Comptroller and Auditor General of India

Every rupee the Union or a state spends has already been voted by a legislature with neither the time nor the technical capacity to check whether the money went where it was voted to go. The Comptroller and Auditor General exists to close that gap. The question running through every serious assessment of the office is whether an institution given judicial-grade protection after appointment, and none at appointment, can do the job the Constitution imagined for it.

The office the Constitution inherited and the office it created

PSIR Optional Notes {PDF}

Complete Notes Package (Paper I & II) | 1500+ Pages | Instant Download

Discounted Price | Buy Now @ ₹1000 →

• The Comptroller and Auditor General (CAG) is a constitutional authority under Article 148, and the head of the Indian Audit and Accounts Department (IA&AD), the machinery through which the audit is actually carried out.
  • The lineage is colonial. The Government of India Act, 1919 first gave the Auditor General of India statutory independence from the executive, and the Government of India Act, 1935 strengthened it by making his appointment and removal a matter of the Crown rather than of the Government of India.
  • V. Narahari Rao became the first CAG of independent India in 1948, and the office has since been held by fifteen people.

The comptroller function the office does not have

• The name carries a promise the Indian office does not keep. In the British system, the Comptroller and Auditor General controls the issue of money out of the Exchequer — no money leaves without his authorisation — as well as auditing how it was spent afterwards.
  • The Indian CAG has only the auditing half. He examines expenditure after it has occurred; he does not sanction it before it occurs.
  • The comptroller function was deliberately not transferred, because in India the issue of money from the Consolidated Fund is handled by the executive through the Reserve Bank and the departmentalised accounting system.
  • The office is therefore a post-mortem institution by design, and a great deal of the criticism directed at it is really criticism of that design choice.

Ambedkar and Radhakrishnan on the office

• B. R. Ambedkar thought the office more important than the judiciary, and said so in terms that have never been bettered.

“I am of opinion that this dignitary or officer is probably the most important officer in the Constitution of India. He is the one man who is going to see that the expenses voted by Parliament are not exceeded, or varied from what has been laid down by Parliament in what is called the Appropriation Act. If this functionary is to carry out the duties — and his duties, I submit, are far more important than the duties even of the Judiciary — he should have been certainly as independent as the Judiciary. But, comparing the articles about the Supreme Court and the articles relating to the Auditor-General, I cannot help saying that we have not given him the same independence which we have given to the Judiciary, although I personally feel that he ought to have far greater independence than the Judiciary itself.” — B. R. Ambedkar

• Read closely, Ambedkar’s statement is a criticism and not only a tribute. He is saying the office deserved more independence than the judges and got less, and the gap he identified — in the manner of appointment — is precisely the gap still under litigation.
• S. Radhakrishnan supplied the other half of the office’s self-understanding in the Constituent Assembly: the CAG is not responsible to the government that appoints him, but serves the people whose money he is tracing.
  • That matters because the audited entity, the appointing authority and the paymaster are all the same executive; the arrangement works only if the incumbent treats the legislature and the public as his client.
• The office is routinely described as the guardian of the public purse and one of the bulwarks of the democratic system, because it controls the entire financial system at both levels of the federation and upholds the Constitution and the laws of Parliament in the field of financial administration.

Articles 148 to 151, and the forgotten Article 279

• Article 148 establishes the office and builds its independence.
  • The CAG is appointed by the President by warrant under his hand and seal, and takes an oath in the form prescribed in the Third Schedule to preserve the Constitution and to discharge his duties without fear or favour.
  • He may be removed only in the manner and on the grounds on which a judge of the Supreme Court is removed — proved misbehaviour or incapacity, an address by each House supported by a special majority, presented to the President in the same session.
  • His salary and conditions of service are determined by Parliament and cannot be varied to his disadvantage after appointment.
  • Article 148(4) makes him ineligible for further office under the Government of India or under the government of any state after ceasing to hold office.
  • Article 148(5) provides that the conditions of service of IA&AD staff and the administrative powers of the CAG are prescribed by rules made by the President after consultation with the CAG, so the executive cannot reorganise the department over his objection without hearing him.
  • Article 148(6) charges the administrative expenses of his office, including all salaries, allowances and pensions, on the Consolidated Fund of India — meaning they are not votable by Parliament and cannot be squeezed through the annual budget process.
• Article 149 is the source of the duties, and it is a conferring rather than an enumerating provision.
  • In substance it means three things: audit of all receipts and expenditure of the Government of India and of every state government; audit of the accounts of any other authority or body as prescribed by law; and a standing power in Parliament to prescribe the CAG’s duties and powers by legislation.
  • Until Parliament legislated, he continued to exercise the duties conferred on the Auditor General immediately before the Constitution commenced.
  • The practical consequence is that the CAG’s mandate is statutory in detail and constitutional only in principle, which is why the reform debate is really a debate about amending the governing Act.
• Article 150 provides that the accounts of the Union and of the states shall be kept in such form as the President may prescribe on the advice of the CAG.
  • The words matter: the President prescribes, on the advice of the CAG, so the auditor shapes the very form of the record he will later examine.
  • Before the Forty-second Amendment, the article required accounts to be kept in the form the CAG prescribed with the President’s approval; the wording was softened, and the shift from prescription to advice was a real dilution of the office’s control over accounting standards.
• Article 151 governs submission.
  • Reports relating to the accounts of the Union are submitted to the President, who shall cause them to be laid before each House of Parliament.
  • Reports relating to the accounts of a state are submitted to the Governor, who shall cause them to be laid before the legislature of the state.
  • The article fixes the destination and says nothing about the time, and that silence has become one of the office’s most exploited weaknesses.
• Article 279 is the least discussed of the CAG’s constitutional functions and is quietly one of the most consequential.
  • The “net proceeds” of any tax or duty — the proceeds reduced by the cost of collection — must be ascertained and certified by the CAG, and his certificate is final.
  • Since the divisible pool shared with the states under Article 270 is built on net proceeds, the CAG’s certificate is the arithmetical foundation of fiscal federalism.
  • The Sixteenth Finance Commission has recommended that the Union disclose the CAG-certified net proceeds annually, a recommendation that only makes sense because these figures have not routinely been placed in the public domain.

