The government is likely to save up to ₹10,000 crore by ‘EAT’ing into the holding time of funds by the distributing agency. The new fund distribution module is based on the Public Financial Management System (PFMS).

“The idea is to time the fund flow and stop parking of funds,” a senior Finance Ministry official told BusinessLine. EAT – Expenditure Advance and Transfer — is core of one of the two modules.

The fund will be released as and when required to be disbursed. This will help in appropriate planning of the borrowing and cut interest outgo. Interest payment is the second biggest expenditure of the Central Government with budget allocation of over ₹5.75 lakh crore during the current fiscal.

The Centre’s expenditure has two key components: Central Sector Scheme (CS) and Centrally Sponsored Scheme (CSS). While CS is fully funded and administered by the Central Government, CSS has major fund from Centre and some from States, while fund goes to the States for disbursal. PFMS is mandatory for CS, while voluntary for CSS. For the current fiscal, approximately ₹7 lakh crore is to be spent through CS while ₹3 lakh crore through CSS.

The official said that quantum of floating fund on daily basis under the various schemes has come down to ₹90,000 crore during the current fiscal from ₹1.4 lakh crore during the last fiscal and it has been possible through EAT module. Among the schemes which have seen major reduction in parking of fund is the Mahatma Gandhi National Rural Employment Guarantee Scheme (MG-NREGA) where it has come down to zero from ₹50,000- 60,000 crore.

At present, all subsidy schemes, except LPG and fertiliser, are being implemented through PFMS. The official said that due to some technical issues, LPG subsidy has not been brought on PFMS while effort is on to use this for fertiliser subsidy distribution. The government has already indicated using Direct Benefit Transfer (DBT) for fertiliser and subsidy will be given directly to the farmers.

Ministries left out

At present, only three ministries — Defence, Railway and Post & Telegraph (Communication) — are not using PFMS. Another senior Finance Ministry official said a presentation on PFMS will be made to the Defence Ministry in about a week’s time. While the Postal Department has agreed to use PFMS, the Telecommunication Department is yet to take a call. The Railway will continue to be out from PFMS as it has a very ‘complicated’ payment mechanism.

Both the officials said there is need to look at the Human Resources (HR) issue. Officers from Indian Civil Account Services (ICAS) are responsible for running and maintaining the PFMS. “Officials posted in Central Ministries and Departments are also given charge of States which make work very difficult,” one official said while adding that Cabinet has already approved more posts and allocated budget.

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