BUDGET; CONCEPTS AND FORMS important facet of public administration. It operates thi : That is, formulation of the budget, enactment of the Fan avditing. . = sed in its present sense for the first time in 1773, in ore te EP Bhembhrithe-termbadger” Was Us 2 satire entitled “Opening the Bua Prete ‘against Walpole’s financial plan for that year” Financia! administration is ay ~ Significance 3 = 5 an statements made on the importance of financial administration to the government administration ‘are spationed belay ai = See ED. White: “Every sdministeative act-has its financiak implications; either créatifig’a chargé on the!s ~ taeasury or making a contribution t0 it” eT “Gladstone: “Budgets are not merely matters of arithmetic but in a thousand Wwalys go to the root of prosperity? _ ‘of individuals, the relations of classes and the-strength of kingdoms”. 5 Plowden Committee: “Budget is a process in which the instruments of taxation and the expendi 3 used to influence the course of economy”. a ‘ FA. Nigro: “Financial administration is of special importance today for the sim hee ses 0 be no Knit what we may ak of govemnen, thar is cineca he ‘Aaron Witdavsky: “Budge is the life blood of the government, ‘ Vfautilya: “Ail undertakings depend upon finance. Hence, foremost attention shall be paid to the tres : 4 “Hoover Commission: Financial administration is "athe core of modem government = Willoughby: Budget is “an integral and indispensable tool of admini iby: Bo administration.” “The? seal significance of the budget system lies in providing for the nseny tiniees affairs of a government.” Dimock: “OF all the aspe: fi i aspects of edianuenan ee Be coms ects of financial administration, that of budgeting raises the largest ~ (viii) It increases the participation of the line, personnel in the preparation of budget. In India, the ZBB was first introduced in the Department of Science and Technology in 1983 and in all « the ministries during 1986-87 fiscal year. ‘ Sunset Legislation It is a formal process of policy review for eliminating the undesired, outdated, redundant and irrelevant programmes. In the words of KL. Handa, “It embodies the concept of self-retiring government programmes by providing for the termination of statutory authorisation of programmes. This is {achieved by placing time limits on government programmes in the legislative enactments themselves and roviding for their automatic termination on the prescribed dates unless, affirmatively recreated by legislature after condhicting a detailed review. c F . ‘ The advantages or benefits of the sunset legislation are as follows: (i) Irensures economy in government expenditure, : Gi) 1 avoids unnecessary expansion of government activites. (ii) It makes the financial resources available for new programmes. = oat ue: (iv) Irensures administrative rationality by facilitating the reallocation of limited funds on a continuous basis. . a ~ (¥) Hthelps in overcoming the resistance met within the executive for: climinating an ongoing progranime by shifting the major responsibility for its evaluation to the legislature. ~ Top-Down Budgeting: The system of Top-Down Budgeting was introduced in the USA in 1981 during poogilte Reagan cra I isalsoknown as “Target Base Budgeting’ Ithas the elements of earlier systems of budgeting, = tats, performance budgeting, PPBS, Management by Objectives (MBO), ZZB and Sunset Legislation. Nicholas Henry has defined Top-Down Budgeting as “a method of all public revenuies to the Pescies in which agency spending limits (and, often, igency godls, too) are set by'the chief executive officer the government, while agency heads are permitted to attain their goals inthe manner that they deem to be pest ffective within these centrally set spending limits”. He futher observed, “Top-Down Budgeting clearly ini and programmatic goals; therefore, it is a complete Bal ofthe tracitional budgetary process in government, which is bottom-up, The real system of budgeting {means the preparation of the budget estimates, that is, preparing the statement re-and receipt (income) of the Government of India in respect of each financial year. —A_ACA lia is from Ist April to 315 March.