The independence architecture, element by element

• The Constitution’s protections are best read as answers to specific ways an auditor can be neutralised.
• Security of tenure removes the threat of dismissal. The CAG holds office for six years or until the age of sixty-five, whichever is earlier, and may resign by writing to the President.
  • Removal requires proved misbehaviour or incapacity and an address by both Houses with a special majority, the standard applying to a judge of the Supreme Court.
  • No CAG has ever been removed, so an incumbent who produces an unwelcome report cannot be dislodged for producing it.
• Financial insulation removes the threat of the purse. Salary and service conditions cannot be varied to his disadvantage after appointment, and the salary equals that of a Supreme Court judge.
  • Charging the office’s expenses on the Consolidated Fund means Parliament may discuss but cannot vote them down, so the department cannot be starved through an appropriation cut.
• Ineligibility for further office removes the threat of reward, which is the subtler danger, and Article 148(4) carries the same logic as the equivalent bar on the UPSC and the Election Commission.
  • Its weakness is that it bars office under the Union or a state and not every form of public preferment.
  • T. N. Chaturvedi became a Rajya Sabha member and later a Governor after demitting office; Vinod Rai chaired the Banks Board Bureau and headed the Supreme Court-appointed Committee of Administrators for the Board of Control for Cricket in India.
  • Whether such appointments fall inside or outside the bar is arguable, and that the argument is available at all is a defect in the drafting.
• Administrative autonomy removes the threat of hollowing out: staff conditions require consultation with the CAG, so the executive cannot restructure the IA&AD without engaging him.
  • Consultation is not concurrence, and postings, cadre strength and resourcing remain areas where the government retains leverage.

Every protection the Constitution gives the CAG operates after he is in office; none of them operates on the choice of who gets there.

The appointment problem

• The appointment is made by the President, which under the Constitution means on the advice of the Prime Minister and the Council of Ministers, with no role whatever for the legislature, the opposition or the judiciary.
  • There is no prescribed eligibility qualification, no advertised vacancy, no search committee, no shortlist and no published criteria.
  • The executive alone selects the person who will audit the executive, the asymmetry from which most criticism of the office descends.
• The risk is not incompetence but a pliable appointee, or one carrying a conflict of interest.
  • Shashi Kant Sharma’s appointment in 2013 was questioned on exactly this ground: he had served in the Ministry of Defence as Director General (Acquisition) and later Defence Secretary, supervising the very defence procurements his office would go on to audit.
  • The objection was structural rather than personal: an auditor who was the accounting officer for a transaction cannot credibly sit in judgment on it.
  • G. C. Murmu’s appointment in 2020 drew criticism on the transparency of the method: he moved to the audit office directly from being Lieutenant Governor of Jammu and Kashmir, having earlier been Expenditure Secretary, and no reasons were published.

Who has actually been appointed

• The pattern of appointment is itself part of the critique.
  • Every CAG since 1978 has been an Indian Administrative Service officer. The last incumbent drawn from the Indian Audit and Accounts Service, the professional cadre that actually conducts the audit, was A. Baksi, who held office from 1972 to 1978.
  • The head of the audit institution is therefore drawn from the executive service whose work it audits, typically from a post held immediately before appointment.
  • Officers of the audit service object that this caps their career at Deputy CAG and treats the office as a placement rather than a professional apex.
• The current incumbent is K. Sanjay Murthy, the fifteenth CAG, who took office on 21 November 2024.
  • He is a 1989-batch IAS officer of the Himachal Pradesh cadre and came to the office directly from the post of Secretary, Department of Higher Education.
  • The pattern the earlier controversies identified therefore persists: a serving Union secretary moved from an audited ministry to the audit office, with no external scrutiny of the choice.

The challenge before the Supreme Court

• The appointment procedure is now before the Court.
  • In March 2025 a bench of Justices Surya Kant and N. Kotiswar Singh issued notice to the Union government on a public interest petition filed by the Centre for Public Interest Litigation, argued by Prashant Bhushan, and clubbed it with an earlier pending petition.
  • The petition seeks appointment by the President on the recommendation of an independent selection committee of the Prime Minister, the Leader of the Opposition and the Chief Justice of India, on the model the Court itself devised for the Election Commission in Anoop Baranwal.
  • The Court’s initial response signalled caution rather than sympathy.

“Ultimately, we have to trust our institutions. Article 148 also provides protection, similar to one which is provided to the judges of the Supreme Court.” — Supreme Court, on the challenge to the CAG appointment process, 2025

• The remark identifies the question rather than settling it: Article 148 protects the office-holder and says nothing about the selection, which is the stage the petition is about.

