23

REVIEW OF NORMS FORRE-APPROPRIATIONOF FUNDS

MINISTRY OF FINANCE(DEPARTMENT OF EXPENDITURE)

PUBLIC ACCOUNTSCOMMITTEE2005-2006

TWENTY-THIRD REPORT

FOURTEENTH LOK SABHA

LOK SABHA SECRETARIATNEW DELHI

TWENTY-THIRD REPORT

PUBLIC ACCOUNTS COMMITTEE(2005-2006)

(FOURTEENTH LOK SABHA)

REVIEW OF NORMS FORRE-APPROPRIATION OF FUNDS

MINISTRY OF FINANCE(DEPARTMENT OF EXPENDITURE)

Presented to Lok Sabha on 22.12.2005

Laid in Rajya Sabha on 22.12.2005

LOK SABHA SECRETARIATNEW DELHI

December, 2005/Agrahayana, 1927 (Saka)

PAC No. 1802

Price: Rs. 32.00

© 2005 BY LOK SABHA SECRETARIAT

Published under Rule 382 of the Rules of Procedure and Conduct of Business inLok Sabha (Eleventh Edition) and Printed by the Manager, Government of IndiaPress, Minto Road, New Delhi.

CONTENTS

PAGE

COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2005-2006) . . . . . . . . . . . (iii)

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (v)

REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

APPENDICES

I-II. Notes received from the Ministry of Finance (Departmentof Expenditure) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

III. Statement of Observations and Recommendations . . . . . . . . . . 23

PART-II

Minutes of the sitting of Public Accounts Committee held on12th December, 2005.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

COMPOSITION OF PUBLIC ACCOUNTS COMMITTEE(2005-2006)

Prof. Vijay Kumar Malhotra — Chairman

MEMBERS

Lok Sabha

2. Shri Ramesh Bais

3. Shri Khagen Das

4. Dr. M. Jagannath

5. Shri R. L. Jalappa

6. Shri Raghunath Jha

7. Shri Brajesh Pathak

8. Shri Magunta Sreenivasulu Reddy

9. Dr. R. Senthil

10. Shri Madan Lal Sharma

11. Shri Brijbhushan Sharan Singh

12. Dr. Ramlakhan Singh

13. Kunwar Rewati Raman Singh

14. Shri K.V. Thangkabalu

15. Shri Tarit Baran Topdar

Rajya Sabha

16. Shri Prasanta Chatterjee

17. Shri R. K. Dhawan

18. Dr. K. Malaisamy

19. Shri V. Narayanasamy

20. Shri C. Ramachandraiah

21. Shri Jairam Ramesh

22. Prof. R. B. S. Varma

SECRETARIAT

1. Shri S. K. Sharma — Additional Secretary

2. Shri A. Mukhopadhyay — Joint Secretary

3. Shri Ashok Sarin — Director

4. Smt. Anita B. Panda — Under Secretary

(iii)

INTRODUCTION

I, the Chairman of Public Accounts Committee having been authorised by theCommittee to submit this Report on their behalf, do present this Twenty-third Report(Fourteenth Lok Sabha) on "Review of norms for Re-Appropriation of funds".

2. Pursuant to Fiscal Policy strategy statement laid by Finance Minister beforeParliament under Fiscal Responsibility and Budget Management Act, 2003, the Ministryof Finance (Department of Expenditure) had submitted proposals seeking approval ofthe Public Accounts Committee for review of norms for re-appropriation of funds.

3. According to the Ministry, these proposals were finalized in consultation withthe Office of the Comptroller and Auditor General of India.

4. The Committee considered and approved the proposals submitted by theMinistry of Finance (Department of Expenditure) at their sitting held on 12th December,2005. Minutes of the sitting form Part II of the Report.

5. For facility of reference and convenience, the Observations andRecommendations of the Committee have been printed in thick type in the body of theReport and have also been reproduced in a consolidated form in Appendix-III to theReport.

6. The Committee would like to place on record their appreciation of the assistancerendered to them in the matter by the Office of the Comptroller and Auditor General ofIndia.

NEW DELHI; PROF. VIJAY KUMAR MALHOTRA,13 December, 2005 Chairman,22 Agrahayana, 1927 (Saka) Public Accounts Committee.