[354 _Pusuic AowiistRanion a= eee eres rah ather words, the term ‘budget Fhe Constnution refers to the budget as the ‘annual financial stterment”_In othe bee ee he ea “The Constitution. is the popular name for the ‘annual fit arstat im teca dean with in Article T120f “onstinution. a —- budget contains In addition to the estimates oF receipis and expenditure, @ OverlTl the budget contains the following “T- waiimates of revenue and capital receipts, ways and means to raise the revenue, estimates of expenditure, . + f ns For any uils of the actual receipts and expenditure of the closing financial car ang the reasons SS deficit or surplus in that year, and : i ji venue, cconomipam Trancial policy of the coming year rat i, taxation proposals, prospects of re s fon of neW schemes/projects. Spending programme and introduc Separation of Railway Budget at of India has two budgets, namely, the railway Budget and the general Budget. While the the latter The Governmer sists of the estimates of receipts and expenditure of only the Ministry of Railways, “the estimates of receipts and expenditure of all the ministries of the Government of India (except former consists The railway budget was separated from the general budget in 1921 on the recommendations of the Acworth : Cominittes. The reasons or objectives of this separation are.as follows: =. -- = To introduce flexibility in railway finance. To facilitate a business approach to thetailway policy. ‘Fo secure stability of the general revenues by. providing an assured annual contribution from-railway Fevenues, a i 4 4. To enable ihe railways to keep their profits for their own’development (after paying a fixed annual / contribution to.the general revenues). 7 Agencies E 3 eis Ba oon. ae The four different organs involved an the formulation of the budget are: OThe Fi ini: r and provides y inance Ministry _ It has the overall responsibility for the formulation of the budget, and provides~ the required leadership and direction, ; i @The Administrative Ministries They have a detailed knowledge of administrative requirements. “| ~@pThe Planning Commission It facilitates the-incorporation of plan priorities in the budget. In other words, the Fina i ins i i i lission i he the Finance Ministry remains in close touch with the Planning Commission in order toincorporate i; Plan priorities in the budget, ‘ he Com, it ‘ $ ptroller and Auditor-General He provides the accounti i ic necessary ‘OF the formulation of the budget estimates. i Deane 7 Stages/Process oie ae : : 1 The vg a ti ‘aio a at ; Fe Pee Stages involved in the formulation of the budget are explained below: Oaks fags of Estimates by the Drawing and Disbursing Officers In September- cine 5-6 months before the commencement of the financial yea), the Finance Ministry dispatches Year Tpit forms to Administrative Ministry inviting therestimates of expenditure forthe ensuing finan | ‘Administrative Ministry in turn pass on these forms (in which the estimates and othe raformation have w be filled in) 10 their ocal/field offices, that isto the disbursing offivers. Each such information have contains the following columns: Actual figures of the previous year & Sanctioned budget estimates for the current year Revised estimates of the current year ’ a . iol ‘estimates for the next year (with explanation for any increase ea Actuals ofthe cuiremt year avaiable (at the time of preparation of the es Actuals for the corresponding period of the previous year i its ant Scrutiny and Consolidation of Estimates by the De ieee and coos! 4 t, after receiving the estimates from the drawing officers, s peices ddministrative Ministry. consoled for the entire department and submits them to the Admini eral policy a0 me ‘The Administrative Ministry also scrutinises the estimates in the light Hage oe gion of the Depastine ; them for the whole ministry and submits them to the Finance Ministry (Budg of Eoonomic Affairs). : Be incest Scrutiny by the Finance Ministry The Finance Ministry eeciases ae bility of revenues. the Administrative Ministry from the point of view of economy of ae SE a eer expan its scrutiny ts nominal in case of “standing charges” and more exacting in case 0 seat ioc Settlement of Disputes If here isa difference of opinion between the ae ee a the Finance Ministry on the inclusion of a scheme in-the budget eae _ z estimuites t0 the Union Cabinet. The decision of the Cabinet in this regard is final | ji fait i inance Ministry consolidates the budget ‘Consolidation by the Finance Ministry Afier this, the Finance Mit ae “repace Ssimats on the expenditure. side. Basedton the estimated expenditure, the Finance Mini sy ; et he _ estimates of revenue in Consultation withthe Central Board of Direct