Redactive pricing audit and the CAG’s
duties (The Hindu)
Mains Paper 2: Polity
Prelims level: CAG
Mains level: Various constitutional bodies
The Supreme Court’s observations in connection with the Rafale
fighter aircraft deal by citing the Comptroller and Auditor General of
India’s (CAG’s) report on redacted pricing, and subsequent media reports and
the controversy over “stolen files” brought back into the spotlight the role
of the supreme audit institution of India.
Redaction is the selection or adaption by ‘obscuring or removing
sensitive information’ from a document prior to publication.
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 favour.
He 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.
Legislative committees such as the Public Accounts Committee and
Committee on Public Undertakings examine the CAG’s selected reports.
In the preface of the audit report, the CAG stated that redactive
pricing was unprecedented but had to be accepted due to the Ministry’s
insistence citing security concerns. Consequently, the full commercial
details were withheld and the figures on the procurement deal were
It was unprecedented that an audit report submitted by the CAG to
the President under Article 151 of the Constitution suppressed relevant
Whether the 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.
Redactive pricing is nowhere used in SAI audit reports.
It does not seem to have been used in a government audit by any
SAI of any country.
Redactive pricing in the ‘Performance Audit Report of the
Comptroller and Auditor General of India on Capital Acquisition in Indian
Air Force (Union Government – Defence Services, Air Force, Report No. 3 of
2019)’ suppresses more than it reveals. For example, in the Rafale deal,
Parliament, its committees, the media and other stakeholders of the CAG’s
reports cannot obtain complete, accurate and reliable information due to
The reduction in the original requirement, to 36 aircraft, a
waiver of the earlier decision to involve Hindustan Aeronautics Limited,
observations of the Indian Negotiating Team, cost escalation due to
inclusion of bank guarantee and performance guarantee were not compared
properly to arrive at the audit conclusion.
Pivotal to procurement
Pricing is the quintessence of any procurement decision. Along
with quality and quantitative specifications, comparative merits and
demerits are ascertained, and the pricing of comparable products are
compared in decision-making.
Pricing is an integral part of the procurement decision-making
process of any equipment, product, goods or service.
A strategic competitive advantage of a product, how best it should
be procured, how many at a time are to be purchased and at what price and
under what conditions, terms, instalments, along with after-service
conditions, discounts, commissions and other conditions are evaluated to
arrive at a purchase decision.
Therefore, price integrity and comparative competitiveness are at
the heart of any procurement decision.
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. It is a complex audit, demanding exceptional insight, expertise,
knowledge and skills.
In case the CAG’s office lacks expertise to conduct a performance
audit, expertise can be sought from the pool of resources or credible
organisations to be coopted in the audit team.
Pricing decisions must be subjected to detailed analysis, without
resorting to redactive pricing.
Parliament is constitutionally privileged to know what the
executive had done and how and under what conditions a procurement was
The CAG’s audit is expected to highlight value for money in
A performance audit is done to establish whether the procurement
activity was executed keeping in mind economy, efficiency, effectiveness,
ethics and equity.
Only a thorough pricing audit can bring out the credibility and
integrity of a purchase decision, thereby achieving an SAI’s
constitutionally mandated responsibilities
Q.1) Consider the following statements regarding 'Departmentally Related
1. It was established on the recommendation of the second Administrative Reform
Commission in 2006.
2. Each standing committee consists of members from both Lok Sabha and Rajya
3. A minister is not eligible to be nominated as a member of any of the standing
Which of the statements given above is/are correct? (a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Q.1) Do any supreme audit institutions (SAIs) such as the National Audit Office,
the Government Accountability Office or Commonwealth countries follow redactive
pricing in audit reports?