Part of a pattern
The situation in West Bengal is especially educative. Here is a State that has been ruled for over two decades by ones who have been most vociferous in maintaining that units must remain under government ownership as this is the one way accountability can be maintained. Diluting government holding in them will take them out of the purview of CAG, CVC, CBI and other watchdogs, and from legislative oversight. But the fate of reports of the CAG testifies to the same condition. Reports are received. Hardly anyone scans them. On the rarest of rare occasions, some snippet is taken up by some newspaper or someone in Opposition. The hulla lasts for a few days, and everyone moves on to some other issue.
The CAGs reports on different States have a portion, Response to Inspection Reports, Draft Paragraphs and Reviews. The portions turn out to be almost identical from State to State.
The reports explain that Audit observations noticed during audit and not settled on the spot are communicated to the heads of PSUs and the concerned administrative departments of State Government through Inspection Reports. The heads of PSUs are required to furnish replies to the Inspection Reports through the respective heads of departments within a period of six weeks.
The position in different States can be gleaned from the accompanying table. In each instance the CAG has been constrained to make recommendations analogous to what he has advanced in the case of West Bengal: It is recommended that (a) the Government should ensure that procedure exists for action against officials who failed to send replies to Inspection Reports/ draft paragraphs/ reviews as per the prescribed time schedule, (b) action is taken to recover the loss/ outstanding advances/ over-payments in a time-bound schedule, and (c) the system of responding to the audit observations is revamped.
To as much effect as the corresponding exhortations did in the case of West Bengal. The position in regard to the discussions in the Legislatures on these reports turns out to be just a little different. Few can recall any structured discussion that may have followed a report of the CAG. The reaction in general is that the reports are dealt with by the Public Accounts Committees. And few seem to be up to date as to what report has been discussed by the PAC of the State, and what action has followed as a result.
Nor is this lack of response, this casualness confined to what the CAG has stated. The passage in the report (Civil) on Orissa for the year ending 31 March 2003 is typical:
A review of the IRs (Inspection Reports) issued up to June 2003 pertaining to 4752 offices of 34 departments showed that 52394 paragraphs relating to 15509 IRs were outstanding at the end of September 2003. Of these, 3822 IRs containing 8025 paragraphs had not been settled for more than 10 years.
Even the initial replies which were required to be received from the Heads of Offices within six weeks from the date of issue were not received in respect of 4058 IRs, issued between 1964-65 and 2002-03 in respect of civil departments and works departments. As a result, several serious irregularities commented upon in these IRs had not been settled as of September 2003. Failure to comply with the issues raised by Audit facilitated the continuation of serious financial irregularities and loss to the Government.
Such paragraphs are followed by recommendations that too do not need to be changed from State to State, so uniform is the casualness:
It is recommended that Government should look into this matter and ensure that procedure exists for (a) action against officials who fail to send replies to IRs/ Paras as per the prescribed time schedule, (b) revamping the system of proper response to the audit observations in the Departments and (c) action to recover loss/ outstanding advances/ overpayments pointed out in audit in a time bound manner.
And this is followed by another observation that would by now be familiar to the reader:
The matter was referred to Government in November 2003. No reply was received (December 2003).
Irregularities that are of a serious nature and for which the departments are not able to provide satisfactory explanations get included in the CAGs reports to the State Legislature. The departments concerned are required to submit their responses within three months to the PAC. The PAC discusses the CAGs observations and the explanations furnished by the departments. Once it finalises its views, and presents them to the Legislature, the departments are to furnish Action Taken Reports within six months.
The CAG points out, to continue the Orissa example, that even the explanatory notes were not received for a third of the paragraphs and reviews. The next stage, of course, is the examination by the Public Accounts Committee of the State Legislature. The reports of the PAC, the CAG notes, are the principal medium by which the Legislature enforces financial accountability of the Executive to the Legislature.
His review of the affairs in Orissa showed that 15,509 reports containing 52,394 paragraphs were awaiting settlement up to September 2003. Furthermore, that of these about 11,000 reports and 23,000 paragraphs had not been settled for more than five years; and that 3,822 reports with 8,025 paragraphs had been awaiting settlement for more than ten years. In the case of 4,058 reports, even the first replies had not been received. Finally, there were 2,030 recommendations of the Public Accounts Committee on which action had not been taken. Of these, 842 emanated from the 9th Assembly of the State that is, from 1985/90; 711 from the 10th Assembly that is, from 1990/95; and 253 from the 11th Assembly that is, from 1995/2000.
Because of this situation, in Maharashtra 26 Departmental Audit Committees have been instituted. During 2002/03, the CAG records, only five of the 26 held meetings. Out of 12,272 paragraphs that were outstanding against five departments, only 1,439 paragraphs could be discussed, and only 562 settled. Tabulating data from 1985, the CAG found that of the 1,057 paragraphs that figured in Audit Reports, the PAC discussed only 149. Of the 149 that had been discussed, Action Taken Reports had been submitted for only 116.