Proposed alternatives to executive appointment

• The Second Administrative Reforms Commission recommended replacing sole executive appointment with a bipartisan, multi-member collegium in which the opposition has a formal role.
  • Its illustrative composition was a committee of the Prime Minister, the Leader of the Opposition and the Law Minister, with a designated head steering the selection.
  • The purpose is not to remove the executive from the choice but to make the choice defensible to someone other than the executive.
• Amitabh Mukhopadhyay, in “Foregrounding Financial Accountability in Governance”, argues that the Public Accounts Committee must be consulted in the appointment.
  • The logic is institutional: the PAC is the CAG’s principal consumer and is chaired by convention by a member of the opposition, so an auditor chosen with its consent is answerable to the right constituency.
  • It mirrors settled practice in the United Kingdom, where the Comptroller and Auditor General is appointed on a motion moved by the Prime Minister with the agreement of the Chairman of the Public Accounts Committee.
• Other proposals include a fixed non-renewable term with a statutory eligibility qualification, and a published statement of reasons for the selection, which is the minimum condition for any appointment to be reviewable.
• A complete bar on any post-retirement public appointment, closing the gap in Article 148(4), is the natural companion reform.

The statutory frame: the DPC Act, 1971

• Article 149 was given content by the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971, universally called the DPC Act.
  • The Act fixes the term at six years or age sixty-five and settles the salary, but its real work is defining what the CAG may audit and with what powers — and because the mandate lives in an ordinary statute, Parliament can widen it without a constitutional amendment.
• The operative sections form a ladder from core government spending outwards to bodies at the edge of the public sector.

• Two features of this scheme shape everything downstream: the reach is defined by the flow of public money, not by the legal form of the entity, and Sections 20 and 19(3) make part of the mandate consent-dependent.
  • Where audit requires a request from the President or a Governor, the executive decides whether the auditor gets in, which reverses the usual logic of an independent institution.
• A structural change in 1976 separated accounts from audit at the Union level.
  • Compilation of departmental accounts was transferred to departmentalised accounting organisations under the ministries themselves, leaving the CAG with audit alone at the Centre.
  • The reform was sound in principle — an auditor should not audit accounts he himself compiled — but it narrowed the office’s day-to-day grip on Union financial records, and the CAG continues to compile state accounts, producing an asymmetry between the two levels.

The edges of the mandate

• The reach described above covers the three constitutional funds in their entirety at both levels of the federation, the commercial and quasi-commercial operations of government, and receipts as well as expenditure.
  • Government companies are reached through the CAG’s power to appoint and direct statutory auditors and to conduct a supplementary audit of his own; for statutory corporations the mandate varies by the governing Act.
  • Section 16 requires satisfaction that the rules for assessing and collecting revenue are properly designed and observed — direct taxes, indirect taxes, spectrum charges, royalties and licence fees.
  • This is what makes the CAG a check on foregone revenue and not merely on money spent, and it is the doctrinal basis of the presumptive-loss argument.
• What lies outside, or only partly inside, defines the reform agenda.
  • Private companies as such, unless public revenue flows through them or entrustment is ordered.
  • Panchayats and urban local bodies, which have their own audit machinery, with the CAG providing only technical guidance in most states.
  • Public-private partnership concessionaires, where audit access depends on what the concession agreement happens to say.
  • Bodies below the Section 14 threshold, and non-governmental organisations receiving small but numerous grants.

Three kinds of audit, and where the friction lies

• The CAG conducts three types of audit, and the distinction between them explains almost every political controversy the office has generated.

• In performance audit, economy is acquiring resources at the right cost, efficiency is the ratio of output to input, and effectiveness is whether the stated objective was met at all.
  • The audit that produces the most useful findings is the one the CAG is least obliged to conduct, since only the first two types are obligatory.
• The balance between these three tells you a great deal about how mature an audit institution is.
  • Supreme Audit Institutions across the developing world have historically concentrated on the low-key functions of compliance and financial audit, which are technically safer and politically less exposed.
  • In developed countries with mature democracies, SAIs devote more than two-thirds of their time and resources to performance audit, on the reasoning that legality is a floor rather than a standard.
  • India has moved substantially towards performance audit since the 2000s, and every major controversy attaching to the office arises from that move, because performance audit necessarily evaluates the consequences of choices the government made.
• The line the CAG must hold is between auditing a policy’s implementation and auditing the policy itself. Doctrine permits examination of whether a policy was implemented economically, efficiently and effectively, and whether the decision followed the government’s own stated criteria.
  • It does not permit the auditor to say the policy was wrong, which is a judgement for the legislature and the electorate.
  • In practice the boundary is porous: a finding that a chosen method cost the exchequer far more than an available alternative is at once a statement about implementation and about the choice.

The three audit reports and the accounts of the Union

• The CAG submits three audit reports on the Union’s finances, and they answer three different questions.
  • Appropriation accounts compare actual expenditure against the amounts voted and charged under each grant, and reveal excesses requiring regularisation and savings that were never surrendered.
  • Finance accounts present the annual receipts and disbursements of the government with assets and liabilities, giving the consolidated financial position rather than the grant-wise picture.
  • Reports on public undertakings cover the commercial audit of government companies and corporations, examined not by the PAC but by the Committee on Public Undertakings.
• Beyond these three, the office produces a large annual volume of compliance and performance audit reports, sector by sector, for the Union and separately for each state.
  • Union reports are laid before both Houses of Parliament; state reports are laid before the state legislature by the Governor, and are numerically the larger part of the output while receiving far less attention.

