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Left out of the public glare By Arun Shourie, Part I OF ECONOMY PDF Print E-mail

http://www.indianexpress.com/full_story.php?content_id=56000

Special to The Indian Express, 29 September, 2004

PSUs apparently serve a social purpose, they are ‘accountable’ and vigilance over them is strict. Instead, the CAG shows they maintain no accounts, disregard public interest and waste a colossal amount of money.

ARUN SHOURIE: The myth of accountability

The units must remain in the public sector so as to ensure accountability, the progressives argue. If government holding is allowed to fall below 51 per cent, the managements will escape from the purview of CAG, CVC and other similar watchdogs, they maintain. In point of fact, accountability will increase were government ownership to be diluted. The lament of the CAG in the West Bengal case explains the state of accountability in these units, and bears testimony to his own helplessness. In his Report for 2001 (Volume I, Civil) he writes,

‘‘The Comptroller and Auditor General of India has repeatedly commented in the Audit Reports of the State (West Bengal) on the failure of the Heads of Departments and the Management of the undertakings in timely preparation of the pro forma accounts. Accountant General (Audit) reminded Principal Secretary (Finance) and the Secretaries of the concerned departments periodically in this matter. But there was little improvement in the situation and most of these undertakings have not finalised their accounts for periods up to 10 years or more... The Principal Secretary/ Secretary of the department concerned neither initiated action against the defaulting Heads of Departments for their failure to prepare the accounts nor took any effective initiative to set right the position. Moreover, there was no system of Internal Audit and performance appraisal to analyse the efficiency of these departmentally run undertakings. As a result there is no accountability of the management and government in respect of the public funds spent by these undertakings...’’

The CAG then lists companies and the latest year for which their accounts are available. Remember, he is not commenting on their financial and physical performance — that is awful by every standard. Nor even on the veracity or otherwise of the accounts. He is merely commenting on the most elementary requirement — whether they have cared to maintain even pro-forma accounts. As we have seen earlier, it transpires that accounts for the Sisal Plantation Scheme have ‘‘not (been) prepared since inception’’ — in 1955/56. That the accounts of the Oriental Gas Companies’ undertakings too have ‘‘not (been) prepared since inception’’ — in 1960/61. That the accounts of the Government Sales Emporia in Calcutta and Howrah too have ‘‘not (been) prepared since inception’’ — in 1951/52. That the accounts of the Government’s Silk Reeling Scheme too have ‘‘not (been) prepared since inception’’ — in 1956/57. That the accounts of the Government’s Training-cum-Production Centre — Mechanical Toys, Hooghly, too have ‘‘not (been) prepared since inception’’ — in 1972/72. That the accounts of the Government’s Central Lock Factory, Bargachia, Howrah, too have ‘‘not (been) prepared since inception’’ — in 1972/73. That the accounts of the Government’s Industrial Estate, Manicktola too have ‘‘not (been) prepared since inception’’ — in 1983/84. That the accounts of the Government’s Industrial Estate at Saktigarh too have ‘‘not (been) prepared since inception’’ — in 1983/84. That the accounts of the Government’s Kanchrapara Area Development Scheme too have ‘‘not (been) prepared since inception’’ — in 1975/76. That the accounts of ‘‘hats’’ under the management of the Government too have ‘‘not (been) prepared since inception’’ — in 1982/83. Fifteen other companies are listed — with accounts not being available for 3 years to a decade. Accountability! Governmental enterprises serving a ‘‘social purpose’’!

Having given this distressing list, the CAG observes, ‘‘No action was taken by Government against the management of these undertakings for such gross failure and disregard of public interest.’’

His concluding words are worth putting as the frontispiece of reports of public sector enterprises. The CAG laments, ‘‘The lack of accountability arising out of the failure to prepare accounts by the departmentally run units for years on end is a matter of serious concern, as large amounts of public funds are involved coupled with the possibility of serious financial iregularities remaining undetected for long periods. Since these are departmentally run commercial units, responsibility for failure to ensure accountability of public funds should be fixed on the Heads of Departments. Government should re-examine the justification of continued release of budgetary funds to units without finalised accounts and without assessing their financial performance...’’

That was written three years ago. Nothing but nothing has happened since then on any of the strictures. Not one person has been brought to book. The culture of not one unit has changed in any way.