(v)

REPORT

REVIEW OF NORMS FOR RE-APPROPRIATION OF FUNDS

Re-appropriation of funds

A grant or appropriation for disbursements is distributed by Sub-heads or standardobjects under which it is accounted. The competent executive authorities can approvere-appropriation of funds between primary units of appropriation within a grant orappropriation before the close of the financial year to which such grant or appropriationrelates. Re-appropriation of funds should be made only when it is known or anticipatedthat the appropriation for the unit from which funds are to be transferred will not beutilized in full or that unspent provision can be affected in the unit of appropriation.

2. All re-appropriations which would have the effect of increasing the budgetprovision by Rs. 1 crore or more under a sub-head should be made only with the priorapproval of Secretary (Expenditure) even if the amount re-appropriated is within25 percent of the provision covered under the limit governing re-appropriation.

Expenditure on "New Service/New Instrument of Service"

3. Government have prescribed financial limits for different categories ofexpenditure beyond which any additional expenditure constitutes "New Service/NewInstrument of Service" and requires prior approval of Parliament. The term New Servicerefers to the expenditure arising out of a new policy decision not brought to the noticeof Parliament earlier, including a new activity or a new form of investment. Likewise,relatively large expenditure arising out of an important expansion of an existing activityhas been termed as a New Instrument of Service.

4. Under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003and Fiscal Responsibility and Budget Management Rules, 2004, a Fiscal Policy StrategyStatement was laid in the Parliament by Finance Minister on 26th February, 2005 whereinseveral initiatives in Public Expenditure Administration were proposed to beimplemented. One of the initiatives proposed is as under:—

"A review of norms governing re-appropriation will be carried out and specificproposal will be placed before the Public Accounts Committee for considerationwith a view to giving the Ministries/Departments greater flexibility in managingtheir departmental budgets with concomitant incentives and disincentives".

5. Accordingly, the Ministry of Finance (Department of Expenditure) submitteda note seeking approval of the PAC for the proposals to review the norms forre-appropriation of funds pursuant to Fiscal Policy strategy statement laid by FMbefore Parliament under Fiscal Responsibility and Budget Management Act, 2003. TheNote is reproduced in Appendix- I of this Report.

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6. In their note, the Ministry of Finance (Department of Expenditure) have statedthat the provisions of the Rule 10 and Government of India Decisions (GIDs) issuedthere under have been revisited and the following proposals have been made in thisregard:—

“(i) According to the existing provisions, all re-appropriations, which havethe effect of increasing budget provision under a sub-head by Rs. 1 croreand more, require approval of Secretary (Expenditure), Ministry of Finance.It is proposed that this limit of Rs. 1 crore or more, which was delegatedway back in 1990, may be enhanced to Rs. 5 crore or more. This would ineffect mean that re-appropriation of funds under a sub-head below Rs. 5crore can be made by the Administrative Ministries/Departments withoutthe approval of this Ministry (i.e. M/o Finance).

(ii) In view of their committed nature of expenditure, it is prposed to give fullpowers to Administrative Ministries/Departments for augmenting theprovisions for the heads, Salary, Wages, Pensionary Expenses, MedicalExpenses and Rent, rate and Taxes through re-appropriation, provided theapproved ceiling of the Grant is not exceeded and re-appropriation doesnot involve transfer of funds from Capital to Revenue and Plan to Non-Plan sections of the Grant or vice-versa. It is also proposed to delegate fullpowers to Ministries/Departments to re-appropriate funds from the headsalary for augmentation of head salary across the schemes (sub-heads)within a grant, which under extant orders require approval of this Ministry[Presently, any re-appropriation from the head Salary (even to the headsalary) requires prior approval of this Ministry].

(iii) Budget Division, Department of Economic Affairs vide its OM No. 7(15)-B (RA)/82 dated 13.4.1982 had laid down guidelines for New Service(NS)Service refers to the expenditure arising out of a new policy decision,not brought to the notice of Parliament earlier, including a new activityor a new form of investment. Likewise, relatively large expenditure arisingout of an important expansion of an existing activity has been termed asa New Instrument of Service (A copy of OM is enclosed). Annexure tothis OM prescribes the financial limits for NS/NIS in two categories viz.(a) limits upto which expenditure can be met by re-appropriation of savingsin a Grant subject to it being reported to Parliament (b) limits beyondwhich prior approval of Parliament is required for the expenditure. As itwas felt that the flexibility on re-appropriation of funds to be delegatedunder the revised norms may not in actual practice, be available to theAdministrative Ministries unless the financial limits for obtainingapproval of Parliament under NS/NIS are revised, it is proposed toenhance/revise these limits as per column 2a and 3a of the Statementenclosed herewith at Flag ‘A’ ”.