The CAG and the Public Accounts Committee

• The CAG’s report is evidence, not verdict, and the body that turns it into accountability is the Public Accounts Committee (PAC) of Parliament.
  • It has twenty-two members — fifteen from the Lok Sabha and seven from the Rajya Sabha — ministers cannot be members, and by a convention established in 1967 the chairperson is drawn from the opposition.
• The relationship is often described in a phrase that has become standard: the CAG acts as “guide, friend and philosopher” of the Public Accounts Committee.
  • He and his officers attend PAC sittings, explain the findings, help frame the questions put to accounting officers, and assist in drafting recommendations.

The chain from finding to correction

• The sequence has several breakable links.
  • Audit produces the finding, which is put to the ministry as an audit observation and its reply is incorporated.
  • The report is submitted under Article 151 and laid before the legislature.
  • The PAC selects which paragraphs to examine, takes evidence from the Secretary of the ministry as accounting officer, and reports to the House.
  • The ministry files an Action Taken Note (ATN), which the PAC scrutinises and, if unsatisfied, pursues further.
  • A failure at any link makes everything upstream of it pointless, and in practice the failures cluster at the last two.
• The throughput data is the clearest single measure of how badly the chain is functioning.
  • As of the PAC’s first meeting of 2026-27 on 22 May 2026, its chairperson K. C. Venugopal reported more than 1,500 Action Taken Notes pending with ministries and departments on the Audit Para Monitoring System, and called for a more cooperative and quicker response to the auditor.
  • The PAC of 2025-26 completed twenty-six reports before its term ended, a respectable figure that nonetheless covers a fraction of the paragraphs available to it.
  • The overwhelming majority of CAG reports are never examined by the PAC in any detail, so the finding is published, noted in the press for a day, and passes out of the accountability system altogether.
• The committee’s own limits compound the problem.
  • Its term is one year, so a chairperson rarely sees an inquiry through, and it has no research or forensic accounting staff of its own.
  • Its recommendations are not binding and there is no penalty for a ministry that does not file an ATN, which is why the backlog runs into four figures.
  • It examines the accounting officer and not the minister, so political responsibility for a financial decision is structurally deflected onto the civil service.

An audit finding that the Public Accounts Committee never examines has been published rather than acted upon, and an unread report is a dead report.

The record: what the office has actually found

• The first great episode came in 1962, when a CAG report indicted the Defence Minister, V. K. Krishna Menon, for contractual lapses in the purchase of army jeeps bought from a foreign supplier without proper inspection or contractual safeguards.
  • The report established very early that the office would not spare a minister of the first rank, and contributed materially to Menon’s political weakening on the eve of the 1962 war.
• The Bofors howitzer contract of the late 1980s produced a report highly critical of how the gun deal was made — the negotiation process, the departure from the recommended competitor and the absence of the promised transfer of technology.

The 2010-12 cluster

• These reports transformed the office’s public standing and remain its most contested legacy.
  • The report on the allocation of 2G spectrum found that licences had been issued at 2001 prices on a first-come-first-served basis in 2008, with the cut-off date advanced and the procedure altered to the advantage of particular applicants.
  • The report on coal block allocation found that blocks were allotted through a screening committee without competitive bidding, transferring value to allottees that could have accrued to the exchequer.
  • Reports on the Commonwealth Games, the Adarsh Housing Society in Mumbai and the AgustaWestland VVIP helicopter contract followed in quick succession.
  • These reports demonstrably shaped politics, contributing to the collapse of the second United Progressive Alliance government and to a decade in which “CAG report” became a term of ordinary political speech.
• The record since has been less spectacular and not less substantial.
  • GST compensation cess: the audit of Union accounts for 2018-19 found that sums due to the non-lapsable GST Compensation Cess Fund, which compensates states for revenue lost on the transition to the Goods and Services Tax, had not been transferred and were retained in the Consolidated Fund.
  • Swachh Vidyalaya Abhiyan: roughly forty per cent of school toilets built by public sector undertakings were found non-existent, partially constructed, unused or non-functional, against a scheme claiming universal coverage.
  • Defence offsets: foreign vendors made offset commitments to qualify for the main supply contract and then showed little interest in fulfilling them, exposing offsets as a procurement formality rather than an industrial policy.
  • Strategic sale of public sector undertakings: certain disinvestments merely transferred resources already held by the public sector to the government, without altering the government’s effective stake, so the proceeds were not genuine receipts.
• The most recent reports are just as pointed, and their reception shows how audit findings now travel.
  • The 2023 performance audit of the Bharatmala Pariyojana costed the Dwarka Expressway at Rs 250.77 crore per kilometre against Rs 18.20 crore sanctioned by the Cabinet Committee on Economic Affairs — and drew a public rebuttal by the ministry instead of an answer through the audit process.
  • The 2023 performance audit of Ayushman Bharat PM-JAY found claims processed for large numbers of patients already recorded as dead in the scheme’s own database.
  • Report No. 28 of 2025 on Defence Services (Army), laid before both Houses on 18 December 2025, found delivery beyond the stipulated timeline in seventy-two per cent of contracts examined under expedited procurement, Rs 166.16 crore of married accommodation unoccupied, and Rs 113.24 crore overpaid by garrison engineers on outdated tariffs.
  • At the state level the audit of Maharashtra reported more than ten thousand audit queries left unanswered, with possible lapses of about Rs 891 crore — a finding about the audit process as much as about the money.
• The Delhi excise policy report shows both the office’s reach and its dependence on others: a revenue loss of about Rs 2,002 crore on the 2021-22 policy, from waivers, licence surrenders without re-tender and irregular grants.
  • It was completed long before it was seen, tabled in the Delhi Legislative Assembly only on 25 February 2025 after a change of government, and then referred to the Delhi Public Accounts Committee.
  • The finding did not change while it sat unpublished; only its political usefulness did, which is why the timing of tabling is a constitutional question and not an administrative one.

