FinMin to Ministries/Dept: Prepare realistic Budget proposals

The Finance Ministry has urged all the Central Ministries and Departments to prepare their Budget proposals more meticulously. At the same time, effort should be to arrest excess expenditure or even savings.

This communication has been made based on the recommendations of Public Account Committee’s report (excess over voted grants and charged appropriations) submitted this February. Although chances of allocations, projected in the Interim Budget 2024-25, unlikely to be altered. However, going by 2019 office memorandum (OM), the Ministries or Departments may be permitted to propose additional fund requirements on account of unavoidable commitments that have not been fully provided for in the Interim Budget. Also, Budget exercise for Fiscal Year 2025-26 to begin in September for which this, latest advisory could be more useful.

In an office memorandum dated May 30, Budget Division of Economic Affairs Department said: “It is re-iterated that Ministries/Departments may ensure that the Budget proposals are prepared on realistic basis taking into considerations all the related aspects such as commitments, trend of expenditure and anticipated expenditure and take concrete remedial action to arrest savings/excess to an optimal level.”

The OM also recalled communication by the Expenditure Department last year, in which Ministries and Departments were enjoined upon to adhere to the guidelines. Also, they need to ensure that there is no excess expenditure over the allocation approved by Parliament, especially when the Supplementary Grant has been obtained by the Ministries and Departments.

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Caution to Depts

Since 2017-18, Union Budget is presented on February 1 and entire legislative process is completed on or before March 31, so that money available for 12 months to be spent in 12 months itself. However, due to various reasons, many Ministries and Departments need money over and above budget allocation and for this government seeks fresh approval through two Supplementary Demands for Grants (one each in winter and budget session).  PAC, in its report, said that it has repeatedly cautioned the Ministries/Departments in the past against incurring excess expenditure despite obtaining Supplementary Grants, the trend continues unabated.

“The Committee are inclined to conclude that not only the Budget Estimates are made inadequately, but even at Supplementary Demands stage, the requirements projected are not realistic. The Committee are of the view that when the Ministries/Departments have opportunities to obtain Supplementary Demand for Grants during three sessions of Parliament in a year, there is no reason for incurring excess expenditure being inevitable,” PAC said.

The issue of savings or excess expenditure is also critical, as 28 per cent of total expenditure is met through borrowing and other liabilities which 20 per cent of total expenditure is for interest payment. This is the reason for not promoting excess or savings being parked in any bank by the Ministries and Departments. Earnings from savings parked by Ministries/Departments in a bank give less than interest incurred on borrowing. The Finance Ministry is also using ‘Just-in-Time’ fund release mechanism to ensure availability of funds as and when required, rather transferring soon after budget and then fund lying idle. This helps in cutting down the borrowing.