Taxés and the Central Board of Indirect Taxes It 1s also assisted in this regard by the income Tax Departmentand the Central Excise and Customs Department Approval by the Cabinet Thie Fin: After the approval of the Cabinet, the budg ‘that the budget is a seeret document and sh inistries Head) Bae jidates them ance Ministry places the consolidated budget before the Cabinet, et can be presented to the Parliament. It must be-mentioned here }ould not be leaked out before it is presented to the Parliam Of the charged expendi : “sty he Prtament, Te (i) The emoluments and allow a di) The sa lanies and , * Fesident and other ex, endit i =a ro ee ‘ SSA = ‘penditure cae lo his office. t her “PUly Speaker of th Ss en x salaries, allowances nq Pension otis : ce a : BEBSionS ofthe judges of High Cour which ene pte Indian Terrvoy, ae () The salary allowances 7) The salar, “Aut! Beason oF the cy _ alaties, allow, ‘OMptroller Commission ** AN Pensions gf th and ay “mpi lor. Chairman and mem)>UBLIC ADMINISTRATION Imitnistrative expenses of the Supreme Court the Office of the Comptrolt und Audlitor-Generay {India andthe Union Pubic Service Commission eluding the eal tes. allowances and pensions the persons serving in these offices The debt charges for whieh the Government of Indias Fable ineliuting interes, sinking fund charges in redemption charges and ther expenditure sciting to the Tuising of loans and the service ang Jemption of debt Xx) Any sum requited 0 saisty any judgement, deeree-or award af Any Court of arbitral tribunal %) ‘ay other expedite dela bythe ramen to be $e charged ENACTMENT OF BUDGET Enactment means the passage or approval of the budget (ie. the annual financial stalement or the sintemen “sinated resp and expenditure ofthe Government of India in ‘not India cons the following provisions with regard to the enactment of budget, a < Fsadent shall in retpect of every financial year ease o'be laid bet ‘both the houses of tisment a statement of thé estimated ar. This is 2ey Biull imposing ta shall be introduced in the Partiament except on the recommendation of ni, ind such a Bill shall not be introduced in the Rajya Sabha (Article 117) <7 Ro tax shall be levied or collected except by authority of law (Article 265) 4 4% Filioment can seduce or abolish a tax but cannot increase i, (vai) ‘Doe-Cnstitation has also defied the relative roles or Position of both the houses of Parliament with oo ‘he enactment of the budget (i.e. the Annual Financial Statement) in the-following way: se 4 Money Bill or Finance Bi dealing with taxation.cunnot be introduced in the Rajya'Sabha—it must be.introduced only inthe Lok Sabha, 2 - 7). The Rajya Sabha his no power o vow on the demand for rants; it isthe exclusive privilege of the Lok Sabha Ac) The Rajya Sabha should rewen the Money Bill (or ance Bill) to the Lok Sabha within fourteen days, The Lol ha can either accept oF reject the Fecommendations made by Rajya Sabha in = this regard. ) a ) The estimates oT?¥penditure embodied in th budget shall show separately thy expenditure charged fn the Consolidated Fund of India and the expenditure made from the Consolidated Bund of India (Atiicle 112) Gx) The budget shalt distin, (x) The expenditure chy Parliament Howe tush espenditure on revenue account trom othe expenditure (Anicle 112). arged on the Consol ‘d Fund of India shall not be submitted to the vote of “tt cin be discussed by the Parliament (Article 113),___FinanoiaL Apmnusrrtion Afi ’ Stages in Enactment wget goes through the following six stages in the Parliament JA Presentation of budget si At General discussion Tw Scrutiny by departmental committees ie ig on demands for grants ees ‘of Appropriation Bill ; iSSing of Finance Bill 4Presentation of Budget Rule 213 of the Lok Sabha provides for the presentation of the budget to abha in two or more parts, and when such presentation takes place, each part shall be dealt with in presented in two parts—Rail the budget. Accordingly, the budget ghanner as if it W end of the budget speech in the Lok Sabha, the budget is laid before the Rajya Sabha which ean only discuss itand has no power to vote on the demand for grants. .u The documents that are also presented to the Lok Sabha along with the budget are: j-B Avexplanatory memorandum.on the budget a po ‘Ani Appropriation Bill i "<-VA Finance Bill containing the taxation proposals <#-Annual reports ofthe ministries i xe eee eee ws survey Teport prepared by the Finance Ministry