Redactive pricing audit and the CAG’s duties

Why in news?
  • Supreme Court’s observations in connection with the Rafale fighter aircraft deal by citing the CAG’s report on redacted pricing, and the controversy over stolen files brought back into the spotlight the role of the supreme audit institution of India.
More in news
  • What is redaction?
    (1) Redaction is the selection or adaption by ‘obscuring or removing sensitive information’ from a document prior to publication.
  • Functions of CAG:
    (1) The CAG is mandated to audit all receipts and expenditures of the three-tier governments in India and report to the legislature judiciously, independently, objectively in compliance with applicable laws, rules and regulations, without fear and favor.
    (2) conducts financial compliance and performance audits and submits his reports to the legislature to help people’s representatives in enforcing legislative oversight and public accountability of the executive.
    (3) Legislative committees such as the Public Accounts Committee and Committee on Public Undertakings examine the CAG’s selected reports.
  • Redactive pricing not transparent:
    (1) CAG stated that redactive pricing was unprecedented but had to be accepted due to the Ministry’s insistence citing security concerns.
    (2) It was unprecedented that an audit report submitted by the CAG to the President under Article 151 of the Constitution suppressed relevant information.
    (3) Ministry’s insistence citing security concerns could have been accepted by the CAG can be examined only by the Supreme Court in the light of the constitutional provisions on the CAG’s duties and parliamentary privileges and prerogatives.
    (4) Redactive pricing is nowhere used in SAI audit reports.
    (5) It does not seem to have been used in a government audit by any SAI of any country.
    (6) Redactive pricing in the ‘Performance Audit Report of the CAG on Capital Acquisition in Indian Air Force’ suppresses more than it reveals.
    (7) For example, in the Rafale deal, Parliament, its committees, cannot obtain complete, accurate and reliable information due to redactive pricing.
  • Pivotal to procurement:
    (1) Pricing is the quintessence of any procurement decision. Along with quality and quantitative specifications, comparative merits and demerits and the pricing of comparable products.
    (2) Pricing is an integral part of the procurement decision-making process of any equipment, product, goods or service.
    (Therefore, price integrity and comparative competitiveness are at the heart of any procurement decision.
  • Complex audit/ way ahead:
    (1) Given the dynamics of international competition in competitive products and pricing in today’s modern market scenario, pricing, delivery and post-delivery service and other conditions are essentially covered in an SAI audit.
    (2) Seek expertise: In case the CAG’s office lacks expertise to conduct a performance audit, expertise can





Posted by Jawwad Kazi on 15th May 2019
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