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7. According to the Ministry, existing limit in case of re-appropriations and Newservice/New Instrument of Servicement upward revision in the light of normal increasein price index and inflation.

Justification for the review

8. At the instance of the Committee, the Ministry have explained as under as towhy the need for such a review arose:—

"Presently, though the administrative Ministries have been given full powersfor re-appropriation under Schedule IV of delegation of Financial Power Rules(DFPRs), 1978, exercise of these powers by the Administrative Departmentsis subject to the various restrictions imposed under Rule 10 of these Rulesand the Government of India Decisions (GIDs) issued thereunder. Some ofthese limits/restrictions imposed under the above rule-like the existing limit of'Rs. 1 crore or more' for proposals requiring approval of Secretary (Expenditure)[mentioned in para 2(i) of our OM ibid], and the norms for "New Service(NS)/New Instrument of Service (NIS)" [mentioned in para 2 (iii) of our letter]were delegated/framed way back in 1990 and in 1982 respectively. Theselimits merit upward revision in the light of normal increase in price index andinflation since then.

While, the upward revision of limits of NS/NIS, as recommended, wouldensure that Administrative Ministries have greater flexibility/accountabilityin the delegation of powers for re-appropriation, dicipline of meaningful andrealistic budgeting would be maintained, and the original objective of thebudgeted scheme would not be substantially altered by the exercise ofdelegated powers without prior approval of the Parliament.In the revisedlimits, powers of administrative Ministries have been rationalized and recastas per contemporary requirements.

Furthermore, it has been observed that with the imposition of variousrestrictions under Rule 10 ibid and GIDs issued thereunder, Ministries arerequired to seek approval of this Department even for re-appropriation offunds for their 'committed' liabilities viz. expenditure towards Salary, Wages,Pensionary Charges, Medical Expenses and Rent Rate and Taxes. As theexpenditure on these heads is of 'committed' nature, it has been proposed togive full powers of re-appropriation to Administrative Departments forexpenditure towards these heads, within the budgeted amount placed at theirdisposal."

9. In their subsequent note, (Appendix-II) submitted to the Committee, theMinistry have justified the proposed norms by stating that these are intended to givegreater delegation of authority and flexibility to the Administrative Ministries inmanaging their departmental budgets and their financial affairs.

Proposed benefits of the proposal

10. According to the Ministry, the delegation through the proposed revisednorms is not in view of any irregularities noticed under the existing norms, but is in fact

4

aimed at enabling Administrative Department in having efficient management of theirdepartmental budgets with a view to improving the quality of implementation, andenhancing the 'efficiency' and 'accountability' of delivery mechanism through quickerdecision making. It is also intended to reduce references to the Ministry of Finance onmatters affecting day to day routine affairs so that expenditure control is enforcedthrough scales of expenses and budgetary ceilings rather than getting involved inmicromanagement of the departmental affairs. Greater delegation would also implygreater responsibility to manage the affairs within the budget with consequent greateraccountability.

11. According to the Ministry of Finance (Department of Expenditure ), theproposed revised norms, have been finalized after consulting various Ministries, andafter obtaining the concurrence of Office of C & AG.

12.The proposal of the Ministry of Finance (Department of Expenditure ) wasconsidered by the Committee at their sitting held on 12th December, 2005. The Committeealso heard the views of the officers of the C&AG on the subject. The ADAI informedthe Committee that while formulating the said proposals, their views on the subjectswere sought by the Ministry of Finance (Department of Expenditure) which have beensuitably incorporated therein. The Committee then considered and approved theproposals.