also used to be presented to the Lok” Sibha along withthe budget, Now, iti presented a few days before the presentation ofthe budget. General Discussion The discussion on budget begi i takes place in both the houses of Parliament and lasts usually for three to four days. Its British legacy. “y During This stage, the Lok Sabha can discuss the b get as WESle or ss as & whole or on any question of principle involved therein but no cut motion shall be moved nor shall the budget be submitted to the vote of the House. ‘The Finance Minister shall have a general right of reply at the end of the discussion, Scrutiny by Departmental Committees _Aftec the general discussion on the is over, - the Houses are adjourned for about three to four-weeks. During this gap period, the 17 departmental: ~ “Committees of the Parliament examine and discuss i detail the demands for grants of the concemed ministries Bipqcgersinbnise ep ae bs OORT amma £ She standing Committ System established is 1993 makes parliamentary financial control over the ‘ministries much more detailed, close, in-depth and comprehensive, ~ Yoting on Demands for Grants In the light of the reports of the departmental standing committees, the Lok Sabha takes up voting of demands for grants. The demands are presented ministrywise. A demand mes a grant after it Wo points should be noted in this context. One, the Voting of demands for grants is the exclusive privilege a the Lok Sabha, that is, the Rajja Sabha has no power of voting the demands. Second, the voting is Seafined to the votable part of the budget—the expenditure charged on the Consolidated Fund of India is not Submitted to the vote (it can only be discussed).358 Pueuic AounistRAriON oe : White the General Budget has totally 109 demands (103 for civit expenditure and 6 for defence expenditure), F she Railway Budget has 32 demands, Each demand is voted separately by thertok Sabha. During this stage, : the members of Parliament can discuss the details of the budget They can also move motions to reduce any j Slemand for gant, Such motions are culled as *cut motions’ which are of three kinds: ' Disapproval of Policy Cut Motion It represents the disapproval of the policy underlying the demand. It ' stats that the amount of te demand be reduced to Re 1. The members can also advocate an allemaive policy. | Economy Cut Motion represents the economy that can be affected in the proposed expenditure. It a rates that he amoum ofthe demand be educed by a specified amount (rich ay Pe CiMien & I=: ; reduction inthe demand or omission or reduction of an item in the demand) 2 Token Cut Motion t ventilates a specific grievance which is within the sphere of responsibility of the Government of India. It tates that the amount of the demand be reduced by Rs 100. A cut motion, to be admissible, must satisfy the following conditions: (i) Ttshould relate to one demand only. 4 \ (it) IU should be clearly expressed and should not contain argufinents or defamatory statements i (ii) T should be confined to one specific matter. (iv) i should not make suggestions for the amendment of. repeal of existing lays: ) It should not refer to-a matter that is not primarily the concern of Union government hould aot relate to the expenditure charged on the Consolidated Fund of Inca, ii) Ti should not relate to @ matter that is under adjudication by a court. 4i)- Li should not raise a question of privilege. = ~~ (2) [should not revive discussion on a matter on WI (2) Itshould not relate to a trivial matter. The significance of a cut motion Jies in two.things: 2 ve 1a)" I facilitates the initiation of con di jpecific demand for gram; and ~~~ (») lps the principle of responsible goverment by probing the activities of the government, _ However the ext motions do not have much uy in practice, They are enly moved ang discussed in the ie me bur not passed as thé government enjoys majority support. Their passage by the Lok-Sabha amounts to = roresson of watt of pubes Ee in the government and may lead to its resignation. » total, 26 days ae allotted forthe voting of demands: On the last da (i.e, 26th day) the Speaker puts all 1 ermaining demands to vote and disposes them whether they have been discussed by the members oF not. hich a decision has been taken in the same session. called as ‘Guillotine’, eee Serconriston Bill The Constitution states that “no money shall be withdrawn from the IS ‘und of India except under appropriatigh ‘made by