Decoding CAG's audit of Gujarat

Kanchan Gupta
1st April, 2012
Look at the findings!

Headlines are meant to stare at you, sort of look you in the eye, and tell a story as it is in the least possible number of words. But there are some headlines that scream at you, demanding immediate attention, sort of like an aggressive sow with scarlet lipstick and mascara. The chai — or coffee, if that's your favourite morning brew — can wait. So it was with newspapers on Saturday morning. "CAG raps Gujarat Government for Rs 17,000 crore losses" screamed the headline on the front page of a leading daily published from Delhi. The headline for the same story in the web version of the newspaper had transmogrified into: "CAG raps Narendra Modi Government for Rs 17,000 crore losses". Having grabbed the reader's attention, the newspaper tells a story that makes the following points:
The Comptroller & Auditor-General reports for 2009-10 and 2010-11, placed before the Gujarat Assembly on the last day of the Budget session on Friday, "tore into the Narendra Modi Government on the issue of corruption by pointing out irregularities causing a cumulative loss of nearly Rs 17,000 crore".
The losses are largely on account of state-run corporations which have indulged in 'financial irregularities'.
The reports said "there were regular unspent 'excesses' left in all departments over the last four years, and that there were 'last minute fund releases and issuance of re-appropriation / surrender orders' at the fag end, particularly on the last day of the year.
This is a classic example of how to write a slanted story, or give a spin to a story that nobody would otherwise read. Snatch a couple of sentences from two voluminous reports; add some carefully selected statistical data; pick a couple of out-of-context comments; shake it all up, and, voila, you have a story that suits your purpose. Give the story a tantalising headline and that purpose is served. All this is premised on the belief, not entirely misplaced, that most readers will read the headline, form an opinion, and move on; those who will read the story will not bother to cross-check facts; and, the few who will take the trouble of accessing the CAG's reports, plod through them and come to the conclusion that the newspaper has been less than truthful, can do little or nothing to enforce a correction, leave alone a retraction.

So, what do the CAG reports really say? Here's how the audit findings should have been interpreted instead of being presented as a chargesheet that indicts the Government of Gujarat, more specifically Narendra Modi. The State Government has not tried to fudge the fact that the CAG has observed that heavy losses have been incurred by GSRTC, GSFC and Alcock Ashdown Gujarat Ltd. But there are reasons, according to the Government, why these PSUs have incurred recurring losses, and those need to be mentioned to present the full picture:
As far as Alcock Ashdown is concerned, because of overall economic pressures, the disinvestment efforts have not borne fruit. However, the company has several prestigious projects in hand, including ships for Indian Navy at very competitive rates.
Gujarat State Road Transport Corporation is a public utility company serving the remotest villages. Some of these routes are not financially viable. The frequent increases in the price of diesel have increased the losses since the corporation has not correspondingly increased the fares looking to the larger public interest.
Similarly, Gujarat State Financial Corporation, which used to give loans to small and medium scale sectors, stopped lending from 2001 onwards. In the last 11 years, GSFC has been concentrating on recovery of dues of the earlier 20 years. In 2004, the State Government extended a loan of Rs 550 crore to repay SIDBI (a Government of India organisation) and public sector banks. The 'loss' pointed out by the CAG pertains largely to the interest that is due to the Government from GSFC against this loan to the corporation. It would be absurd to suggest that this 'loss' is on account of 'financial irregularity'.
The Government of Gujarat has pointed out how the CAG's reports have brought the following points to light, but they do not find any mention in the manipulated media reports:
There are 73 PSUs in the State of which 60 are working.
The CAG has noted the quantum increase in the investments made by public sector undertakings as well as the overall profits earned by them in Gujarat.
The investment in Gujarat State PSUs has gone up from Rs 48,137 crore in 2008-09 to Rs 67,352 crore in 2010-11, reflecting the increased investments in power and irrigation sectors which contribute significantly to crucial infrastructure.
Overall profits earned by PSUs have increased from Rs 1,371 crore in 2005-06 to Rs 2,663 crore in 2010-11.
Of the 60 working PSUs, 41 have earned profits in 2010-11. In other words, two-thirds of the State's PSUs are profit-making and financially viable. Significant profits have been earned by GSPC, GSPC and GSPL.
The turnover of the PSUs has gone up from Rs 8,557 crore in 2005-06 to Rs 63,008 crore in 2010-11, which means it has increased from 3.89 per cent of GSDP to 12.24 per cent of GSDP. This underscores the contribution of these PSUs to the State's robust economy.
The CAG's reports record the improving financial parameters of the State PSUs. What is impressive is that the return on capital has gone up from 4.4 per cent to 5.24 per cent in the last five years.
The debt to turnover ratio has been substantially reduced from 2.72 to 0.43 in the same period.
The CAG in its reports has noted that the overall accumulated profit / loss figures of the functioning State PSUs have shown steady improvement over the past six years and the accumulated losses have been wiped out, indicating overall improvement in performance of these PSUs.
The guarantee commitment of the State Government to PSUs has decreased from Rs 6,694 crore in 2008-09 to Rs 4,960 crore in 2010-11. This reflects the increasing emphasis on self-reliance and credit worthiness of these PSUs.
There's more to the story, but do newspapers care? They would rather don scarlet lipstick and mascara to grab attention.

The above is from a regular mail I receive.
I'll be frank.
When I read the article in the Times of India, I thought et tu Narendra.
I am glad this article has come to clear my doubts.
I am posting it here so that other people also clear their doubts and understand the slanted reporting of the newspapers.