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OBSERVATIONS/RECOMMENDATIONS

13. The Committee have been given to understand that a Fiscal Policy StrategyStatement was laid before the Parliament by the Finance Minister on 26th February,2005 under Fiscal Policy Strategy Statement Responsibility and Budget ManagementAct, 2003. Pursuant to this, the Ministry of Finance (Department of Expenditure)have sought approval of the PAC for revision of norms for re-appropriations offunds.The proposals inter-alia include that the limit of Rs. 1crore or those for re-appropriation of funds under various sub-heads of the Grant, which require approvalof Secretary (Expenditure), may be enhanced to Rs. 5 crore or more. Also, full powersare sought to be delegated to the Ministries/ Departments to re-appropriate fundsfrom the head 'Salary' for augmentation of head 'Salary' across the schemes (sub-heads) within a grant. It is further proposed that financial limits for obtaining approvalof Parliament under New Service/New Instrument of Service may be enhanced/revised.

14. The Ministry have explained that there is an imperative need for such areview in view of inflation and price rise since 1990s. According to the Ministry, theproposed norms are intended to give greater delegation of authority and flexibility tothe Administrative Ministries in managing their departmental budgets and theirfinancial affairs. The revised norms are stated to be aimed at enabling AdministrativeDepartments in having efficient management of their departmental budgets with aview to improving the quality of implementation, and enhancing the 'efficiency' and'accountability' of delivery mechanism through quicker decision making. It is alsointended to reduce references to the Ministry of Finance on matters affecting day today routine affairs so that expenditure control is enforced through scales of expensesand budgetary ceilings rather than getting involved in micro-management of thedepartmental affairs. Greater delegation would also imply greater responsibility tomanage the affairs within the budget with consequent greater accountability.

15. As these proposals have been finalized after consulting various Ministriesand obtaining the concurrence of the Office of the Comptroller & Auditor General ofIndia, and there is adequate justification and need therefor, the Committee are inagreement with the proposed revision in the norms for re-appropriation of funds. Atthe same time, the Committee would like to impress upon the Ministry of Finance(Department of Expenditure) to devise an effective mechanism for proper and continuousmonitoring of the revised norms in order to ensure strict adherence to the same byeach and every Ministry/Department. The Committee also expect the FinancialAdvisors of all the Ministries/Departments to ensure that there is no violation inimplementation of the said revised norms for re-appropriation of funds and anyslackness in complying with the said norms is strictly dealt with.

NEW DELHI; PROF. VIJAY KUMAR MALHOTRA,13 December, 2005 Chairman,22 Agrahayana 1927 (Saka) Public Accounts Committee.

APPENDIX I

Note received from m/o Finance (Deptt. of Exp.)

F.No. 1(4)/E.II(A)/05Ministry of Finance

Department of Expenditure****

New Delhi dated 30th August, 2005

OFFICE MEMORANDUM

SUBJECT: Review of norms for re-appropriation of funds pursuant to Fiscal PolicyStrategy Statement laid before Parliament under Fiscal Responsibility andBudget Management Act, 2003.

*******

Under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003and Fiscal Responsibility and Budget Management Rules, 2004, a Fiscal PolicyStrategy Statement was laid in the Parliament by FM on 26th February, 2005 whereinseveral initiatives in Public Expenditure Administration were proposed to beimplemented (reference para 13 of the Statement). One of the initiatives proposed is asunder:

"A review of norms governing re-appropriation will be carried out and specificproposal will be placed before the Public Accounts Committee by Sept., 2005for consideration with a view to giving the Ministries/Departments greaterflexibility in managing their departmental budgets with concomitant incentivesand disincentives."

2. The norms regulating re-appropriation (i.e. transfer of funds from one primaryunit of appropriation to another such unit) are given in Rule 10 and Government ofIndia Decisions (GIDs) issued there under, of Delegation of Financial Power Rules(DFPRs), 1978. Pursuant to the Statement mentioned in para 1 above, the provisionsof the above Rule and GIDs have been re-visited and the following proposals are nowsubmitted for consideration of the PAC:—

(i) According to the existing provisions, all re-appropriations, which havethe effect of increasing budget provision under a sub-head by Rs. 1 croreand more, require approval of Secretary (Expenditure), Ministry of Finance.It is proposed that this limit of Rs. 1 crore or more, which was delegatedway back in 1990, may be enhanced to Rs. 5 crore or more. This would ineffect mean that re-appropriation of funds under a sub-head belowRs.5 crore can be made by the Administrative Ministries/Departmentswithout the approval of this Ministry (i.e. MoF).

