Apex Court Judgment has Telecos Worried
Industry believes the order will further toughen the operating environment
In a decision that has the potential to significantly impact the telecom sector in India, the Supreme Court on April 17 ruled that the Comptroller and Auditor General ( CAG) of India has the right to audit the receipts of telecom operators that share revenue with the government for use of spectrum.
“Scrutiny by the government auditor is necessary to ensure that the exchequer gets a legitimate share of the revenue generated from public resources,” justices KS Radhakrishnan and Vikramjit Sen said.
Expectedly, the telecom industry has reacted cautiously to the verdict and believes that it will further complicate the already difficult environment of operations.
“The verdict is disappointing. Our member telecom companies will now have to assign additional manpower and managerial hours towards this,” said Ashok Sud, Secretary General at the Association of Unified Telecom Service Providers of India.
“The Department of Telecommunications (DoT) already has the power to conduct audits and one more audit was not required,” Sud said.
“There are wider implications of the verdict as well. And not just for telecom. This sets a precedent for all companies that contribute funds towards the exchequer to be audited by the CAG. It also means that the CAG would have to invest public funds towards expanding exponentially to do this,” he said.
Rajan S Mathews, Director General, COAI, though has a different take on the issue.
“The SC has also upheld the limitation on the audit imposed by the Delhi HC order, i.e., CAG has limited scope to audit only that revenue on which government fees is computed,” Mathews said.
But he also believes that the order is far-reaching and will slow down the working of the sector.
“We have two concerns, one is multiple audits by multiple agencies (DoT, TRAI, SEBI and now CAG), increasing the costs and time to operators and secondly, increasing the scope of CAG to private entities,” said Mathews.
He further added, “By the logic of the court, every tax payer should also be subject to audit by the CAG, in addition to the IT Department This ruling will become a larger issue for corporate India and not just mobile operators.”
The issue reached SC after Delhi High Court allowed CAG to conduct an audit of the revenue receipts of telecom firms.
Telecom services firms moved the Supreme Court in January on the grounds that they were private companies and not come under the jurisdiction of CAG.
The government had argued that in private-public partnership ventures, the revenue generated by the licence holders is required to be shared with the Union government in line with the licensing agreements.