Welcome relief

Updated: Nov 16 2005, 05:30am hrs
The governments decision to do away with the requirement of supplementary audits of the accounts of public sector undertakings (PSUs) by the Comptroller and Auditor-General (CAG) is not particularly earth-shattering. But, to the extent that it does remove a major irritant in their functioning, it is certainly welcome. Thanks to their ownership, PSUs operate under a number of constraints, the supplementary audit by the CAG being one such example. At the same time, with liberalisation and the opening of the economy, they are forced to compete with their more nimble-footed private sector counterparts, even as many of the advantages arising from their PSU status have disappeared. Thus, the purchase preference policy that earlier gave PSUs an outright advantage when it came to bidding for PSU tenders has been watered down considerably. Today, the only benefit PSUs get is that they are allowed a second chance they are allowed to try and match the lowest bidbut beyond that there is no additional advantage conferred on them, even when they bid for other PSU/government projects.

Unfortunately, even as PSUs lost on the swings (because private sector players were better placed to benefit from the reform process and globalisation), they were not allowed to make up on the roundabouts. In many ways, they continued to function as in the past, with the ministry, the mantri and the CAG breathing down their necks. The concept of navaratnas was an attempt to mitigate the formerit is a different matter that it has remained largely on paper. The decision to scrap supplementary audits by the CAG is an attempt to tackle the latter.

Audits, whether statutory or supplementary, impose a cost in terms of time, money and effort. However, to the extent they do perform a valuable function by highlighting any irregularities/potential trouble spots, these are also an integral part of any business. Indeed, no one would argue that audits be done away with. It is a moot point, however, whether any purpose is served by having a multiplicity of audits, as is the practice in PSUs, where the statutory audit by chartered accountants appointed by the CAG is followed by a supplementary audit by the CAG itself. That is not all. The CAG also does a proprietary audit and a performance review. The senior management in PSUs spends valuable time answering endless queries, time that could be better spent attending to operational issues. By scrapping the CAG audit, hopefully that is what they will do.