Prelims Capsule: Budget Basics: From the Start to the End



Budget Basics: From the Start to the End


Click here to Download Prelims Capsule PDF (20 Feb. 2017)

 

This article is to help you understand and remember the jargons, procedures, technicalities in and around the budget. The article is deliberately written describing the procedure of the budget making instead of directly giving the concepts to you, which could be shorter but would require a lot of mugging, this way at the first instance it might take 10-15 mins more than just reading the facts directly but will go a long way in staying your memory intact. This format will help you get an overall picture, which will in process help to remember the facts by making connections instead of mugging up the facts in isolation, which are eventually asked in the exam.

<<Tip: Read by imagining yourself as one of the actors in the Budget Making process>>
The term “Budget” is nowhere mentioned in the Constitution of India. Article 112 of the Constitution mandates it but is called as the Annual Financial Statement.

The preparation of Budget is done by a specialized nodal agency under Ministry of Finance.

Budget Making Process – Timeline

• Then the blue-sheets are further discussed between the Finance Minister and the Prime minister on the overall fiscal scenario, scope for fresh spending, new schemes or additional revenue measures and the direction of the budget.
• Once the draft of the budget is finalized, the ministry begins the mammoth task of printing hundreds of copies of the budget documents. A copy needs to be provided to each parliamentarian on the day of budget speech and hence the number almost touches over 1000.


“Halwa Ceremony” and Printing the documents


• The printing process starts with a traditional “halwa” ceremony; a sweet dish is prepared and served in North Block. This officially marks the beginning of budget printing and lock-in of over 100 officials into the basement of North Block for 10 days.These include personnel from Finance Ministry and four other ministries, legal experts, technicians for handling the press, and proof readers as each provision of the budget could have far reaching effect and any leakage could lead to individuals or organizations making windfall trading profits
• High-tech tapping devices, an army of security personnel, sophisticated surveillance gadgetry, digital deterrents, electronic sweeping devices and jammers, huge scanners are all pressed into service to provide the tightest security possible.
• Special arrangements for the food and lodging are made for the officials. The indoor canteen prepares meals and provides uninterrupted supply of tea and coffee.
• The entire North Block is set up as an electronic cocoon. No one is allowed to carry a communication device into the basement and special jammers are used to restrict network signals.
• Intelligence Bureau (IB) assumes charge of the surveillance over the premises and the Bureau Director himself monitors and examines the security provisions. An officer of rank of joint Director heads the IB team comprising of over 24 officers of Deputy Superintendent of Police rank at the North Block. Surprise drills are conducted to take out any potential loop holes in the set up. Special alertness is required post third week of February when the most secret portion of the budget – personal taxation – is provided for printing.
• Any slip on part of IB sleuths if detected can lead to over two year suspension of the entire team. IB also asks Delhi Police to provide high category of security to Finance Secretary as he is one person in know of all the budget provisions and access to all documents, and hence a desired target.
• Once printed, sealed trunks of the budget copies are transferred to the Parliament in the dead of night at an undisclosed time and through an undisclosed route.


Budget Day


The Budget is presented to Lok Sabha on such day* as the President may direct, which has been changed this year to Feb 1st.
• On the day of the Budget, Finance Minister first goes to the President to get his signature on the file approving the budget.
• This is followed by a short cabinet meeting in Parliament where FM briefs them on main features of budget just 10 minutes before the presentation. No details on tax proposals are given out.
• And they all enter the Lok Sabha, where the Finance Minister begins reading the Budget Speech after seeking the permission from the Speaker.Conventionally, the budget has been presented in Lok Sabha by the finance minister.
• The annual financial statement is laid on the table of Rajya Sabha after the finance minister concludes his budget speech in Lok Sabha.
• The budget documents are made available to the members of Parliament after the finance bill has been introduced in Lok Sabha, and the House has been adjourned for the day.


Presentation of Budget


• By Convention, or cursory understanding of the articles related to the powers of Lok Sabha with respect to the Money Bill and Finance Bill, the Budget is presented to LokSabha; there is no explicit mention in the Constitution.
• As soon as the presentation of the Budget, the following three statements under the FRBM Act are also laid on the Table of Lok Sabha:-
o The Medium Term Fiscal Policy Statement;
o The Fiscal Policy Strategy Statement; and
o The Macro Economic Framework Statement.