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(ii) In view of their committed nature of expenditure, it is proposed to give fullpowers to Administrative Ministries/Departments for augmenting theprovisions for the heads, Salary, Wages, Pensionary Expenses, MedicalExpenses and Rent rate and Taxes through re-appropriation, providedthat approved ceiling of the Grant is not exceeded and re-appropriationdoes not involve transfer of funds from Capital to Revenue and Plan toNon-Plan sections of the Grant or vice-versa. It is also proposed to delegatefull powers to Ministries/Departments to re-appropriate funds from thehead salary for augmentation of head salary across the schemes (sub-heads) within a grant, which under extant orders require approval of thisMinistry [Presently, any re-appropriation from the head Salary (even tothe head salary) requires prior approval of this Ministry].

(iii) Budget Division, Department of Economic Affairs vide its OM No. 7(15)-B(RA)82 dated 13.4.1982 had laid down guidelines for New Service(NS)/New Instrument of Service(NIS). As per the OM, the term New Servicerefers to the expenditure arising out of a new policy decision, not broughtto the notice of Parliament earlier, including a new activity or a new form ofinvestment. Likewise, relatively large expenditure arising out of a importantexpansion of an existing activity has been termed as a New Instrument ofService (A copy of OM is enclosed). Annexure to this OM prescribes thefinancial limits for NS/NIS in two categories viz (a) limits upto whichexpenditure can be met by re-appropriation of savings in a Grant subjectto it being reported to Parliament (b) limits beyond which prior approval ofParliament is required for the expenditure. As it was felt that the flexibilityon re-appropriation of funds to be delegated under the revised norms maynot, in actual practice, be available to the administrative Ministries unlessthe financial limits for obtaining approval of Parliament under NS/NIS arerevised, it is proposed to enhance/revise these limits as per column2a and 3a of the statement enclosed herewith at Flag 'A'.

3. The above proposals have been framed in consultation with O/oComptroller &Auditor General of India (C&AG) and have been approved by theFinance Minister. It is requested that these proposals as stated in para 3(i), (ii) and incolumns 2a and 3a of the statement placed at Flag 'A' be placed before the PAC for itsconsideration and approval.

sd/-

(Rubina Ali)Under Secretary to the Govt. of India

Shri Ashok Sarin,Director (PAC),Room No. 415,Parliament House Annexe,New Delhi.

IMMEDIATE

No. F. 7 (15)-B (RA)/82Ministry of Finance

Department of Economic Affairs

New Delhi, the 13th April, 1982

OFFICE MEMORANDUM

SUBJECT: Revised guidelines on 'New Service'/'New Instrument of Service'

The financial limits to be observed in determining cases relating to 'New Service'/'New Instrument of Service' prescribed in this Ministry's O.M.No. F. 8(60)-B/69 datedthe 27th July, 1970 have been reviewed in pursuance of the recommendations of thePublic Accounts Committee (Seventh Lok Sabha) in their 41st report. The revisedlimits, which have been drawn up in consultation with the Comptroller and AuditorGeneral of India and have been approved by the Public Accounts Committee in their70th report are annexed.

2. As the Ministry of Agriculture, etc. are aware, the term 'New Service', appearingin article 115(I)(a) of the Constitution, has been held as referring to expenditure arisingout of a new policy decision, not brought to the notice of Parliament earlier, includinga new activity or a new form of investment. Like-wise, relatively large expenditurearising out of important expansion of an existing activity is treated as a 'New Instrumentof service' which is a slight variant of the term 'New Service'. The basic principle is thatno expenditure can be incurred from the Consolidated Fund of India on a 'New Service'/'New Instrument of Service' without prior approval of Parliament through aSupplementary Grant. That is to say, the powers of Ministries/Departments to re-appropriate savings available under some sub-head(s) in a Grant for meeting additionalrequirements under other sub-head (s) within that Grant are subject to the aforesaidlimits. As any non-observance of these limits reflects laxity in financial control,Ministries/Departments are requested to ensure strict adherence of these instructionsin examining proposals for augmentation of sanctioned provisions.

