Govt proposes to hike ministries reporting limits for financial expenditure

Source-This post on Govt proposes to hike ministries’ reporting limits for financial expenditure has been created based on the article “After PAC nod, govt proposes to hike ministries’ reporting limits for financial expenditure” published in “The Indian Express” on 19 February 2024.

Why in the news?

Parliament’s Public Accounts Committee has recently approved the Finance Ministry’s proposal to raise financial limits on spending for ‘New Service’ and ‘New Instruments of Service’.

What are ‘New Service’ and ‘New Instruments of Service’?

New Service (NS)- It refers to expenditure arising out of a new policy decision that was not brought to the notice of Parliament earlier. This may include a new activity or a new investment.

New Instrument of Service (NIS)-It refers to relatively large expenditure arising out of important expansion of an existing policy.

What was the need to raise financial limits for spending?

1) Increase in demands for supplementary grants– Due to the low financial limits for new policy-related expenditure earlier, there was an increase in the number of supplementary proposals from the ministries/departments. The time taken by Parliament to approve those demands caused delay in execution of projects.

2) Increase In Budget size- With an expected growth of GDP in the range of 6-7 per cent year-on-year, the size of the Budget is expected to grow substantially in the next decade too. This necessitates an upward revision in the financial limits.

3) Excessive expenditure– The PAC has highlighted instances of excessive ministerial expenditure. For ex- Despite the ministries obtaining high amounts of supplementary grants during FY 2019-20, they incurred additional expenditure ranging between 10.04 per cent to 79.77 per cent.

4) Unnecessary re-appropriations– The PAC and the CAG have highlighted about growing instances of unnecessary supplementary, re-appropriations that do not adhere to the NS/NIS limits. The re-appropriations were undertaken without reporting to Parliament or without obtaining prior approval of the Finance Ministry.

What is the new limit approved by Public Account Committee?

The new policy-related expenditure by ministries/departments can be more than Rs 50 crore but can not exceed Rs 100 crore. For exceeding Rs 100 crore limit, prior approval of Parliament is mandatory.

The panel has fixed the reporting limit for ‘New Instrument of Service’, to up to 20% of the original appropriation or up to Rs 100 crore, whichever is higher. For exceeding this limit, prior approval of Parliament is mandatory.

What is the significance of the proposed changes?

1) Efficient planning-The proposed changes would encourage the ministries to meticulously estimate their budgetary requirements. This would ensure that ministries do not raise demands for supplementary grants frequently.

2) Simplification– The proposed changes will make it easy for the PAC to find deviations in expenditure of funds. This will enhance Parliamentary control over executive spending.

3) Expeditious decision making-It would speed up the process of decision-making for the government and also improve the pace of scheme implementation.

Read more about-Public Account Committee(PAC)

UPSC Syllabus-Polity and Indian economy.