In an election year, the Budgets may be presented twice—first to get a Vote on Accountfor a few months (a provision has been made in the Constitution empowering the Lok Sabha to make any grant in advance through a vote on account to enable the Government to carry on until the voting of demands for grants and the passing of the Appropriation Bill and Finance Bill.) and later in full the second time.


Discussion on the Budget


Budgets are discussed in two stages—the General Discussion followed by detailed discussion and voting on the demands for grants.
• The whole process of discussion and voting on the demands for grants and the passage of the Appropriation and Finance Bills is to be completed within a specified time.
• The Minister of Parliamentary Affairs, after the presentation of the Budget, holds a meeting of leaders of Parties in Lok Sabha for the selection of Ministries whose demands for grants might be discussed in the House as all the demand for grants can’t be discussed.

On the basis of decisions arrived at this meeting, the Government forwards the proposals for the consideration of the Business Advisory Committee.

• The Business Advisory Committee after considering the proposals allots time and also recommends the order in which the demands might be discussed.


General Discussion on the Budget


During the General Discussion, the House is at liberty to discuss the Budget as a whole or any question of principles involved therein but no motion can be moved.

Consideration of the Demands for Grants by Departmentally Related Standing Committees of Parliament (DRSC)

DRSC created in Parliament in 1993 (they are not constitutional bodies, this line of questioning is possible), considers all the Demands for Grants. 

• After the General Discussion on the Budget is over, the House is adjourned for a fixed period.
• These Committees are required to make their reports to the House within specified period and no permission is granted for more time.


Discussion on Demands for Grants


• After the reports of the Standing Committees are presented to the House, the House proceeds to the discussion and voting on Demands for Grants, Ministry-wise.
• The scope of discussion at this stage is confined to a matter which is under the administrative control of the Ministry and to each head of the demand as is put to the vote of the House.
o It is open to members to disapprove a policy pursued by a particular Ministry or
o to suggest measure for economy in the administration of that Ministry or
o to focus attention of the Ministry to specific local grievances.

At this stage, cut motions can be moved to reduce any demand for grant but no amendments to a motion seeking to reduce any demand is permissible.


Cut Motions

The motions to reduce the amounts of demands for grants are called ‘Cut Motions’.

Cut Motions can be classified into three categories:—

• Disapproval of Policy Cut;
• Economy Cut; and
• Token Cut.

Disapproval of Policy Cut: A cut motion which says “That the amount of the demand be reduced to Re. 1” implies that the mover disapproves of the policy underlying the demand.
• The member giving notice of such a Cut Motion has to indicate in precise terms the particulars of the policy which he proposes to discuss.
• Discussion is confined to the specific point or points mentioned in the notice, and are open to the member to advocate an alternative policy.

Economy Cut: Where the objective of the motion is to bring prudence in the expenditure, the form of the motion is “That the amount of the demand be reduced by Rs ____ (a specified amount)”. The amount suggested for reduction may be either a lump-sum reduction in the demand or omission or reduction of an item in the demand.

Token Cut: Where the objective of the motion is to point out a specific grievance within the sphere of responsibility of the Government of India, its form is: “That the amount of the demand be reduced by Rs. 100”. (Token amount)
• Discussion on such a cut motion is confined to the particular grievance specified in the motion which is within the sphere of responsibility of the Government of India.


Admissibility of Cut Motions

A cut motion to be admissible should satisfy the following conditions:—
• It should relate to one demand only, clearly expressed and should not contain arguments or defamatory statements.
• It should not reflect on the character or conduct of any person whose conduct can only be challenged on a substantive motion.
• It should not make suggestions for the amendment or repeal of existing laws.
• It should not relate to expenditure ‘Charged’ on the Consolidated Fund of India.
• It should not relate to a matter which is under adjudication by a court of law having jurisdiction in any part of India.
• It should not raise a question of privilege.