lay,” Accordingly, an Appropriation Bill is ee ese for he appropriation out of the Consolidated Fund of India all money required to mee Re Bans weed by be Lok Sabha, No a pena charged onthe Consolidated Fund of India will kaye a peciegs can be proposed to the Appropriation Bill in either house of the Parliament which J oe of vari the amount or altering the destination of any grant voted, or of varying the | The Ae huarged on the Consolidated Fund of India é one i Bill becomes the Appropriation Act after it is assented to by the President, This Act cant ye ee a payments from the Consolidated Bund of India. ‘This means that the Government Ths takes ae inne) fom the Consolidated Fund of India ti the enactment of the Appropriation Bill and usually goes on till the end of April. But the government needs money to carry on its normal activities Cone tivities after 34st March (the end of the financial yea). ne as of the financial year). To overcome this functional difficuly Lok Sabha to make any grant in advance in respect to the estimated expenditureFinancia ADMiastrinnon for 4 part of the financial year, pending the completion of the voting of the demands for grants ang enactment of the Appropriation Bill, This Provision is known as the ‘Vote on Account’. It is granted) after the general discussion on budget is over, I s generally granted for two months for an g equivalent to one-sixth of the total estimation, Passing of Finance Bill Under Rile 219 of the Lok Sabha, the ‘Finance Bill’ means the Bill ordin: inyoduced in each year to give effect to the financial proposals of the : crowing Tinaneial year, and ifeludesa bill to give MeO plementary financial proposals for a Paniod. ICs subjected to alT the conditions applicable to a Money Bill. Unlike the Appropnation Bit amendments (seeking to reject of Yeduce a lax) can be moved in the case of Finance Bill. According to the Provisional Collection of Taxes Act of 1931, the Finance Bill must be enacted (i passed by the Parliament and assented to by the President) within 75 days. eel ‘The Finance Act legalises the income side of the budget and completes the process of the enactment budget. Other Grants {In addition to the budget which contains the ordinary éstimates of income and expenditure for om 4 Year, various other kinds of grants are made by the Parliament under extraordinary or special circumstan ‘These are explained below: Additional Grant 11 is granted when a.need has arisen during the current financial year for add ;penditure upon. some féw-service not corifemplated in the budget-for thrit year = ae “Excess Grant it is granted when.money hag baen spent on any service during a financial year ing of the amount granted for that service in the budget for-that year. It is voted by the Lok Sabha Tnancial year Before the demands for excess grants ate submitted to the Lok Sabha for voting, they approved by the Public Accounts Commitiee of Parliament.” a Vote of Credit tris granted for meeti implementation of the implementation of the App, ith the revenue), S, I means the jj NANCE Act (dealing wi& uted by various administrative ministr =nonsibility regarding the execution of the 5 Finance Ministry, In other words, the overall responsibility regarding iesMdepartments under the overall control and vernment of Indja. Finance Ministry—the central financial agency of the Gi Expenditure Part he financial control exercised by the Finance Ministry has been very tight due to the excessive concentration nicial authority in it, However, this control has been relaxed in.course of time through various schemes ‘egation of powers by which the administrative ministries are granted some operational freedom and levibility in managing their expenditure, he Finance Ministry controls the expenditure of admi istrative ministries/departments in the following §2Appsovat of policies and programmes in principle. {eAcceptance of provision in the budget estimates. \_ Sanctioning expenditure, subject to the powers which are delegated to the spending authorities (i.e, mpalsiries) ena financial advice through the Integrated Financial Advisor, ene eee of grants (i.e. transfer Of funds from one subhead to another). {yb-‘itemnal audit system. $o-escribing a financial code to be followed by the spending autho, S, The “qaipostion of the macbinery devised by the executive government for discharging its respon So“ system of controlling officers (i. usually the head of the ministry/department) aes