After PAC nod, hike in reporting limits for Ministries’ spending proposed
- February 19, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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After PAC nod, hike in reporting limits for Ministries’ spending proposed
Subject: Polity
Section: Parliament
Context:
- After a gap of about 18 years, the government is set to revise its financial limits for ‘New Service’ and ‘New Instruments of Service’ after getting approval from Parliament’s Public Accounts Committee (PAC).
More on news:
- The approval, which has come in line with expansion in GDP growth and the Budget size, has fixed the reporting limit for ‘New Instrument of Service’, to up to 20 per cent of the original appropriation or up to Rs 100 crore, whichever is higher.
- Approval from Parliament would be mandatory for amounts exceeding 20 percent of the original appropriation or above 100 crores, whichever is higher, subject to savings within the same section of the grant.
- The Ministry said it intends to simplify the process in such a way that it becomes very easy to adopt by the Ministries and it will be very easy for the PAC to find deviations.
- This would speed up the process of decision making for the government and also perhaps improve the pace of scheme implementation.
- During the last 50 years, the first such change occurred in 1970.
- Then subsequently in the 1980s , the third one was in 2005. This is the fourth time the PAC has prepared this report.
About Finance Ministry Proposal:
- The panel has approved the Finance Ministry’s proposal to raise the reporting limit for new policy-related expenditure by ministries/departments to above Rs 50 crore but not exceeding Rs 100 crore along with mandating prior approval of Parliament for spending over Rs 100 crore.
- This proposal for revision in the financial limits, which has just been the fourth such instance since Independence, is aimed at minimizing the frequency of Supplementary Demands for Grants presented to Parliament during a financial year.
- The last such revision had come into effect in 2006.
Reasons for such a step:
- Due to the low financial limits for new policy-related expenditure earlier, there has been a reported increase in the number of supplementary proposals from the ministries/departments.
- The time taken in seeking Parliament’s approval would then cause delay in execution of projects.
About New Service (NS) and New Instrument of Service (NIS):
- New Service (NS) refers to expenditure arising out of a new policy decision, not brought to the notice of Parliament earlier, including a new activity or a new investment.
- New Instrument of Service (NIS) refers to relatively large expenditure arising out of important expansion of an existing policy.
- The financial limits for ‘New Service/New Instrument of Service’ are applied whenever the expenditure is incurred on account of the expansion of an existing policy.
- The proposed amendments intend to encourage the Ministries to meticulously estimate their budgetary requirements.
- The necessity for the upward revision arises due to a surge in supplementary proposals from the Ministries/Departments seeking prior approval from Parliament, causing delays in execution of projects/schemes/programmes despite availability of savings.
- With an expected growth of GDP in the range of 6-7 per cent year-on-year, the size of the Budget is anticipated to grow substantially in the next decade too and thus, required an upward revision in the financial limits.
Other Key Takeaways:
- According to the report, a substantial growth in budget size has diminished the delegated powers of the ministries leading to voluminous proposal(s) being forwarded, for reporting/approval of the Parliament.
- The limits were very low between Rs 10 lakh to Rs 2.5 crore and the value differed across nearly 50 items of expenditure.
- The PAC and the Comptroller and Auditor General of India (CAG) have been pointing to the growing instances of unnecessary supplementary, re-appropriations not adhering to the NS/NIS limits; and re-appropriations without reporting to Parliament or without obtaining prior approval of the Finance Ministry.
- In a separate report titled ‘Excesses over Voted Grants and Charged Appropriations (2019-20)’, which was also tabled in Parliament earlier this month, the PAC had raised concerns over excess expenditure, ranging between 10.04 per cent to 79.77 per cent, incurred during FY 2019-20 for grants/appropriations even after obtaining high amounts of supplementary grants by the ministries/departments to meet their additional requirements.
About Public Accounts Committee(PAC)
- The PAC is the oldest parliamentary committee in Indian legislative affairs and has been crucial in upholding the principle of accountability as it exercises oversight of public expenditure.
- The Public Accounts Committee examines the value for money of Government projects, programmes and service delivery.
- Drawing on the work of the National Audit Office the Committee holds government officials to account for the economy, efficiency and effectiveness of public spending.
- This Committee scrutinizes the value for money—the economy, efficiency and effectiveness—of public spending and generally holds the government and its civil servants to account for the delivery of public services.
- The Public Accounts Committee was introduced in 1921 after its first mention in the Government of India Act, 1919 also called Montford Reforms.
- It has existed in the Indian Constitution since then.
- PAC is one of the parliamentary committees that examine the annual audit reports of CAG which the President lays before the Parliament of India. Those three reports submitted by CAG are:
- Audit report on appropriation accounts
- Audit report on finance accounts
- Audit report on public undertakings
- The financial committee has 22 members.
- All the members are taken from the Indian Parliament. Out of 22 members, 15 are elected from Lok Sabha (Lower House) and 7 members are elected from Rajya Sabha (Upper House.)