The Speaker decides whether a cut motion is or is not admissible and may disallow any cut motion when in his opinion it is an abuse of the right of moving cut motions if it is in contravention of the Rules of Procedure of the House.

• It is a well-established Parliamentary convention that cut motion seeking to discuss the action of the Speaker or relating to Speaker’s Department or matters under the control of Speaker are not allowed.
• Cut motions relating to the office of the Vice- President (who is also ex-officio Chairman of Rajya Sabha) are not admissible.
• Cut motion relating to matters under consideration of a Parliamentary Committee is not admissible.
• Normally members of ruling party do not table cut motions.


Moving of Cut Motions


Cut motions cannot be moved by proxy. A member should be present in the House to move his cut motions when the relevant demands for grants are taken up.


Guillotine


Since all the demand for grants can’t be discussed as mentioned in the preceding arguments, on the last of the allotted days for the discussion, at the appointed time the Speaker puts all questionsrelated to the demands for grants to vote at once. This is known as guillotine.

The guillotine concludes the discussion on demands for grants.


Vote on Account


• A provision has been made in the Constitution empowering the Lok Sabha to make any grant in advance through a vote on account to enable the Government to carry on until the voting of demands for grants and the passing of the Appropriation Bill and Finance Bill.

As a convention, vote on account is treated as a formal matter and passed by Lok Sabha without discussion.

Vote on account is passed by Lok Sabha after the general discussion on the Budget is over and before the discussion on demands for grants is taken up.


Supplementary and Excess Demands for Grants


• If the amount authorised to be spent for a particular service for the current financial year is insufficient then, the President causes to be presented to Lok Sabha a demand for such excess.
• All cases involving such excesses are brought to the notice of Parliament by the CAG report on the Appropriation Accounts.
The excesses are then examined by the Public Accounts Committee which makes recommendations in its report to the House.
• During discussion on Excess Demands for Grants members can point out how money has been spent unnecessarily or that it ought not to have been spent; beyond this there is no scope for general discussion or for ventilation of grievances.
• The cut motions to Excess Demands for Grants must relate to the subject matter of the Demands.


Appropriation Bill


• After the demands for grants have been passed by the House, a Bill to take the money from the Consolidated Fund of India to meet the grants and the expenditure charged on the Consolidated Fund of India is introduced, considered and passed.
The introduction of such Bill cannot be opposed. The scope of discussion is limited to matters of public importance or administrative policy implied in the grants covered by the Bill and which have not already been raised during the discussion on demands for grants.
No amendment can be proposed to an Appropriation Billto vary the amount or altering the destination of any grant so made or of varying the amount of any expenditure charged on the Consolidated Fund of India, and the decision of the Speaker as to whether such an amendment is admissible is final.
• The procedure in respect of an Appropriation Bill is the same as in respect of other Money Bills.


Finance Bill


• “Finance Bill” means a Bill ordinarily introduced every year to give effect to the financial proposals of the Government of India for the next following financial year.
• The Finance Bill is introduced immediately after the presentation of the Budget.
• The introduction of the Bill cannot be opposed.
• The Finance Bill has to be passed by Parliament and assented to by the President before the expiry of the 75th day after the day on which it was introduced.
• As the Finance Bill contains taxation proposals, it is considered and passed by the Lok Sabha only after the Demands for Grants have been voted and the total expenditure is known.
• The procedure in respect of Finance Bill is the same as in the case of other Money Bills.

Thus with the passing of the Financial Bill, concludes the Process of Budget.

Hope you liked the article, share your comments, and also give suggestions, if you want any topics to be covered in this manner.


 

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  • ARUN ALEXANDER

    simply explained … it will be helpful to many

  • Demux

    What is the meaning of “cut motions can be moved to reduce any demand for grant but no amendments to a motion seeking to reduce any demand is permissible.”?

  • SkiRony

    is appropriation bill introduced only in lok sabha?

  • Arkhamasylum

    Very well explained.Thank you.

    Plz make one on the process of Bill–> Act.(Private member,Govt bill, their life and death wrt Lok sabha dissolution/death of bill in Rajya sabha , etc)

  • ForumIAS

    Thanks.

  • Checkmate

    Superb all in one …. guide… 🙂