The presumptive loss controversy

• The audit of 2G spectrum estimated a presumptive loss of about Rs 1.76 lakh crore to the exchequer, and that single figure has since carried more argumentative weight than any other number the office has produced.
• Presumptive or notional loss is the difference between what the exchequer actually received and what it would have received under an alternative and identifiable benchmark.
  • The report did not present one figure but a range, derived from three separate benchmarks, of which the highest became the headline.
  • The first benchmark was a competing offer: S Tel had offered Rs 13,752 crore over ten years for spectrum in 2007 against the fixed entry fee of Rs 1,651 crore per licence, indicating what at least one bidder thought the asset was worth.
  • The second benchmark was post-allocation equity valuation: Telenor’s purchase of a controlling stake in Unitech Wireless and NTT Docomo’s purchase of a stake in Tata Teleservices implied per-licence values of the order of Rs 8,000 to 9,000 crore for assets sold at about Rs 1,658 crore.
  • The third benchmark was the 3G auction of May 2010, on the reasoning that the 2G licences carried capability comparable to what the 3G auction had priced competitively.

The case against the methodology

• The criticism comes from several directions and is serious.
  • A notional figure is a counterfactual, and the counterfactual depends on assumptions — about auction design, participation, spectrum caps and the state of the market in 2008 — that the auditor is not obviously better placed to make than the policymaker.
  • The government’s telecom policy of the period was avowedly to keep tariffs low by keeping entry costs low, so treating revenue maximisation as the benchmark is to substitute one policy objective for another, which is policy assessment rather than audit.
  • Senior officials of the period, including the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, and former Cabinet Secretaries, publicly disputed both the figure and the propriety of the office producing it.
  • There was internal disagreement as well. A senior audit officer associated with the draft put the loss at about Rs 2,645 crore, an assessment the CAG’s office publicly rejected.
  • The headline figure proved impossible to test in court: the special CBI court acquitted all the accused in December 2017, holding the prosecution had failed to prove its case, and the CBI’s appeal against those acquittals was admitted by the Delhi High Court and remains pending.

The case for the methodology

• The defence is grounded in the statute rather than in politics.
  • Section 16 of the DPC Act obliges the CAG to audit receipts, and to satisfy himself that the rules and procedures for assessing and collecting revenue provide an effective check. An auditor forbidden to comment on foregone revenue could not discharge that duty at all.
  • Performance audit is defined by economy, efficiency and effectiveness in the use of resources, and spectrum is a finite public resource, so an examination of what the state obtained for it falls squarely within the mandate.
  • The audit’s target was not the decision to price administratively but the departure from the government’s own stated procedure — the advancing of the cut-off date, the compressed window for compliance and the disregard of the regulator’s and the Law Ministry’s advice.
  • The Supreme Court’s own response was not to dismiss the exercise. In February 2012 it cancelled 122 licences granted under the impugned process, holding first-come-first-served to be an inappropriate method of alienating a scarce natural resource, and in September 2014 it cancelled 204 coal block allocations on comparable reasoning.
• The balanced assessment is that the exercise was legitimate and its presentation was not.
  • Estimating what the exchequer forwent is within the audit function, provided the assumptions are stated and the result is presented as a range with its sensitivities.
  • Collapsing a range into a single headline number invited the figure to be treated as a discovered fact rather than a modelled estimate, and that is what made the report vulnerable to the charge of overreach.

Auditing what the state gave away is as much a part of the audit function as auditing what the state spent; the error was to state a modelled estimate as though it were a counted sum.

Jurisdiction over private actors, partnerships and local bodies

Revenue-sharing licensees and the telecom judgment

• The frontier question is how far public audit follows public money once it leaves the government’s hands, and it arises in three settings: revenue-sharing licensees, public-private partnerships and local government.
• The leading authority is Association of Unified Telecom Service Providers of India v. Union of India (2014), decided by a bench of Justices K. S. Radhakrishnan and Vikramajit Sen.
  • Private telecom licensees challenged a direction requiring them to produce their accounts for examination, arguing that Article 149 and the DPC Act permitted audit only of governmental entities.
  • The Court held otherwise: under the Unified Access Service licences operators pay a percentage of their adjusted gross revenue to the government, that share is revenue payable into the Consolidated Fund, and Section 16 of the DPC Act therefore brings their revenue accounts within audit.
  • It read “any other authority or body” in Article 149 broadly, and relied on Rule 5 of the Telecom Regulatory Authority of India (Service Providers) Rules, 2002, which requires licensees to produce accounting records for CAG inspection.
  • The judgment also observed that the CAG’s constitutional function is not liable to be whittled down by legislation, treating the audit power as part of the constitutional scheme rather than a statutory convenience.
  • The Court was explicit that audit is not a brake on governance.

