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The CAG Report: the facts we do not know!

CAG’s Audit Report on ESIC

CAG’s Performance Audit Report on ESI Corporation for the period from 2008-09 to 2012-13 has been presented to the Parliament in December 2014.

I. Some of the important observations of the CAG are:

  1. Substantial difference of Rs.556.59 crore was observed between challans generated towards contribution to be paid by the employers and actual receipts.
  2. While opening two 500 bed hospitals at Gulbarga and Mandi, the norms for existence of minimum number of insured persons were not followed and the locations were incorrectly selected.

Facts, as we know:

  • The manner in which the IT Roll-Out was rushed through without proper spade work, was the reason for the first observation.
  • The manner in which the politicians in power managed to hijack the ESI Scheme for narrow personal ends was the reason for the second observation. That the ESIC authorities could not do anything in such cases earlier too, like the locations of the hospitals at Nagda (instead of Indore) and at a village near Salem (instead of the town of Salem) shows that the ESIC had been pawn in the hands of self-serving politicians.

II. Some of the CAG’s observations based on superficial understanding are:

  1. Approximately 12000 ESIC employees had been irregularly availing medical benefits from ESIC dispensaries/hospitals without paying, though the facilities were meant for only insured persons paying contributions.
  2. Non-initiation of timely action to determine the dues resulted in cases becoming time-barred and consequent loss of revenue amounting to Rs.48.31 crore. Advances of Rs. 20.31 crore given to hospitals as of March 2013 were lying unadjusted in eight States.

Facts, as we know:

  • The conditions of service of the employees of the ESIC are similar to those of the Central Government servants drawing corresponding scales of pay, as per Sec. 17 (2) (a) of the ESI Act, 1948. In the early 1960s, the ESIC employees were getting medical facilities through ESI medical institutions but it was switched to CGHS later. The employees of the ESIC in Delhi were, in the 1980s, getting medical facilities through the CGHS. The decision to enable them to take medical facilities through ESI medical institutions was intended to replace that CGHS facility. The employees are entitled either to CGHS or the ESI facilities. The CAG did not consider these facts.
  • It is not non-initiation of timely action which resulted in the loss alleged. It was the unseemly hurry with which Sec. 45 was amended to insert the limitation clause of five years, without any steps taken by the Revenue Division of the Hqrs. to ascertain the extent of pending claims at the time of amendment. It was not just that. The amended clause was enforced with immediate effect from 01.06.2010 in a hurry, in spite of the fact that there was executive power to examine the issues in house and enforce the amendments at later dates too, as was done in the case of various amendments of the year 1989. The CAG would have done a great service to the nation, if he had examined whether any preliminary study was done and reports obtained from Regions on this issue before embarking on such amendment and before bringing it to force on 01.06.2010. The loss is a recurring phenomenon, every month now.

III. Absence of observations of the CAG on the following vital issues:

  1. Construction matters from 2008.
  2. Alienation of ESIC’s land to Municipalities for permission to construct buildings.
  3. Certifications regarding the progress in the construction of buildings.
  4. Proposal to commence the construction of buildings for medical colleges in a tearing hurry even before the ESI Act  was amended to facilitate setting up medical colleges. 

Facts, as we know:

The CAG was supposed to detect on his own. But, in this case, he was deemed to be aware of these issues. We get information that he had, specifically, been made to be aware of these issues. But, his report is silent on these issues.

Facts we do not know:

We do not know whether such silence implies that there was nothing wrong in the aforesaid four areas or whether that silence implies the attempt at the cover-up.



(This article has been prepared with reference to the report in Outlook (http://www.outlookindia.com/news/article/CAG-Finds-Irregular-Expenditure-By-ESIC/872374)

and the contents in the website


and the PDF format report available in

http://www.saiindia.gov.in/english/home/Public/In%20_Media/30of2014.pdf. )


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