system of competent authorities wha issue i) sibility financial sanctions s & systeni of drawing and disbursing officers l= ioe ee eat Koes of payments and accounts (pay and accounts offices are created in various departments of ‘he Central Government 10 make payments and compile accounts) Reappropristion, which is an executive act, requires the formal approval of the Finance Ministry or the adiministra may ministrative Mini Deparment To which the Te luired powers are delegated. Reappropriation is Pemussibe wihin te same pan on ind ina pe Te (3) As between voted and charged items of expenditures. (ti) To meet the expenditure on a new service nat provided for in the budget ii) As between different grants voted by the Lok Sabha, 4 (i¥}-"To meet any expenditure whichsyas tot sanctioned by the Lok Sabha or ‘any othercompetent authority. ~ (~) To meet any expenditure which involves outlay in the'future financial year (except the contingent expenditure) (yi) As between the revenue and the capital parts of the budget The scheme of Integrated Financial Advisor was introduced first inthe in 1974 on an experimental basis and then extended to a 1975-1976. Under this scheme, the ministries, The Integrated Finane Josntly by the Administrative Ministry and Fi both the ministries. He is unde the Administrative M \ the ministries of the Integrated Financial Advisors are ry Of Shipping and Transport Central Government during Appointed in the administrative # | Advisor is of the rank of Joint Seen ‘ity oF Additional Sec ‘nance Ministry and his confidential re of both the ministries and also answerable to both. He assists 4 enhanced delegated financial powers and his advice can be | Ministry (in the ease of delegated! powers and functions). Bui outside the 4 Lary. He is selected Port is Written jointly by # the dual com y in the exercise tary of the> MINSTRATION SORE ees e Financia Ab scope of delegated powers, he functions under the general direction ofthe Finance Ministry and has diet access to the Finance Secretary. He has the following powers and functions: (i) Preparation of the budget ii} Scrutiny of projects and pri mmmes for the approval of Finance Ministry (iii) Post-budget vigilan ; (jv) Formulation of performance budget of the ministry and monitoring of the progress of schemes, (x) Assisting the Secretary in discharge of his responsibility as the chief accounting authority of the Ministry Revenue Part Exccution of the budget on the revenue side involves proper (a) collection of revenues; (b) custody of the collected Funds; and (c) distbution of Tunds. = ra "The collection of PSvenueS HVOIVES The following stages: 47 Devising a suitable macl iety for tax administration and determination of procedure. (a) Assessment of tax_that is, preparation of a list of persons liable to pay tax and determining the \L* amount to be paid by them. ae ii} Making provisions for hearing of objections and appeals. on, that is. realisation of the amount due from the various assessees. < up and realisation of arrears, that is, dealing with the defauliers. Fie Deparment of Revenue of the Finance Ministry exercises overall control and supervision over the _ ~~ nery charged with the collection of taxes through the Central Board of Direct Taxes and-the Central Excise and Customs : erve Bank of India, the Stote Bank of India, the district treasuries (about 300) and snb-treasuries. ©) are Engaged in the castody and distribution of funds. The Cofigitution of India provides for the _ 2 ing three Kinds of funds.for-the Central Government; = == —=——————==—_— Consolidated Fund of India (Article (i) Public Account of India (Article 266)... = (iii) Contingency Fund of India (Article 267) ~ = Consolidated Fund of India It isa fund to which all receipts are credited and all payments are ‘hited. In other words, (i) all revenues received by the Government of India; (ii) all loans raised by the + Goverment by the issue of treasury bills, loans or ways and means of advances; and (iii) all moneys received ‘by th i nature of banking transactions: ontingency Fund of India The Constitution authorised the Parliament to establish a ‘Contingency nd of India’, into which shall be: aid from time to time such sums as may be determined by law. Accordingly, en enacted the Contingency Fund of India Act in 1950, ‘This fund is placed at the disposal of the pissat, and he can make advances out of it to meet unforeseen expenditure pending its authorisation by