New CAG guidelines for govt accounting to be unveiled tomorrow

In line with the recommendations of the 12th and 13th Finance Commissions and the second Administrative Reforms Commission, the operational guidelines suggest shifting from the present cash-based accounting system to an accrual basis of accounting

New Delhi: The Comptroller and Auditor General (CAG) guidelines for a new government accounting system aimed at improving transparency and fixing the accountability of departments for managing state-owned assets will be unveiled tomorrow, reports PTI.

In line with the recommendations of the 12th and 13th Finance Commissions and the second Administrative Reforms Commission, the operational guidelines suggest shifting from the present cash-based accounting system to an accrual basis of accounting.

“A move from cash to accrual accounting will be a fundamental change which will help overcome the deficiencies of the present system,” a finance ministry statement said today.

Under the accrual system, transactions will be recorded at the time when economic value is created, exchanged, transferred or impaired, irrespective of whether cash is actually exchanged or not, it said.

“Only accrual accounting captures the full cost of services provided by the government, thereby supporting effective and efficient decision-making,” it said, adding it will also fully disclose information on the assets and liabilities of the government.

The new norms would be unveiled at a national conference of state finance ministers by Union finance minister Pranab Mukherjee.

The present system lacks an adequate framework for accounting of assets and liabilities, depicting consumption of resources and presenting the full picture of the government's financial position at any point of time.

In this system, there is no effective way of tracking assets created out of public money which, in turn, dilutes the accountability of departments for management of government assets, it said.

The deficiencies in the present system result in a lack of transparency, poor stewardship and impaired ability to accurately predict the future cost of a current financial commitment, it added.

The job of steering the transition to accrual accounting was given to the Government Accounting Standards Advisory Board (GASAB) under the office of the CAG.

The GASAB is a high-power advisory body which includes the heads of six major accounting departments of the government of India, namely Indian Audit and Accounts Department, Indian Civil Accounts Department, Indian Defence Accounts Department, Indian Railway Accounts Department and Indian Postal Department.

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SC dismisses bail pleas of Kanimozhi, Sharad Kumar

The CBI opposed Ms Kanimozhi’s plea saying the original documents regarding the illegal financial transaction of Rs200 crore to DMK family-run Kalaignar TV are yet to be recovered and the accused might tamper with evidence if released on bail

New Delhi: In a major setback to DMK MP Kanimozhi and Kalaignar TV MD Sharad Kumar, the Supreme Court today dismissed their bail pleas in the second generation (2G) spectrum allocation case, reports PTI.

A special bench of justices GS Singhvi and BS Chauhan directed the two accused to wait till framing of charges before approaching the special Central Bureau of Investigation (CBI) court for regular bail.

The apex court said the CBI court can thereafter decide their bail pleas uninfluenced by the earlier bail proceedings.

The apex court decision to reject the bail would mean that Ms Kanimozhi and Mr Kumar will continue to cool their heels in jail till the time the charges are framed.

The court dismissed the bail application after hearing the CBI and counsel for the accused for over one-and-a-half hour.

During the arguments, the CBI opposed Ms Kanimozhi’s plea, saying the original documents regarding the illegal financial transaction of Rs200 crore to DMK family-run Kalaignar TV are yet to be recovered and the accused might tamper with evidence if released on bail.

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RPower’s Krishnapatnam UMPP hits road block; may seek govt help

A recent change in Indonesian law mandates all parties to sell coal at market prices. Earlier, Indonesian coal mines had the freedom to bilaterally agree coal prices with buyers. The change in law will impact the viability of all power projects that are based on imported coal, especially from Indonesia

Hyderabad: Anil Ambani Group firm Reliance Power’s (RPower) 4,000MW Krishnapatnam ultra-mega power project (UMPP) is facing road blocks due to various reasons, including a recent change in Indonesian law which mandates all parties to sell coal at market prices, reports PTI.

Earlier, Indonesian coal mines had the freedom to bilaterally agree coal prices with buyers. The recent change in law will impact the viability of this project as well as others that are based on imported coal, especially from Indonesia.

“This change by the Indonesian government will adversely impact not only Krishnapatnam, but all existing and future imported coal-based power plants in India, including UMPPs,” Ashok Khurana, the director general of the Association of Power Producers, said.

The association is likely to approach the government to find a solution in the interest of capacity addition in the country, he said.

Other issues impacting the Krishnapatnam project include the condition of the soil where the foundation for the boiler has to be laid and land disputes at strategic locations.

A team of officials of the Central Electricity Authority (CEA) recently visited the project site at Krishnapatnam in Nellore District of Andhra Pradesh. According to sources, the company has slowed down the construction of the project due to these factors.

“Even after going 75 metres down, engineers found marine sand, which may not be a good sign for laying foundation. If it has to be filled with layers, the cost would go up significantly,” sources said.

When contacted, RPower officials said the company has briefed their stand to the visiting CEA officials.

According to the CEA’s latest report on the project, as of 31st May, work on the boiler foundation is yet to start, sources said.

“90% boundary work completed. Soil investigations for sea water intake systems are in progress. Work on boiler foundation has not yet started,” the report said.

The Krishnapatnam UMPP was originally a 5x800MW project, which was later configured to 6x660MW.

It is expected that the project will start generating power from the year 2013 and will be completed before the contemplated schedule. The project achieved financial closure in July, 2009. The lenders for the project are a consortium of almost 12 banks lead by IDBI and the lending was done on a project finance basis for an estimated project cost of around Rs17,450 crore ($4 billion) with a debt-equity ratio of 75:25.

The company had evaluated various options for sourcing imported coal and has acquired three coal mines in Indonesia.

The coal requirement of around 15 million tonnes for the project would be sourced from these mines, RPower had said earlier.

However, all existing coal supply agreements with the Indonesian coal mining companies (including with affiliates) will have to be modified to comply with the new coal pricing regulations before September 2011, and this has impacted all imported coal projects in India, including the Krishnapatnam project.

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