Telecom companies resent CAG bid to audit their books

Leading mobile operators Bharti Airtel, Tata Teleservices, Vodafone Essar and state-run Bharatiya Sanchar Nigam Ltd have questioned the Comptroller and Auditor General's authority to audit their accounts, with Bharti Airtel recently saying the apex auditor's powers are with respect to state-owned firms only.
 
The Department of Telecom (DoT) had earlier asked five telecom companies - Bharti Airtel, Reliance Communications, Tata Teleservices, Vodafone Essar, and BSNL - to provide accounting details of three years from 2006-07 onwards to the CAG. In turn, the CAG had asked these telecom companies to submit their books and records within 15 days, including cost break-up and details of depreciation charged on fixed assets and other income.
 
Bharti Airtel and Vodafone Essar, in a communication to the government pointed out that powers of the CAG do not extend to private operators.
 
"The various sections of the CAG (Duties, Powers and Conditions of Service) Act 1971, which set out the duties and powers of the CAG, are with respect to audit of accounts of government companies/corporations under the Union of State. These powers do not extend to private companies like Bharti Airtel," India's largest telecom company said in a communication to Telecom Secretary PJ Thomas.
 
The company said the information sought by the CAG is confidential and sensitive from a competition point of view and asserted that such disclosures falls beyond its obligations under the licence agreement. The company also questioned the need for conducting such an audit soon after a special audit by the DoT, which went on for eight months.
 
"The recent audit required us to spend an enormous number of hours and dedicate a large number of resources to collate the massive data required by DoT. Considering that the audit went on for eight months and has been completed very recently, a fresh audit following immediately after the last is highly unfair on us and will result in major duplication of efforts/cost/time and manpower," said the operator.
 
Bharti Airtel officials declined to comment on the issue. But earlier, Tata Communications had also questioned the need for a CAG audit immediately after the Special Audit by DoT. BSNL executives also said a new audit for the past three years would only amount to duplication, since CAG had already audited its financials for this period. The accounts of all PSUs are audited by CAG.
 
Vodafone Essar, too, is learnt to have taken a similar stance in its communication to the government opposing a second round of audit by the CAG.
 
Officials of the CAG, however, said that a 2002 notification authorises it to audit the accounts of telecom companies, as they share their revenues with the government. So far, the CAG never exercised this power, they added.
 
CAG of India Vinod Rai had earlier said that CAG had still not got access to records of private (telecom) operators despite a request by the government itself. According to the government, the CAG audit is to ensure the telecom operators have made payments to the government as per licence rules.
 
This is the second instance of the government wanting to examine the telcos' books. The move follows allegations of underreporting of revenues. Since telecom companies pay 6-10 per cent of their annual revenue as licence fee and 2-6 per cent as spectrum usage charges, reporting lower revenue brings down the component they have to share with the government.
 
In April 2009, the government had ordered a special audit of the account books of top private cellphone companies, including Reliance Communications, Bharti Airtel, Vodafone Essar, Tata Teleservices and Idea Cellular, to ensure that they have correctly reported and shared revenue with it.