In State after State, the data is similar. In several States, after the lacunae became a matter of some discussion, remedies were put in place. Only to subside into the same quicksand of indifference. Andhra, to take a typical instance, instituted the practice of getting reports about outstanding paragraphs to Principal Secretaries and Secretaries of Government every six months. Upon reviewing what happened to this innovation, the CAG found:
The Principal Secretaries/ Secretaries who were also informed of the position through half yearly reports, failed to ensure prompt and timely action by the concerned officers. Lack of response to Audit indicated inaction against the defaulting officers, facilitating contiuation of serious financial irregularities and loss to government even after these were pointed out in audit.
The CAGs report on Rajasthan speaks of a rule that in the course of time obliterates the problem literally and entirely! According to Rule 327(1) of General Financial and Accounts Rules, the retention period for various accounting records ranges between one and three years after audit. As the departmental officers failed to comply with observations in IRs within the prescribed retention period of records, the possibility of their settlement in future appeared to be bleak due to non-availability of records.
In a word, what we found about West Bengal is true of other States as well perhaps to a lesser extent that is all. Second, what we found about public sector enterprises is true of governmental operations in general perhaps to a lesser extent that is all. And what we have found in the case of the CAG and his reports is true of other watchdogs as well. So many States have instituted Lokayuktas, for instance. Even on their own telling, they have been almost totally ineffective.
This is the central moral. We have set up an array of institutions. We have instituted the most complex procedures and systems of checks and crosschecks. They come to little. For, having set up the institution, having instituted the procedures, we do nothing to see whether anything substantive is being done or just the rituals are being gone through.
To take an instance, BIFR goes through the most elaborate hearings before approving a rehabilitation package. What were the assumptions on which the package was approved? What has happened in practice after the reliefs were given to the unit?, I ask. We do not keep track of the package after we have approved it, say BIFR officials.
How much has been given in various relief packages to PSUs in the last five or ten years?
I spend five years in asking the Finance Ministry. They have no consolidated list. Not even of the amounts that the Ministry has shelled out in compliance with Cabinet decisions. Eventually a Secretary has colleagues rummage some records, and a rough and ready estimate of Rs 40,000 crore having been given in relief over six or seven years comes up.
Did the enterprises keep to the promises on the basis of which packages had been sanctioned? I inquire. The nodal department, the Department of Public Enterprises does not receive the information. No one else, the Cabinet Secretariat down, has cared to follow up either. That is the job of the administrative ministries, I am told. The administrative ministries, including the one that has the maximum number of sick PSUs as its special charge, the Ministry of Industry, have no record either.
After years and years of hearings, in some cases after hearings that have gone on for over twelve years, BIFR recommends in the case of some 31 PSUs that they be wound up, that there is just no way in which their net worth can be turned positive in the foreseeable future.
What has happened after the recommendation was given? I inquire. Has an appeal been filed in the AAIFR or the High Court? Has either stayed the matter? We are a quasi-judicial body, BIFR officials explain. BIFR does not appear before AAIFR or High Courts even when it is made a party by the appellant just as a lower court does not appear before a higher court when one of its decisions is challenged.
So, I turn to the Ministries. They say they will get the information from the companies. There are huge over-runs of time and expenditure on projects. A special Department is set up to monitor the progress and coordinate efforts to remove bottlenecks. When I am fortuitously posted to it, I find that it has become, like so many other departments, a parking lot for civil servants who cannot be accommodated elsewhere. The major work of the Department in regard to its original mandate gets reduced to preparing a report every quarter. The reports turn out to be the same, quarter after quarter after quarter. Just a few figures between the words are changed. Even the most elementary analysis is not attempted the projects are listed seriatim; what proportion of the total cost over-run is accounted for by how many and which projects so that focusing on ten or twenty of them would unlock 70/80 per cent of the total outlay even that little bit of reorganising of tables has not been done.
And the reason is evident: the reports are held as closely guarded secret within Government lest any department feel that this Department is out to show it in a bad light; and within Government no one reads the reports.
Time and again, proposals come up for giving additional funds for a project. The justification is invariably the same: Rs X hundred crore have already been spent on this project; if this additional amount is not given, Rs X hundred crore will turn into dead investment. This cannot be allowed to go on, Cabinet decides. Each Ministry implementing major projects must set up a committee to affix responsibility for time and cost over-runs. Twenty-three ministries set up committees. There is no improvement. This cannot be allowed to go on, Cabinet decides. Whenever a proposal comes up for extra funds, it must be accompanied by the report of the committee affixing responsibility for the over-runs. The reports are duly annexed. I read a score of them. Each has concluded that no individual or group of individuals can be held responsible for the over-run; the causes turn out to be either factors that were beyond the control of individuals and Government natural calamities, for instance or systemic failures.
And yet, the myth, The units must remain in the public sector as this is the only way to ensure that they remain accountable.
Concluded. The writer is a BJP MP and former Minister for Disinvestment, Communication and Information Technology