“Though CAG is often cited as a cause for unwillingness in decision-making, it is very important that CAG upholds the entire gamut of audit functions where public interest is involved.” — Supreme Court, Association of Unified Telecom Service Providers of India v. Union of India, 2014

• The judgment settled less than it appeared to, because it turned on a revenue-sharing contract with the Union and did not create a general power over private parties.
  • Where no share of revenue flows to the government, the route into a private entity’s accounts is Section 20 of the DPC Act, which normally requires a request from the President or the Governor — that is, the consent of the executive.
  • The auditor’s reach over private actors therefore still depends substantially on the government’s willingness to let him in, which reproduces the appointment problem at the level of jurisdiction.
• The Delhi electricity distribution episode is the running illustration and is still unresolved after more than a decade.
  • In 2014 the Delhi government requested a CAG audit of the three private distribution companies under the entrustment route, on the allegation that they were understating profits and overstating operational losses in order to justify higher tariffs.
  • A draft audit report in 2016 pointed to potential under-reporting of profits of up to about Rs 8,000 crore, but the exercise was contested at every stage and the report was never carried to completion.
  • The litigation continues. On 3 July 2026 a Supreme Court bench of Justices K. V. Viswanathan and Shree Chandrashekhar ordered status quo, halting both the CAG audit and the appointment of independent chartered accountants.
    • The order awaits the Court’s interpretation of its own August 2025 judgment on the phased liquidation of regulatory assets of about Rs 38,552 crore accumulated by the distribution companies.

Public-private partnerships

• Partnerships are the largest structural gap in the mandate.
  • Under a typical concession agreement the private partner builds and operates the asset and recovers its investment from user charges, so little or no money passes through the government’s accounts even though a public asset and a public service are involved.
  • Audit access then depends entirely on what the concession agreement says, and standard agreements have generally carried no audit clause in the CAG’s favour; the office’s guidelines for auditing PPP projects cannot create a right the contract withholds.
  • The consequence is an inverse relationship no accountability system should tolerate: the more infrastructure is delivered through partnership, the less of it is subject to public audit.

Panchayats and urban local bodies

• The third tier presents a different problem: not absence of audit but weakness of it.
  • The 73rd and 74th Amendments created a third tier with substantial funds but left its audit to state legislation, typically to a Director of Local Fund Audit working under the state government — an auditor placed under the executive he audits.
  • The Eleventh Finance Commission recommended that the CAG be entrusted with control and supervision over the maintenance and audit of local body accounts, which took shape as the Technical Guidance and Support (TGS) arrangement: the CAG sets standards and gives guidance, the state agency conducts the audit.
  • TGS is advisory rather than directive, adoption is uneven, and the CAG’s product for the third tier is usually an Annual Technical Inspection Report rather than a full audit report laid before the legislature.
  • The Sixteenth Finance Commission has made the timely constitution of State Finance Commissions an entry-level condition for local body grants, while routing Rs 7,91,493 crore through a tier whose audit remains the weakest link in the chain.
  • The International Centre for Audit of Local Governance (iCAL), inaugurated at Rajkot on 18 July 2024, is the office’s institutional response, building capacity and standards for local government auditors.
• Vinod Rai, on demitting office in 2013, argued that the mandate should be extended to public-private partnerships, Panchayati Raj institutions and societies receiving government funds, citing the National Rural Health Mission — a fully government-funded programme executed through registered societies — as the type of case that falls between the stools.

Audit quality, the INTOSAI peer review and international standing

• The quality of the CAG’s own work has been questioned, particularly where reports criticise government policy, and the office responded by submitting itself to external assessment.
• In 2012 the CAG underwent a peer review conducted under the auspices of INTOSAI, the International Organisation of Supreme Audit Institutions.
  • It focused on the Audit Quality Management Framework (AQMF) and the performance audit function, examining thirty-five performance audits from the financial year 2010-11 — the very cohort from which the most contested reports came.

The ten peer-review recommendations

• Read together, the ten recommendations describe an institution with sound doctrine and uneven execution.
  • Communicate the Audit Quality Management Framework to staff so that it is understood and complied with rather than merely promulgated.
  • Review and update audit standards and guidelines to match current practice and global standards.
  • Strengthen training programmes to develop staff skills specifically in performance auditing, a discipline distinct from compliance checking.
  • Develop clear, achievable audit objectives, criteria and test programmes at the planning stage of each audit.
  • Implement a formal policy to manage conflicts of interest among audit staff.
  • Seek and publish the responses of audited entities, so that the audited body’s version is on the record alongside the finding.
  • Include third parties in audits where necessary to ensure fairness and thoroughness.
  • Strengthen techniques and documentation for the validation of evidence, so that each conclusion is traceable to a verified record.
  • Enhance the quality and clarity of audit reports, which speaks directly to the presentational failure in the presumptive-loss episode.
  • Introduce annual internal reviews and share lessons learned for continuous improvement.
• Despite these shortcomings, the peer reviewers found the CAG’s reports to be an invaluable and authoritative source of reliable information for holding the executive to account, which is the finding that matters most and is routinely omitted from summaries of the review.
• The Public Accounts Committee has recommended that such peer assessments be conducted once every three years, so that changes in audit quality can be tracked over time rather than sampled once.
• The office’s international standing is a counterweight to domestic criticism, since appointment as an external auditor is decided by the votes of member states, and it locates the Indian debate on independence and follow-through rather than capability.
  • The CAG of India is currently External Auditor of the International Atomic Energy Agency (2022-2027), the World Health Organization (2024-2027), the International Labour Organization (2024-2027) and the Organisation for the Prohibition of Chemical Weapons (2024-2026), and has served the Food and Agriculture Organization.

