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3G operators may come under scrutiny of CAG
September, 13th 2010

The director-general of audit (posts & telecommunications) has asked the Department of Telecommunications (DoT) to amend the licence conditions of telecom operators by incorporating a clause enabling the comptroller & auditor general (CAG) to audit the accounts of private operators that recently bagged 3G and broadband wireless access spectrum.

The move is significant as it would extend the power of CAG set up to audit central and state government departments as well as PSUs to private sector companies. In telecom, CAG will ascertain the correctness of the gross revenues of private operators. This comes after allegations that telcos were under-reporting revenues, thereby short-changing the government of its rightful revenue share.

The audit departments decision also provides a new twist to the growing battle between DoT and CAG on their respective jurisdictions in formulating and dictating telecom sector policy.

The director-general, in its communication, pointed out that with 3G services expected to be launched by private operators by the end of this year, there was need for an amendment to their licence conditions to also provide for rollout obligations and payment of additional spectrum charges. It also argued that the changes needed to be carried out so that there are no legal complications.

Telcos had earlier sought the Supreme Courts intervention to halt a move by the government to ask CAG to scrutinise the accounts of 2G operators for any evidence of under-reporting. DoT had appointed independent auditors to look into the books of operators and their reports had been submitted. The Supreme Court declined to stay the CAG scrutiny.

Last month, DoT had sought the opinion of the law ministry on the jurisdiction of CAG after the latters audit report on the allocation of 2G spectrum questioned the departments policy decisions. The law ministry wrote back stating that though CAG and the Central Vigilance Commission work as watchdogs, they could not exceed the clear role assigned to them. This has been interpreted by experts as meaning CAG cannot challenge policy decisions taken by government departments.

The communication from the director-general was addressed to former DoT Secretary P J Thomas on September 3, just days before he was appointed the new central vigilance commissioner amidst a brewing controversy.

However, the battle between the DoT and CAG took on a political colour, with BJP leaders alleging that the fraudulent query from the department on CAGS jurisdiction aimed to protect Communications Minister A Raja. Decisions taken on the ministers watch are under scrutiny by investigative agencies.

The BJP also opposed Thomass appointment to the coveted post. BJP leader Sushma Swaraj, who was part of a three-member panel to appoint a new vigilance commissioner had objected to Thomas because he faced charges of corruption while in Kerala and was not seen as the right candidate to investigate allegations into 2G spectrum allocation to new players.

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