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Telcos in tizzy as General of India to audit their books

Friday, 18 April 2014 - 7:05am IST | Place: New Delhi | Agency: dna

Say SC order allowing Comptroller and Auditor General of India to audit their books may lead to its extension to other sectors such as power, mining and oil

The Supreme Court order to let Comptroller and Auditor General of India (CAG) audit the account books of telecom firms has dealt a blow to India Inc.

If it is telecom firms today, it could be power producers, miners and oil explorers tomorrow, they fear.

In a major setback to the private telecom firms, the apex court on Thursday held that CAG can audit the account books of these firms, which share their revenue with the government.

Rajan Mathews, director general, Cellular Operators Association of India (COAI), said the industry is disappointed by the verdict.

"It has larger ramifications for the corporate India. Any company which has a relation with the government or has some type of financial arrangement with the government shall be subject to CAG audit," he told dna.

"It also affects the industry by virtue of fact that it increases our cost. One more layer of cost will be added to the company apart from a substantial amount of time which will be devoted for the audit," he said.

So far, telecom companies are subject to audit by the term cells of the Department of Telecom, the Telecom Regulatory Authority of India (Trai) and the Securities and Exchange Board of India (Sebi). Now, CAG will also audit these companies.

A bench comprising justices K S Radhakrishnan and Vikramajit Sen said the CAG can carry out the audit to examine whether the companies are giving proper share of their revenue to the government.

The court passed the order on a batch of petitions filed by telecom companies' associations, including the Association of Unified Telecom Service Providers of India (AUTSPI) and the Cellular Operators Association of India (COAI), challenging the January 6, 2014, Delhi High Court verdict that had given green signal for CAG audit of the firms' account.

Analysts and consultants too said this judgment is likely to add to the complexity of the operating environment of the telecom operators.

"The country is 4-5 years behind in technology in telecom and need about $100 billion to catch up with the world. This ruling would add to the perception that India is a difficult country to do business in and there is more government than warranted," said Hemant Joshi, Partner, Deloitte Haskins & Sells.

"It could then extend to mining, power, airline, banking, manufacturing, services companies and individuals, etc," he said.

The Supreme Court had on February 3, 2014 sought responses from the Centre and the CAG on the pleas of the associations.

The firms had challenged the High Court order which had said that it was the duty of CAG to audit telecom companies as a part of their revenue goes to the Consolidated Fund of India.

Earlier, the telecom firms had submitted before the Supreme Court that the High Court had erred in holding that CAG was empowered to conduct their revenue audits.

The firms had said that the high court had wrongly assumed that they share revenue with the government and contended that they only pay a licence fee, which was a percentage of their revenue.

—(With inputs from PTI)

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