06:35am hrs
The government is set to do away with the requirement of supplementary audits of the accounts of public sector undertakings (PSUs) by the Comptroller and Auditor General. Independent audits would suffice, provided they were done as per the law.

Top-level government sources told FE that the relaxation would, however, come with more stringent disclosure norms for the PSUs, akin to that for other companies. A policy is being prepared and may be tabled in the winter session, a source said.

The sources said the special regulatory dispensation for PSUs may be on its way out. PSU directors would carry the same liabilities as their counterparts in other companies. There would be no selective exclusions for PSU directors from liabilities.

According to sources, a CAG audit in addition to the normal audit was superfluous and caused avoidable delays. If you want PSUs to grow and have professional management, it is necessary they are treated at par with other public companies, the source said.

As regards the proposed policy change, inter-ministerial discussions are on. Many PSUs dont have their accounts audited for even 10-12 years because of certain working problems, one of which, of course, is the special exclusion of directors from liabilities.

Special dispensation for PSU commercial ventures makes them inefficient
CAG gaze in addition to statutory
audit superfluous, causes delays
PSU directors to carry same liabilities as their counterparts in other companies
New policy likely to be announced
in winter session of Parliament
The Companies Act provides a special regime for PSU audits. Also PSU accounts are audited by the CAG.

The Irani committee on the company law had said that special exemptions and protections to commercial ventures taken up by PSUs in the course of their commercial operations along with strategic partners or general public should be done away with.

It also expressed concern over the delays in finalisation of the accounts of PSUs. In many cases, state-owned companies and their directors become liable for penal action but are provided selective exclusions from their liabilities only because they are government companies. This was leading to an unhealthy situation which must be addressed, it said.