In today’s Finshots, we examine whether the CAG’s appointment procedure needs a rethink.

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The Story 

Governments–whether central or state or even government-controlled institutions like public sector undertakings (PSUs)–spend a lot of money every day. Think of building highways, funding welfare schemes, procuring defence equipment, and maintaining public healthcare systems. The list is endless. 

And the money they use for this is public money, so ensuring it’s spent efficiently and legally is crucial. That’s where the Comptroller and Auditor General of India (CAG) comes into the picture.

The CAG audits government spending, making sure it’s used legally and for its intended purpose. These reports then land in Parliament or State Legislatures, where the Public Accounts Committee (PAC) sifts through them. If any major irregularities pop up, the PAC then summons officials, questioning them on what went wrong and recommending fixes to prevent future mess-ups.

And over the years, the CAG has exposed some shocking lapses. Like the 2G spectrum scam, where it found that telecom licenses were handed out at outdated prices, potentially costing the Indian exchequer a revenue loss of ₹1.76 lakh crore. Or the coal block allocation scam, where the CAG flagged that coal mines were allocated without competitive bidding, causing a loss of ₹1.86 lakh crore.

So yes, you can call the CAG the official watchdog of public money and the government’s auditor, keeping it accountable.

The fun fact is that the acronym CAG is used for both a person and an institution. The CAG (the person) is appointed by the President (after consultation with the Prime Minister) to head the CAG (the institution), which is an independent constitutional body. 

But why are we talking about the CAG today?

Well, because the Supreme Court just got a petition calling the CAG’s appointment process unconstitutional. The public interest litigation (PIL) argues that the CAG shouldn’t be handpicked by the ruling government. In simple terms, it means that the person auditing public finances must not be chosen by the very people they’re supposed to keep in check. And it suggests that an independent panel, featuring the Prime Minister, the Leader of the Opposition, and the Chief Justice of India must choose the CAG instead. 

And the Supreme Court isn’t brushing it aside. It has not only admitted the plea but has also sought a response from the central government.

So is the CAG’s independence being compromised?

The Probe cites the example of Maharashtra. In 2024, just weeks before state elections, a directive from the CAG’s headquarters suddenly put all crucial audits in Maharashtra on hold. No explanation. No justification. Just a sudden, quiet pause. And these weren’t minor audits. These were the ones that typically dig up inefficiencies and financial mismanagement—the kind that governments don’t really like.

A much bigger example? The National Project Audit. It was supposed to review massive infrastructure projects across India. You know, the kind that gets billions in funding. But it was abruptly put on hold, again without any official explanation.

And while some audits were quietly shelved, others were blowing up into full-blown political storms.

Take Delhi’s liquor policy. Back in 2021-22, the Delhi government rolled out a new plan to boost revenue and streamline alcohol sales. Sounds great on paper, but when the CAG took a closer look, it found a ₹2,000 crore hole—thanks to faulty implementation, shady licensing, and a bidding process that lacked transparency. And boom! And the opposition quickly grabbed the chance to launch full-blown corruption allegations. And the Delhi government too, hit back, calling the audit politically timed. Eventually, the policy was scrapped, arrests were made, and Delhi’s liquor laws turned into prime-time drama.

But not all audits are getting stalled. Some, like in Uttarakhand, are going through but they’re causing an entirely different kind of controversy.

Take the CAMPA (Compensatory Afforestation Fund Management and Planning Authority) Fund. It’s meant to help with afforestation. Companies pay a fee when they use forest land, and that money is supposed to go into planting new trees. Simple, right? Well, not in Uttarakhand. The CAG found that forest land was being diverted for other purposes. The afforestation projects were either delayed or just never happened, and funds meant for trees were being used for altogether different purposes. So naturally, this raised a bigger question: was the state government misusing environmental funds? However, instead of fixing the issue, a new debate kicked in: was the CAG exposing genuine mismanagement, or was it overstepping into state affairs?

And if Uttarakhand’s CAMPA audit was about financial mismanagement, Kerala’s fight with the CAG was all about control: who really gets to decide how states handle their finances?

The Kerala Infrastructure Investment Fund Board (KIIFB) was flagged for using ‘off-budget borrowing’ - essentially, taking loans without recording them in the official state budget. The CAG called it a violation of financial rules that distorted fiscal transparency. The state government countered by pointing out that the Centre does off-budget borrowing all the time. So why was Kerala being singled out? And just like that, the issue escalated from a financial dispute to a full-blown federalism debate: were audits being used to keep states in check?

So, the real problem isn’t just financial irregularities. It’s how the CAG’s findings are used, ignored, or twisted to suit different agendas. And reports suggest that while the central government is influencing CAG audits, state governments are accusing the CAG of overstepping their jurisdictions.

And this is where the PIL in the Supreme Court becomes crucial.

If the CAG appointment process is made independent of the federal government, it could solve two problems. First, CAG could conduct audits impartially, without external pressure. And second, it wouldn’t have to deal with state governments blaming it for overstepping its powers.

Because at the end of the day, a watchdog that is influenced by the very people it’s supposed to monitor isn’t really a watchdog, no? The verdict will decide whether that changes or stays the same.

Until then…

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