Make realistic budget estimates, ministries told over unused funds issue
The government will ask ministries and departments to provide realistic estimates of their annual outlays to avoid accumulation of huge unspent money at the end of the financial year even as the Comptroller and Auditor General of India (CAG) last week pointed at Rs 4.72 lakh crore unspent amount in FY-19 due to injudicious formulation of budget, two government officials said.
About Rs 4.72 lakh crore could not be spent in the financial year ended March 2019 due to various reasons, including regulation of spending, short transfer against budget estimate, reversal of expenditure and shortfalls in performance, they said requesting anonymity.
A recent CAG audit report on the Union government’s account for 2018-19 pointed at the discrepancy. The report was tabled in Parliament on September 23. The government draws specified sums from the Consolidated Fund of India (CFI) for identified activities and functions as approved by Parliament. Authorisations by Parliament are based on budget estimates (BE) prepared by ministries and departments as directed by the budget division of the ministry of finance.
“These instructions envisage that the BEs are prepared realistically to meet all expenditure requirements and ensure that unspent balances are avoided,” the CAG report said. The appropriation accounts of the government for 2018-19 cover approved provisions aggregating to Rs 97.58 lakh crore. The total expenditure that fiscal year, however, amounted to Rs 92.91 lakh crore, it said.
The finance ministry did not respond to email queries on this matter.
The Public Accounts Committee (PAC), a panel of members of Parliament to audit the revenue and the expenditure of the government, had also raised the issue of large savings in the grants of ministries. According to the CAG, the committee had said that savings of Rs 100 crore or above are indicative of “defective budgeting” as well as “shortfall in budget performance” and such savings are a result of “injudicious formulation” of budget, which could be significantly reduced by making realistic budgetary projections.
According to the audit report, savings of Rs 1.31 lakh crore in 2018-19 were on account of regulation of expenditure both at revised estimate (RE) stages and thereafter. It included Rs 69,889.71 crore due to withdrawal of food subsidy to Food Corporation of India (FCI), Rs 35,725 crore due to short transfer of Goods and Services Tax (GST) compensation cess to GST Compensation Fund, Rs 5,000 crore due to reversal of expenditure on defence pension, Rs 6,842.64 crore on regulation of capital expenditure for railways and reduction in provisions at RE stage of Rs 4,953.05 crore due to lesser receipts, the report said.
There was a saving of Rs 22,039.83 crore on account of less than budgeted transfer of funds to Madhyamik and Uchhattar Shiksha Kosh (MUSK). Savings of Rs 43,104.51 crore occurred due to reasons like finalisation of fewer spending proposals, non-receipt of viable proposals from states, non-receipt of utilisation certificates, schemes not being formulated and delays in grant of approvals.
Savings of Rs 1,43,999.12 crore occurred due to factors such as unspent balances not being considered, revision in funding decisions and fund requirements after BE stage, gaps in cash flow forecasting, inaccurate assessment of internal resource generation and budgeting of funds under wrong section of grant. “These indicate gaps with respect to budget formulation and assessment,” the report said.
Divakar Vijayasarathy, founder and managing partner at consulting firm DVS Advisors LLP, said some of the savings were because of accounting issues and also due to restraint by some ministries as the year was preceding the general election. “The Department of Agriculture Co-operation and Farmers Welfare has clearly stated the operation of the Model Code of Conduct as one of the reasons for short spending/savings,” he said. He, however, said the focus of the government is often on “fiscal consolidation rather than quality spending”.