Govt Proposes To Hike Ministries’ Reporting Limits For Financial Expenditure

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). 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 500 millions but not exceeding Rs 1 billion along with mandating prior approval of Parliament for spending over Rs 1 billion. 

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 1 billion whichever is higher. “Approval from Parliament would be mandatory for amounts exceeding 20 percent of the original appropriation or above 1 billion, whichever is higher, subject to savings within the same section of the grant,” the PAC, headed by Congress leader Adhir Ranjan Chowdhury, has said in the report titled ‘Revision of Financial Limits for Determining the Cases Relating to ‘New Service/New Instrument of Service’, tabled in Parliament on February 7.

This proposal for revision in the financial limits, which has just been the fourth such instance since Independence, is aimed at minimising the frequency of Supplementary Demands for Grants presented to Parliament during a financial year. The last such revision had come into effect in 2006. 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, the report said.

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,” the PAC report said.

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.

Bhartruhari Mahtab, Member of the PAC and Biju Janata Dal leader, said this is the fourth such change since the last 50 years and has come after wide consultations. “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. All such reports are unanimous and are prepared after wide consultations,” he informed the media. 

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 25 million and the value differed across nearly 50 items of expenditure. Hence, it was extremely difficult to comply and it would slow down the overall government spending process,” a senior government official informed the media. 

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.

While explaining the need for the proposed revision, the Department of Expenditure under the Finance Ministry in its submission to the PAC said that in the last four financial years, the ministry took 2,500 tokens to the notice of the Parliament for reappropriation. “Since the last revision in 2006, on a gross basis, the Union Budget has grown in size by more than 1000 per cent…. several of the Ministries tend to take unnecessary supplementary when none was required and requisite authorisation had been given by the Parliament or the PAC to the Government….

 As a result of low NIS limits, we have been providing voluminous reports for its scrutiny. In the years 2019-20, 2020- 21, 2021-22, and 2022-23, we took 2,500 tokens to the notice of the Parliament for reappropriating Rs. 5.45 trillion… if we apply those proposals to these years, the number of tokens that we would have taken to Parliament for its consideration would have dropped to 800 approximately with the amount that is being scrutinised by Parliament only coming down marginally by Rs 5.25 trillion,” it said.

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. Also, it would speed up the process of decision making for the government and also perhaps improve the pace of scheme implementation, it said.

Source: Agencies