While the three armed forces have been vigorously fighting against an external audit of its Unit Run Canteens (URCs), arguing that there is an internal mechanism to keep a watch on expenses and that the canteens are not run using public funds, the CAG has been requesting access to the accounts after preliminary reports pointed to glaring deficiencies.

Matter came to a head last year after the Public Accounts Committee (PAC) of Parliament summoned all three service chiefs to discuss their refusal to give the CAG access to its accounts. The armed forces had argued that the funds and profits generated from the canteens were not public money but were used for welfare activities of the unit itself.

However, the view that has prevailed is CAG's argument that the canteens are run from official premises and that they are funded each year by a soft loan that is extended from public funds.

The auditor had argued that since the canteens are not private enterprises as they are aided by the CSD, they are liable to external audit.

As per the current mechanism, the government every year extends a soft loan to the 3,600 unit-run canteens across the nation that is used to make purchases. The funds are returned by the units by the end of the year. However, a CAG report had found that there was a loss of Rs 441 crore to the government over the past few years due to concessions given to the canteens. The canteens have a turnover of over Rs 7,000 crore annually.