Malpractices and Manipulations: CAG illustrates blatant blunders in the Modi government’s accounting mechanisms

In August, the Comptroller and Auditor General (CAG) of India, also known as the “Watchdog of the Public Purse,” issued twelve critical audit reports that illustrated glaring discrepancies in the finances of several departments of the Modi government.

One of the twelve audit reports was a 27-page report called “Quality of Accounts and Financial Reporting Practices” (Report 21), and it upheld several malpractices and manipulative methods employed by the government to foster a fake image of ‘purity’ in its governance. 

Such was the extent of disparity in the government’s report that the CAG broke its character and claimed, “it (the report) will leave any private conglomerate and its auditors aghast at the sheer audacity of the sharp practices in central government accounts.”

We shall illustrate some discrepancies in the Modi government’s accountancy habits that cast an air of ambiguity around the government’s ethical integrity.

The Modi government played down its debt by Rs. 2 lakh crore!

One of the most striking blunders by the government, according to the CAG, is the ambiguity in their ‘footnotes’ while preparing the 2021-22 Annual Finance Statement. A ‘footnote’ is a supplementary document encompassing all the minute details (like estimates, methodologies, accounting procedures, etc.) concerned with making a financial report.

The government apparently used the “historical rate of exchange” and estimated its external debt at Rs. 4.39 lakh crore. However, in its footnote, the government sheepishly mentioned that the actual debt (adjusted to the current exchange rate) is a whopping Rs. 6.58 lakh crore. Hence, the debt was Rs 2.18 lakh crore higher than what was shown in the parliament. The Modi government had also underreported its liabilities by over Rs. 21,000 crore!

The CAG also pontificated how the government used plenty of ‘footnotes’ to elude the parliament and uphold a superficial image before the masses. The report read, “A total of 258 footnotes had been included for disclosing additional information in [the finance accounts] for FY 2021-22. However, these footnotes did not disclose the complete picture of the finances of the Union government.”

Public Funds were deposited to banks’ current accounts without provision

The Audit report divulged that the Modi government used the Department of Space to put public funds worth Rs 154.94 crore into banks’ current accounts despite there being “no provision in government accounting rules to retain public funds outside government accounts.”

The CAG mentioned that despite raising repeated alerts demanding the closure of the accounts in October 2021, they remained operational.

Ministries failed to co-ordinate their share of funds:

The report divulged that the Modi government, while making the ‘Rashtriya Swachata Kosh’ (Hindi for ‘national cleanliness fund’), divided its share between the Department of Sanitation and the Ministry of Urban Affairs to 80% and 20%, respectively.

However, according to the data between 2015-16, the sanitation ministry utilised the entire fund, resulting in an adverse balance for the Ministry of Urban Affairs continuing to this day.

The fund collected under ‘health and education cess’ was put to no use:

In 2021-22, the Modi government raised Rs. 52,732 crores under the ‘health and education cess,’ of which approximately 60% was to get allocated to the ‘Prarambhik Shiksha Kosh’ (primary education fund) and the remainder was supposed to get transferred to two other funds, the ‘Madhyamik and Uchhatar Shiksha Kosh’ (middle and higher education fund) and the ‘Pradhan Mantri Swasthya Suraksha Nidhi’ (prime minister health protection fund).

The CAG discovered that the two funds had not been created despite the cabinet’s approval. The report divulges, “Both are yet to be operationalised [as of May 2023] due to non-finalisation of their accounting procedures.”

Mismatch of shares in the PSUs:

The report found 15 cases of incongruity between the government’s statement on equity holdings in Public Sector Undertakings (PSUs) and the information inscribed in the respective annual reports of PSUs. For example:

• The government claimed to own 30,40,00,000 equity shares in New India Assurance, while the company’s annual accounts put this figure at 1,40,80,00,000. 

• In NTPC, the government claims to own 3,99,67,26,967 equity shares, but their annual report puts this figure at 4,95,53,46,251.

The opposition has been alleging foul play in the Modi government’s “underhanded dealing” with public finances for a long time. After illustrating discrepancies in the centre’s flagship programs like the PMJAY, Bharatmala, and the Dwarka Expressway, the CAG has upheld ‘institutional follies’ inside the central bureaucracy this time. 

We must remember that this document is not a propaganda piece by a ‘George Soros-funded Outlet’ but a carefully scrutinised report by a constitutional body like the CAG. With the ethical integrity of the Prime Minister at stake, it will be interesting to note how the mainstream media presents it before the masses.