Govt suggests increasing the reporting limits for financial expenditure by ministries

Context: The government is planning to update the financial limits for ‘New Service’ and ‘New Instruments of Service’ after receiving approval from the Public Accounts Committee, marking the first revision in 18 years.

Key Points: 

• The PAC has agreed to the Finance Ministry’s suggestion to increase the reporting limit for new policy-related expenses by government departments to between Rs 50 crore and Rs 100 crore. 
• Any spending over Rs 100 crore will require prior approval from Parliament. The reporting limit for ‘New Instrument of Service’ has been set at up to 20% of the original allocation or up to Rs 100 crore, with Parliament approval needed for amounts beyond this limit.

Details:

• The government has recently made the fourth revision to budgetary regulations in the last 50 years after consulting widely. 
• The Public Accounts Committee (PAC) and the Comptroller and Auditor General of India (CAG) have highlighted issues such as unnecessary supplementary appropriations, exceeding budget limits, and lack of reporting to Parliament. 
• The PAC also raised concerns about ministries and departments exceeding their budgets by significant percentages in the fiscal year 2019-20, despite receiving additional grants.

About New Service and New Instruments of Service:

• New Service (NS) refers to any spending that is a result of a policy decision that was not previously disclosed to Parliament. 
  • This could involve a new project or investment. 
• The New Instrument of Service (NIS) is a significant expense that occurs when there is a substantial expansion of a current policy.

Need to increase the  financial limits for spending:

• The proposed amendments aim to encourage Ministries to carefully estimate their budgetary needs. 
• The need for an increase in the budget arises due to a large number of additional proposals from Ministries, causing delays in projects despite available savings. 
• The current low limits on expenditure are difficult to comply with and slow down government spending. 
• With expected GDP growth, the size of the Budget is expected to increase in the next decade and thus, the financial limits need to be revised.

Importance of the suggested modifications:

• The government has plans to streamline the process so that it can be effortlessly adopted by the Ministries, making it incredibly simple for the PAC to identify any deviations. 
• This initiative aims to expedite the government’s decision-making process and potentially enhance the efficiency of implementing various schemes.

Conclusion:

• The revaluation of financial limits is viewed as a beneficial measure for enhancing budget procedures, decreasing delays, and ensuring that government expenditure aligns with economic growth. 
• This adjustment encourages transparency, responsible financial management, and efficient governance.

Source: The Indian Express

UPSC Mains Practice Question:

Q.How does the Public Account Committee (PAC) ensure financial accountability of the executive to Parliament and discuss its limitations in doing so? (250 words)

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