The Himachal government has secured US $40 million (about `245 crore) funding from the World Bank for a project on improving and consolidating public financial management. The project was floated to streamline management of financial activities and ensure stringent expenditure control measures in the wake of the government's worsening fiscal deficit.
The Himachal Pradesh Fiscal Responsibility and Budget Management Act was enacted in 2005 to regulate fiscal activities and the project will help in automation of several operations including treasury functioning and restructuring and modernization of business processes in the excise and taxation department.
The Fiscal Responsibility Act is just a framework and has no powers to enforce fiscal discipline that the cash starved government needs sorely. Since the state has no mechanism to ensure accountability in fiscal management this project could play a key role.
A delegation of World Bank officials will soon visit the state to discuss various aspects of the project, which will include improving functioning of the finance, treasury and excise & taxation departments employing information technology enabled applications as a tool.
Principal finance Secretary Shrikant Baldi said the state had been adopting various measures for fiscal management and the new project was a major initiative in that direction. "We've received the World's Bank approval for the project that will definitely help in strengthening public finance management. The project will also include stringent expenditure control measures necessary for fiscal discipline in the state," he told this reporter.
An impact study on the project will suggest recommendations for implementation of the goods & service tax (GST). The government has allocated `12 crore for GST rollout in the state and Rs 6 core for project management, which will facilitate various implementation, coordination, learning and quality enhancement efforts under including operating costs.
The project has three main components - strengthening the public finance framework in the state for which `4 crore has been set aside, improving governance and accountability through IT-enabled initiatives, a major part of the project, for which `235 crore has been allocated and project management. The second component will focus on integrated financial management information systems, undertaking treasury reforms and establishing IT-enabled systems in the treasury department besides modernizing the excise and taxation department.
Public financial management capacity building project
Amount: Rs. 245cr ($40 million)
Strengthening public finance framework: `4cr
Strengthening treasury: `81cr
Establishing IT enabled system: `81cr
Modernization of excise and taxation department: `73cr
Project mgmt: `6cr