2G auction: Why CAG must say sorry to the nation

The Comptroller and Auditor General (CAG) of India, Vinod Rai, owes an apology to the nation. His position on 2G spectrum allocations has been proved flawed twice - once by the Supreme Court, again by the results 2G auction process which concluded recently. He misused the public trust vested in his office by choosing to be sensationalist in his 2G 'presumptive' loss theory. In his overzealousness to assert himself over the government he might have caused serious damage to the credibility of the institution of CAG. So, an apology is in order.

The CAG vs government controversy raging over the last three years rested on two substantive questions -- first, the government’s competence to take policy decisions in case of rare natural resources; and second; the actual loss, if any, to the country from the allegedly arbitrary spectrum allocations by former telecom minister A Raja. The answers are more or less settled now. In both cases, the national auditor appears to be on shaky ground.

 2G auction: Why CAG must say sorry to the nation

Comptroller and Auditor General, Vinod Rai. Image courtesy PIB

How? The Supreme Court, offering its opinion on the Presidential Reference on the first question, has held that maximisation of revenue in the distribution of natural resources can't be the only criteria in all situations and circumstances and auctions cannot be made the sole constitutional principle in such cases. The court also made it clear that defining the policy of allocation of natural resources for public good was the prerogative of the legislature and the executive.

The emphasis of the court was on greater common good vis-a-vis maximisation of gains in revenue terms. CAG, while pegging the 'notional' loss from the absence of auctions in 2G spectrum at Rs 1.76 lakh crore, was making a policy prescription for the process of auctions. The court rejected it and re-established the primacy of the elected government when it involved allocation of natural resources. That was defeat number one for the national auditor. He was trying to trespass into the territory of the executive and the court drew the no-go line.

Now, the number: Rs 1, 76 lakh crore. Where did it come from? CAG based its estimates on the loss from 2G allocations in 2008 on the 3G spectrum allocations of 2010 and sought to prove by implication that spectrum was deliberately underpriced by the government to favour a few firms . As the just concluded re-auction of 2G spectrum reveal, the number was all wrong. The government raised a mere Rs 9, 407 crore against an ambitious target of Rs 40,000 crore.

Had it been a successful auction, the gains for the government still would not have been anywhere close Rs 1,76 lakh crore. The CAG was overshooting, but for what? Was there a political motive involved or is just plain professional incompetence? In 2009, the CVC had put the number at Rs 22,000 crore and the CBI at around Rs 35,000 crore. These numbers appear more believable under the present circumstances than what CAG offers.

Whatever the truth, the result of the auctions proves that Vinod Rai has lost out on the second question. There are allegations of 'fixing' in the latest auction process and collusion between the telecom players and the government to show CAG wrong. In the absence of concrete evidence the allegations could be as fantastic as the 2G loss figure. One would have expected him to stand vindicated. Unfortunately, that is not the case.

Now, the biggest question. Has Rai tarnished the credibility of the institution he heads in some way? Possibly, yes. The next time, CAG releases a number, it will be viewed with suspicion and put under intense scrutiny. The estimation of loss from the coal block allocations—Rs 1.86 lakh crore—is already being pooh poohed by the government. And yes, if the intention is to grab media and public attention, CAG will need to throw bigger numbers into the public domain. With Rs 1.76 lakh crore a bench mark—of the wrong kind—has been set. Anything below that number won’t be taken seriously. That’s in the public nature. The 'sensational' just have to get bigger.

Rai is a man of integrity. It won’t harm him if he admits that he overreached and got the numbers a bit messed up, and says sorry to the country. It would enhance his image in the public perception. More importantly, it would make CAG a more credible institution.

Updated Date: Nov 16, 2012 14:57:56 IST