January 7, 2014
NEW DELHI: The Delhi high court ruling on Monday permitting the comptroller and auditor general (CAG) to audit telecom companies has the potential to open up yet another massive scandal, according to indications available from limited official audits done in the past.
January 7, 2014
NEW DELHI: The Delhi high court ruling on Monday permitting the comptroller and auditor general (CAG) to audit telecom companies has the potential to open up yet another massive scandal, according to indications available from limited official audits done in the past.
CAG, were not submitted before the court since the auditor felt that their submission could be interpreted as contempt of court.
According to sources, private auditors appointed by the department of telecommunications had audited five telecom companies in the financial years 2006-07 and 2007-08. The five operators — Bharti Airtel, Vodafone, Reliance Communications, Tata Teleservices and Idea Cellular — together understated their revenues by Rs 10,268 crore during these two years. Based on the findings of the audit in mid-2012, DoT had slapped penalties totaling Rs 1,594 crore on the five companies.
Under the contract between DoT and telecom companies, the private entities pay 6%-10% of annual revenue as licence fee and 2%-6% as spectrum usage charges. Under-reporting of revenues would have significant adverse impact on the revenues accrued to the government.
It was at the request of telecom companies that the then NDA government, headed by Atal Bihari Vajpayee, allowed telecoms to migrate from a fixed licence fee regime to a revenue sharing one in 1999. This was provided through the New Telecom Policy of 1999.
However, when the government discovered variation in the gross revenue of certain operators as reported to the DoT, the Securities and Exchange Board of India (Sebi) and the Telecom Regulatory Authority of India (Trai), it ordered special CAG audit into books of their accounts.
Starting October 2009, the CAG began efforts to audit the private telecom companies. And, for the past three years it has also been asking DoT to nominate CAG as its auditor under the agreement between the government and the companies. However, the DoT has been reluctant about nominating CAG, while private telecom firms went to the high court, which has now ruled in favour of a CAG audit.
Under the revenue sharing regime, the government trusted telecoms for whatever revenue they declared based on their self-certification of accounts. This was despite the fact that Parliament, through TRAI Rules 2002, made provisions for verification of the books of accounts of all operators by the CAG under Section 16 of CAG Act to confirm the correctness of revenue share.
Details on understatement of revenue by telecom firms, though compiled by the CAG, were not submitted before the court since the auditor felt that their submission could be interpreted as contempt of court. Also, these understatements were discovered by private auditors.
A CAG spokesperson said the order would help clear all doubts that the auditor is required to audit all receipts payable into the Consolidated Fund of India.
DoT-appointed private auditors had checked the books of 5 telcos for the financial years 2006-07 and 2007-08 and found they had understated revenues by Rs 10,268 crore.
Courtesy: PTI
