GS Paper II
News Excerpt:
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 details on the news:
- The PAC 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.
- Reporting limit for 'New Instrument of Service' set at up to 20% of the original appropriation or up to Rs 100 crore, with Parliament approval required for amounts exceeding this limit.
Background:
- This is the fourth such change since the last 50 years and has come after wide consultations. The first change occurred in 1970. The last such revision had come into effect in 2006.
- 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 recently, the PAC had raised concerns over excess expenditure, ranging between 10.04 % to 79.77 %, 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.
New Service (NS)
New Instrument of Service (NIS)
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Need to raise financial limits for spending:
- Encouraging Meticulous Budgetary Estimation: The proposed amendments intend to encourage the Ministries to meticulously estimate their budgetary requirements.
- Addressing Surge in Supplementary Proposals: 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.
- Challenges of Low Limits on Expenditure: The limits were very low between Rs 10 lakh to Rs 2.5 crore 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.
- Anticipating Budget Growth with GDP Increase: With an expected growth of GDP in the range of 6-7 % year-on-year, the size of the Budget is anticipated to grow substantially in the next decade too and thus, requires an upward revision in the financial limits.
Public Accounts Committee (PAC)
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Significance of proposed changes
- The government 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.
- It would speed up the process of decision making for the government and also perhaps improve the pace of scheme implementation.
Supplementary Grants - Supplementary Grants refer to additional grant amounts sought by the government during a financial year, over and above the amounts already authorized in the budget. They are necessary when the authorized funds are insufficient to meet the current expenditure or when a need arises for spending on new services not contemplated in the budget for the year.
Types of Supplementary Grants:
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Conclusion:
The proposed financial limits revision signals a positive stride in promoting efficient budgetary processes, curbing delays, and aligning government spending with economic growth. This move fosters transparency, prudent fiscal management, and effective governance.