Forces, CAG lock horns over audit of unit run canteens

Wednesday, 14 September 2011 00:54
The armed forces and Comptroller & Auditor General of India (CAG) are at loggerheads over the auditing of the 4,500 unit-run canteens which have an annual turnover of Rs 10,000 crore.

Documents available with The Pioneer show that the chiefs of the Army, Air Force and Navy have refused to comply with the direction of the Defence Secretary to permit the CAG to audit the unit canteens. The Secretary had conveyed the direction of Defence Minister AK Antony, who had received a complaint from the CAG on the denial of audit by Army Headquarters.

“Since no headway has been made in this regard, the CAG has written to the Raksha Mantri on this issue and has requested his intervention for providing audit parties access to unit-run canteens (URC) as early as possible,” noted the Defence Secretary’s letter to the three service chiefs, marked ‘secret’.

“It has been observed by the CAG that considering the facts that URCs are located in Government premises, are run in most cases by service personnel, use Government transport and, most importantly, receive substantial funds from the Consolidated Fund of India, such denial violates provisions of the Constitution of India regarding the powers and duties of the CAG,” it added.

“It is, therefore, requested that necessary instructions may kindly be given to the concerned for allowing audit personnel to access information from the URCs under their control so that RM is apprised of them,” the Defence Secretary wrote.

Meanwhile, on September 7, Public Accounts Committee chairman Murli Manohar Joshi summoned the vice-chiefs of the Army, Air Force and Navy and directed them to provide access to the CAG for auditing unit-run canteens.

Earlier, in the second week of January, Joshi had summoned heads of the three forces on the same issue.

According to sources, the Vice Chiefs, who were representing the heads of the three Services, vehemently objected to the auditing of CAG in the Unit Run Canteens and claimed that each canteen is audited by chartered accountants. At this point Joshi told them that this argument was not tenable and questioned the reasons for preferring Chartered accountants over the Government Auditor.

While Vice Chiefs contended in the meeting that it was not possible for CAG to audit all 4,500 canteens, the CAG officials countered that they would audit on random basis and if they found irregularities, would consider further auditing.

Joshi directed the three forces to submit a detailed report on how to make way for audit of unit run canteens within a week and suggested for a high level committee of auditors and forces to resolve the issue.

For the past two years CAG and forces are locking horns over the auditing of Unit Run Canteens. In India, the forces supply system is managed by 34 depots of Canteen Stores Department (CSD), which is distributed through the 160 lakh end users through more than 4500 canteens, controlled by each unit. The Unit Run Canteens would take a margin at an average of four percent on the supply and the profit is expected to be around Rs.500 crore in the annual turn over of more than Rs.10000. Though CAG got access to audit the 34 CSDs, forces object the auditors when they demanded to check the accounts of Unit Run Canteens, where the actual sale takes place.

The forces get the money from the Consolidated Fund of India and enjoy Quantitative Discounts approved by the government, apart from the avoidance of taxes on most of the supplied items.

The CAG has argued out that as the fund is made available from the Consolidated Funds, they have the right to audit where as the forces claim that the affairs of the Unit Run Canteens are “purely private ventures of each units” and hence no need of auditing.
Forces, CAG lock horns over audit

Col KN Nair (Retd) comments
The CAG should have audited these URCs long back. Misuse of tax payer's money is in any case not in the interest of Nation. In this transperancy era, the Services cannot say no to the Govt Auditor. It is certain that the huge profits earned out of URC venture were/are being used by the Service Officers left and right. If the URC records are audited, this will come out as another major scandal. The CAG should act now.