The data problem in the GST era

• The migration of government finance onto large digital platforms has created an access problem the DPC Act never anticipated.
  • The CAG’s audit of the Goods and Services Tax was conducted as a limited test audit rather than a full examination because access to the GST database was restricted, and the report recorded that providing such data as the CAG requires is a constitutional and legal requirement.
  • The audit found that the promised system of invoice matching had not been implemented, leaving the regime prone to input tax credit fraud.
    • It identified a single fraudulent input credit entry of the order of Rs 6.45 lakh crore by one entity — the overwhelming majority of national input credits claimed that month — which had passed undetected.
  • It also found that large amounts of Integrated GST remained unsettled, and that a portion of the states’ share had been improperly appropriated by the Union.
• The general point outlives the particular findings. Where a transaction’s record exists only inside a government-controlled information system, the power to inspect offices and requisition documents does not automatically become a right of access to a database.
  • Denial of access is a far quieter way of limiting audit than refusing to answer an audit paragraph.
  • The office has built analytical capacity — a centre for data management and analytics, data-driven sampling, audit of information systems as such — but capacity cannot substitute for a right of access.

Structural weaknesses

• The office is a comptroller in name only, and the consequences of auditing after the event rather than authorising before it run through everything else.
  • Post-mortem audit can establish responsibility but cannot prevent loss; it can recommend recovery, not effect it, and findings arrive when the money is spent and the officers transferred.
  • The lag compounds this: Report No. 28 of 2025 covered the year ended March 2023, so a finding on procurement delay reached Parliament roughly two and a half years after the events described.
• There is no time frame for tabling reports, and the silence of Article 151 has been exploited by governments of every persuasion.
  • Reports are submitted to the President or the Governor, who is bound by ministerial advice, and the executive therefore controls the moment at which the auditor’s findings become public.
  • Delay has often been deliberate, because an adverse report is a serious political embarrassment, and postponement denies the legislature the evidence at the time it would matter.
  • The Delhi episode made the practice visible: fourteen CAG reports were pending before the Delhi Legislative Assembly, with a delay alleged at roughly 490 days in forwarding them.
    • When the matter reached the Delhi High Court on 24 January 2025, Justice Sachin Datta declined to direct a special sitting of the House, but recorded inordinate delay on the government’s part in placing the reports before the assembly.
  • The judgment marks the limit of judicial remedy: courts will not order a legislature to sit, so a political convention is protecting a constitutional function.
  • Both the Second Administrative Reforms Commission and the Public Accounts Committee have argued for a time-bound procedure, preferably requiring tabling within a year of submission.

Falling output and the challenge to the office’s autonomy

• The volume of Union audit reports has fallen sharply, and the decline is the most disputed fact about the contemporary office.
  • Against an average of about forty Union audit reports a year in the period 2014-2018, the average for 2019-2023 was roughly twenty-two, with fewer than twenty tabled in 2023.
  • In November 2023 a group of eighty-six retired civil servants wrote an open letter to the President on the autonomy of the office.
    • They pointed to the decline in reports, to allegations that audit officers associated with critical findings had been moved to insignificant postings, and to ministers rebutting audit observations in the media rather than through the audit process.

“This means either that the working of the CAG has slowed down, or that the organisation, despite detection of flaws in expenditure by the government, is reluctant to present this to Parliament and make the information public.” — open letter of former civil servants to the President, 2023

• Ministries do not cooperate reliably, and the audit process depends on their cooperation at every stage.
  • Failures to furnish records and replies within the prescribed time force audit either to proceed on incomplete evidence or to drop the paragraph, and Action Taken Notes run into a backlog of more than 1,500.
• The Rafale episode raised a question of constitutional propriety that has not been answered. Pricing details in the audit report were redacted, and the CAG’s preface recorded that this was unprecedented but had to be accepted because of the ministry’s insistence on security grounds.
  • The difficulty is that the ministry is the audited entity, and an audited entity that can determine what the auditor may publish has acquired a power the Constitution did not give it.
  • The deeper problem is precedent: once security is accepted as a ground for suppressing figures, the category is available for every sensitive contract, with no independent arbiter of the claim.
• The office is a single-member institution, unusual for the auditor of a federation of this size, which concentrates the audit judgement and the reputational risk in one individual.
  • It also makes the appointment decision correspondingly higher-stakes, since there are no colleagues to dissent, moderate or record a different view.
• The output is recommendatory throughout. The CAG cannot surcharge — he cannot hold an officer personally liable to make good a loss, a power local government auditors possess in some jurisdictions.
  • He cannot prosecute, penalise or compel recovery; he can only report, and PAC recommendations are equally non-binding, so the chain terminates in a request rather than a command.

