SUPREME COURT JUDGEMENT ON CAG AUDIT OF PVT COMPANIES– RETROGRADE STEP? By its recent land mark judgement , the Hon SC has propounded a new hypothesis. Its two primary components are: @ that the CAG has the power to audit the accounts of any pvt company which uses natural resources on being enabled to do so by the govt @the focus of such audit is whether the govt is getting a fair share of revenue for utilisation of these resources by the cos. As a backdrop, how these companies get to use these resources in he first place? It is because of an implicit recognition by the govt that it lacks the resources to use these resources by way of capital, human skill in management and a general efficiency. Does the govt allot these natural resources free ? No way. It is through an elaborate bidding process in which price is “discovered”. What are the basic tenets of this price discovery. An optimum share in the revenue to the govt as the ultimate owner of these resources even as a decent return to the investor as a compense for his stake. Now what the SC judgement empowers the CAG is to look at this profit that these companies make and opine whether it is the result of a lower revenue share to the govt. In other words revisit the contract and reopen the settled price issue. Does it conform to principles of contract and more basically principles of natural justice.Is it not a measure to deny fruits of efficiency to the investor and deny him the fruits of his toil. More critically it covers every existing project in ports/ roads/ ports/ airports/ and even banks. Question every item of cost/ investment made by these companies as its reasonableness and need . Unacceptable under any norm. To me it is retrograde and a step which will be a dampener for investor confidence. Coming after the Videocon affair which put us back in the FDI by several years, this will repulse all domestic investors . More than any body GOI has more reasons to bother. It has grandiose plans of a one trillion dollar investment in the next plan with pvt sector contributing 50%.What can enthuse participation is an assurance of a stable environment where every scrutiny and award of investment will be rigorously adhering to ensuring fair and an equitable distribution of return to all the stake holders and once done it will not be revisited at all. The fidgeting PPP initiatives require this confidence restoration badly Will GOI act?
Posted on: Fri, 18 Apr 2014 03:10:25 +0000
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