Pros and cons of advancing Budget date

The Cabinet has decided in principle to advance the presentation of the Union Budget by a month, from February to January. The objective is to have the Budget constitutionally approved by Parliament and assented to by the President, and all allocations at different tiers disseminated to budget-holders, before the financial year begins on April 1.

The new system will eliminate the need for the executive to obtain a vote-on-account budget approval to incur expenditure during the first two months, which normally is in the second fortnight of May.

The aim is that all spending authorities within the system and those financially dependent on the Centre be in a position to work out their activities with assured resources in the beginning of the year itself. With annual financial resources approved and bestowed on April 1, a more planned and regulated expenditure profile during the year is expected.

Though the proposal is reformative, some implications need consideration. Whether the chambers of Parliament and its standing committees will get adequate time to deliberate on the budget is a moot point. If the budget in general and the detailed demands for grants from a number of ministries with annual allocations of over, say, ₹10,000 crore are deliberated upon by the standing committees, and debated and voted by the houses before the appropriations Bill (conveying legislature`s approval to the executive to draw from the Consolidated Fund of India), is passed by Parliament and assented to by the President, a period of 10-11 weeks is required. During the re-scheduled session, that much time may not be available to Parliament. For nearly 10 days in the latter part of January, ministers and their officers are distracted from parliamentary work owing to their involvement with Republic Day celebrations and follow-up events.

The standing committees of Parliament, whose charter is to examine the justification of the ministry-wise allocations and funding needs of concomitant programmes included in the Budget, undertake their scrutiny during a two to three-week gap within the budget session period, when the houses are adjourned.

This scrutiny is an essential element in the parliamentary budget approval system.

Although the incisiveness of this scrutiny has declined over the years, these committees still exercise an oversight over the Budget formulation and appraisal processes. The interface between parliamentarians and secretaries, financial advisers and other senior officers of the ministries in the standing committees, when the latter depose and tender evidence before the peoples’ representatives, is a healthy part of the public oversight and budget appraisal mechanism.

This scrutiny is all the more important because, in the recent past, many of the Budget demands have had to be guillotined without debate in Parliament owing to paucity of time, as Parliament’s time was wasted in acrimony on the floor on different on contentious issues, which is not a healthy phenomenon. The standing committees eventually were the only public institution where a relatively detailed and dispassionate examination of the components of the ministerial budgets was possible. It is doubtful if adequate time would be available to these committees during the advanced budget session period.

Till now, the executive was de facto able to formulate the next year`s Budget reckoning the expenditure classified in government accounts till as late as January, that is, of ten months of the current financial year. Though the expenditure budget ceilings concerning different ministries for the next year`s budget are firmed up by the finance ministry by the third quarter of the current year, fine-tuning was possible till the first fortnight of February. This will not be feasible if the ensuing budget perforce has to be based on three quarters of the current year’s expenditure and partially on anticipated trends till the end of the year. According to the former finance minister, Yashwant Sinha, the outgoing year’s fourth quarter will remain a “dark area” while formulating budget for the next year.

A Public Fund Management System (initially PFMS dealt with Plan Funds only but later covered all funds) has been introduced by the Centre to track its fund flow-based expenditure up to the lowest tier where goods and services are obtained against payments. The purpose is to monitor expenditure up to cutting-edge level on real-time basis, reduce quantum of funds at intermediate tiers as floats, and estimate realistically.

Though PFMS is being progressively expanded, it still does not encompass all State governments’ echelons and establishments, notwithstanding Central funds being spent through the latter to a large extent under schemes and projects funded substantially by the Centre. Therefore, inputs from the PFMS on the entire gamut of the Centre’s expenditure are not expected to be fully available for assessing expenditure in the terminal phases of the current year to enable budget preparation of the ensuing year.

It is undeniable that placing the funds at the disposal of the executive authorities entrusted with Budgets and expenditure responsibilities, to the full extent of their annual requirement, by March 31, has its positive attributes.

If the Budget session is advanced, parliamentary approval of the final batch of supplementary demands (that is, for additional budgeted funds) and re-appropriation relating to the current financial year, may be feasible a few weeks before the end of the financial year. This will enable additional releases from the Centre to the States in February or early March.

The State governments will consequently get more time to actually utilise the funds which may become available to them as a result of these approvals, in the year of release.

This is instead of receiving the last tranche from the Centre at the end of March and placing such receipts perforce in a transitory accounting head or ‘civil deposits’, for utilisation in the next financial year against financial principles.

The author is a retired IDAS officer who served as Special Secretary at the Centre. The views are personal.