And yet we are fed the myth day in and day out: these enterprises must be kept in the public sector as that alone ensures that they remain accountable.

Persistent irregularities

‘‘The following persistent irregularities and system deficiencies in the financial matters of PSUs had been repeatedly pointed out during the course of audit of their accounts,’’ the CAG observes in his Report for the year ending March 2000, ‘‘but no corrective action was taken by these PSUs so far.’’

And then follow representative illustrations from the accounts and operations of the PSUs that the CAG’s teams have examined.

Does the stricture or does the list have any effect? In his Report for the year ending March 2001, the CAG observes, ‘‘The following persistent irregularities and system deficiencies in the financial matters of PSUs had been repeatedly pointed out during the course of audit of their accounts but no corrective action was taken by these PSUs so far.’’ And that is followed by another telling list of illustrative irregularities.

The CAG proceeds to spell out the procedure that has been laid out, and what the Government and the undertakings do in fact. He writes, ‘‘Audit observations noticed during audit and not settled on the spot are communicated to the heads of PSUs and concerned departments of the State Government through Inspection Reports. The heads of PSUs are required to furnish replies to the Inspection Reports through respective heads of departments within a period of six weeks.’’

That is the schedule that has been laid down. And how do the PSUs and the departments of Government in fact treat the watchdog to retain whose jurisdiction our Comrades argue the units must be kept in the Public Sector? The CAG answers:

‘‘Inspection Reports issued up to March 2001 pertaining to 54 PSUs disclosed that 503 paragraphs relating to 281 Inspection Reports remained outstanding at the end of September 2001. Of these, 95 Inspection Reports containing 182 paragraphs had not been replied for more than two years...’’

‘‘Similarly, draft paragraphs and reviews on the working of PSUs are forwarded to the Principal Secretary/ Secretary of the administrative department concerned, demi-officially seeking confirmation of facts and figures and their comments thereon within a period of six weeks. It was, however, observed that 11 draft paragraphs and 3 draft reviews forwarded to the various departments during July 2000 to June 2001... had not been replied to so far.’’

The CAG proceeds to observe, ‘‘It is recommended that (a) the Government should ensure that procedure exists for action against the officials who failed to send replies to Inspection Reports/ draft paragraphs/ reviews as per the prescribed time schedule, (b) action should be taken to recover loss/outstanding advances/overpayment in a time bound scale and (c) the system of responding to the audit observations should be revamped.’’

And what effect did these recommendations have?

The Report for the next year, the one ending in March 2002, furnishes the answer. Nothing but nothing having happened, the CAG is compelled to repeat the very words of his earlier reports:

‘‘The following persistent irregularities and system deficiencies in the financial matters of PSUs had been repeatedly pointed out during the course of audit of their accounts, but no corrective action was taken by these PSUs so far...’’

Followed by the same sort of list.

And then the systemic stricture, so to say, with only a few numerals being changed, ‘‘Audit observations noticed during audit and not settled on the spot are communicated to the heads of PSUs and concerned departments of the State Government through Inspection Reports. The heads of PSUs are required to furnish replies to the Inspection Reports through respective heads of departments within a period of six weeks. Inspection Reports issued up to March 2002 pertaining to 54 PSUs disclosed that 458 paragraphs relating to 233 Inspection Reports remained outstanding at the end of September 2002. Of these, 104 Inspection Reports containing 162 paragraphs had not been replied for more than two years...’’

‘‘Similarly, draft paragraphs and reviews on the working of PSUs are forwarded to the Principal Secretary/ Secretary of the administrative department concerned semi-officially seeking confirmation of facts and figures and their comments thereon within a period of six weeks. It was, however, observed that two draft paragraphs and two draft reviews forwarded to the various departments during March 2002 to July 2002... had not been replied to so far (September 2002).’’

So, what is to be done? The CAG is constrained to repeat the very words he has used to no effect in the earlier Report:

‘‘It is recommended that (a) the Government should ensure that procedure exists for action against the officials who failed to send replies to Inspection Reports/ draft paragraphs/ reviews as per the prescribed time schedule, (b) action should be taken to recover loss/ outstanding advances/ overpayment in a time bound scale and (c) the system of responding to the audit observations should be revamped.’’

But ‘‘accountability’’, ‘‘watchdogs’’...

(To be continued)

The writer is a BJP MP and former Minister for Disinvestment, Communication and Information Technology

 
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