The reform debate

• The reform agenda divides into who is appointed, what may be audited, when the report becomes public and what happens after it does.

Reforming the appointment

• The proposals set out above — the Second Administrative Reforms Commission’s bipartisan selection body, Amitabh Mukhopadhyay’s consultation of the Public Accounts Committee, and the variant substituting the Chief Justice of India for the Law Minister — are the anchor of this half of the debate.
  • Supporting reforms address the pool as well as the process: a statutory eligibility qualification in accountancy, audit or public finance; considering officers of the Indian Audit and Accounts Service; publishing reasons for the selection; and closing the gap in Article 148(4) by barring every subsequent public appointment.

A multi-member Comptroller and Auditor General

• The proposal to convert the office into a multi-member body, on the model of the Election Commission or the Union Public Service Commission, has been urged by the Second Administrative Reforms Commission and by successive commentators.
  • The case for it: collective decision-making moderates individual idiosyncrasy, distributes the pressure that falls on a single incumbent, allows specialisation across defence, revenue, railways and commercial audit, and makes the appointment of any one member less consequential.
  • It would also permit a recorded dissent, so that a contested methodological choice — of the kind the presumptive-loss estimate involved — would be visible as a judgement rather than presented as a fact.
  • The case against it: a plural body diffuses responsibility, can be packed over successive appointments more easily than a single office can be captured, and risks producing consensus reports drained of the sharpness that makes audit useful.
  • Article 148 speaks of a Comptroller and Auditor General in the singular, so the change would require a constitutional amendment rather than a new statute.

Widening and hardening the mandate

• The DPC Act is more than fifty years old and was drafted for a state that spent directly rather than contracting out.
  • A statutory right of audit over PPP concessionaires, with a mandatory audit clause in every model concession agreement, would close the largest current gap.
  • An express statutory right of access to government databases, enforceable without the ministry’s permission, would answer the GST problem, and direct jurisdiction over panchayats and urban local bodies would convert Technical Guidance and Support into a statutory arrangement.
  • Revisiting the Section 14 thresholds, fixed in the 1970s, and removing the requirement of executive request under Section 20 for bodies handling public money would end the consent-dependence of the mandate.
• Whether the office should acquire a pre-audit or concurrent audit function is the oldest question in this debate.
  • In favour: pre-audit prevents rather than records loss, it would give the office the comptroller function its name implies, and concurrent audit of large projects would allow correction while correction is still possible.
  • Against: an auditor who cleared a transaction in advance cannot independently audit it afterwards, so pre-audit buys prevention at the price of the independence that makes the later audit credible.
  • The workable middle position is concurrent audit of very large projects with real-time reporting to the legislature, which shortens the lag without merging approval and audit.

Making the report count

• A statutory time limit for laying reports — a fixed number of days from submission to the President or Governor — would remove the executive’s control over timing, and the Delhi litigation showed that courts will not supply that limit.
• Mandatory Action Taken Notes within a fixed period, with the default recorded in the House, would repair the last link in the chain.
• Strengthening the Public Accounts Committee matters at least as much as strengthening the auditor.
  • A longer term than one year, so that an inquiry can be carried from selection to compliance by the same members.
  • A dedicated research and forensic accounting secretariat, so it is not wholly dependent on the auditor for analysis of the auditor’s own findings.
  • A power to summon the minister and not only the accounting officer, and automatic examination of a defined class of reports — losses above a threshold, or repeated findings — rather than selection by discretion.
• Vinod Rai, in Not Just an Accountant, argues that the CAG has functioned as a fifth pillar of Indian democracy alongside the legislature, executive, judiciary and press, but that the institution must be reformed to fulfil its constitutional obligations effectively.
  • It carries weight because it comes from the incumbent whose tenure produced both the office’s greatest public impact and its most damaging controversy.

The design-versus-practice gap

• The Constitution protects the auditor and leaves the audit exposed at both ends.

• The institutional lesson generalises beyond this office: Indian constitutional design protects individuals in office well and regulates the moment of appointment and the moment of consequence poorly.
• What makes the CAG the sharpest case is that its output is uniquely verifiable: an appropriation account either balances or it does not. The office produces the least deniable findings in the constitutional system and has the least power to act on them.

Conclusion

The Comptroller and Auditor General is the institution through which a legislature that votes money learns what happened to it, and on the evidence of seven decades it has done that job with more independence than most comparable institutions elsewhere. From the jeep purchase report of 1962 to the 2G and coal block reports to the audits of the current decade, it has repeatedly produced findings no other body would have produced and no government wanted published.

• Its weaknesses lie almost entirely at the two ends the Constitution left unregulated — the appointment, and what happens after the report is written.
  • Ambedkar identified the first while the Constitution was being drafted, saying plainly that the office had less independence than the judiciary when it deserved more; the pending litigation is his objection restated.
  • The second is newer and grows as the state contracts out: a mandate written for a government that spent through its own departments reaches less of the money each year.
• The reform that would change the most is the least dramatic — a statutory deadline for laying reports, mandatory Action Taken Notes, and a Public Accounts Committee with the term and the staff to use what it receives — and none of it requires a constitutional amendment.

The Constitution made the auditor independent and left the audit dependent, and every serious proposal for reform is an attempt to close that distance.