Model Answer
0 min readIntroduction
The Comptroller and Auditor General of India (CAG) is a constitutional authority established by Article 148 of the Constitution of India. It audits the accounts of the Union and State governments, including bodies and authorities substantially financed by public funds. Recently, the Supreme Court’s judgment in the case of *Energy Watchdog v. Central Electricity Regulatory Commission (CERC)* (2023) has significantly altered the scope of the CAG’s audit powers, particularly concerning private entities receiving substantial public funding. This judgment has sparked debate regarding the balance between accountability and the independence of regulatory bodies and private sector participation in public services.
Background: Powers of the CAG
The CAG’s powers are derived from Articles 148-151 of the Constitution. These include:
- Audit of Government Accounts: Examining all expenditure from the Consolidated Fund of India and State Consolidated Funds.
- Audit of Public Sector Undertakings (PSUs): Auditing accounts of government companies, corporations, and bodies.
- Subsidiary Accounts: Auditing accounts of departments and agencies.
- Review of Revenue Receipts: Reporting on the receipts of the government.
Traditionally, the CAG’s audit jurisdiction extended to entities where there was ‘substantial public funding’ or ‘government control’. However, the definition of ‘substantial’ and the extent of ‘control’ were often subject to interpretation.
The *Energy Watchdog v. CERC* Case
The case revolved around the CAG’s attempt to audit the accounts of the Power System Development Fund (PSDF), administered by the Central Electricity Regulatory Commission (CERC). The PSDF was funded by a cess levied on electricity consumption, and the funds were used to support various projects in the power sector, including those undertaken by private companies. CERC argued that the CAG lacked jurisdiction to audit private entities benefiting from the PSDF.
The Supreme Court Judgement
The Supreme Court, in its judgment delivered in 2023, ruled that the CAG does not have the power to audit private entities, even if they receive substantial funding from a public fund like the PSDF. The Court emphasized that the CAG’s audit jurisdiction is limited to entities directly controlled by the government or those that are ‘bodies and authorities’ established by law. The Court reasoned that extending the CAG’s audit powers to private entities would violate the principle of separation of powers and undermine the independence of regulatory bodies.
Changes in the Powers of the CAG
The Supreme Court judgment has brought about the following changes:
- Narrowed Audit Jurisdiction: The scope of the CAG’s audit powers has been significantly narrowed, particularly concerning private entities.
- Clarification on ‘Substantial Funding’: The judgment clarified that mere receipt of substantial funding from a public fund is not sufficient to bring a private entity within the CAG’s audit jurisdiction. Direct government control or establishment by law is crucial.
- Impact on PPP Projects: The ruling has implications for Public-Private Partnership (PPP) projects, where private companies often receive significant public funding. The CAG’s ability to scrutinize the use of public funds in these projects is now limited.
- Strengthened Regulatory Independence: The judgment reinforces the independence of regulatory bodies like CERC by protecting them from excessive scrutiny by the CAG.
Constitutional Basis and Debates
The judgment is rooted in the interpretation of Article 148 and the concept of ‘bodies and authorities’ receiving funds from the state. Critics argue that the ruling may weaken accountability in sectors where public funds are channeled through private entities. Proponents maintain that it safeguards the autonomy of regulatory bodies and encourages private sector participation in public services. The judgment has prompted discussions on the need for legislative amendments to clarify the CAG’s audit jurisdiction in the context of evolving public-private partnerships.
Conclusion
The Supreme Court’s judgment in the *Energy Watchdog v. CERC* case represents a significant shift in the understanding of the CAG’s powers. While it clarifies the limits of the CAG’s audit jurisdiction, it also raises concerns about accountability in sectors increasingly reliant on PPP models. A legislative review of the constitutional provisions governing the CAG’s powers may be necessary to address these concerns and ensure a balance between accountability, transparency, and the promotion of private sector investment in public services.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.