3. Where in an emergent case of 'New Service/'New Instrument of Service' it isnot possible to wait for prior approval of Parliament, the Contigency Fund of India canbe drawn upon for meeting the expenditure pending its authorisation by Parliament.Recourse to this arrangement should normally be taken only when Parliament is not insession. Such advances are required to be recouped to the Fund by obtaining asupplementary. Grant in the immediately next session of Parliament. However, when aParliament is in session, a Supplementary Grant should preferably be obtained beforeincurring any expenditure on a 'New Service'/'New Instrument of Service'. That is tosay, recourse to Contingency Fund of India should be taken only in cases of extremeurgency; in such cases the following procedure recommended by the Sixth Lok SabhaCommittee on Papers Laid on the Table in their 4th Report should be observed:

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SERVER5\5162LS\5162LS 8

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"As far as possible, before such withdrawal is made, the concerned Ministerymay make a statement on the floor of the Lok Sabha for information givingdetails of the amount and the scheme for which the money is needed. Inemergent cases, however, where it is not possible to inform the Members inadvance, the withdrawal may be made from the Contingency Fund and soonthereafter a statement may be laid on the Table of the Lok Sabha for theinformation of the Members".

It has been suggested by the Rajya Sabha Secretariat that the above proceduremay also be observed in Rajya Sabha.

4. The following checks may be observed by the Ministries/Departments toensure that any expenditure likely to attract limits of 'New Service'/'New Instrument ofService' is not incurred by re-appropriation.

(i) A specific certificate should be recorded in each case involvingaugementation of sanctioned provision by the IF/Budget Section of theMinistry/Department on receipt of related proposals, to the effect that theproposed augmentation attracts/does not attract limits of 'New Service'/'New Instrument of Service'. Where the proposal is held to attract theselimits the procedure indicated in paragraphs 2 or 3 above depending uponthe circumstances of the case, have to be followed.

(ii) Subject to Paragraph 5 below, the Pay and Accounts Officers should examineeach expenditure sanction from the 'New Service/'New Instrument ofService' angle, especially those involving investments, loans, grants-in-aid, subsidies, new works, etc. All doubtful cases should be put up to theControllers of Accounts/Financial Advisers.

If in any exceptional cases, the expenditure, whether partly or fully on a 'Newservice'/'New Instrument of Service' has been incurred inadvertently and this factcomes to notice within the financial year, an advance from the Contingency Fundshould be obtained during the year itself to cover the expenditure already incurred asalso for the expenditure likely to be incurred before a Supplementary Grant for thatservice becomes available.

5. Having regard to the volume of Government transactions it is not possible tolist out those which are not attracted by 'New Service'/New Instrument of Service'limits. Broadly, however expenditure on normal activities of Government (such asnormal administrative expenditure—including that resulting from reorganisation ofMinistries/Departments, holding of conferences, seminars, exhibitions, surveys,feasibility studies etc., assistance to foreign Governments, contributions to internationalbodies and transfers to State and Union Territory Governments) is not attracted by thelimits of 'New Service'/'New Instrument of Service'. Further, these limits are applicableonly to expenditure which is subject to Vote of Parliament.

6. It should be noted that additional expenditure to the extent mentioned incolumn 2 of the annexed statement can be met by re-appropriation, subject to report toParliament, only if savings are available in the relevant Grant; otherwise a SupplementaryGrant has to be obtained.

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Report to Parliament should ordinarily be made through the ensuing batch ofSupplementary Demands and failing this by adding an Annexure in the Detailed Demandsof Ministry/Department for the ensuing year. Where possible a suitable mention of suchcases may be made in the Notes on Demands for Grants of the Ministry/Department.Mere exhibition of augmented provisions in the Revised Estimates included in theDemands for Grants will not be adequate to meet the requirement.

7. Where a doubt arises about the application of limits of 'New Service/'NewInstrument of Service', a reference may be made to the Budget Division for clarification.

8. A mention may also be made here about the 'New Service' Annexure which isappended to the main Demands for Grants. The purpose of this Annexure is somewhatdifferent. It is intended to bring to the notice of Parliament the details of new schemesi.e. schemes for which the Budget includes provision for the first time so that these canreceive special attention of Parliament. These schemes are normally to be taken upafter the passing of Budget; the Vote on Account provisions are not intended to beutilised therefor. In cases of urgency, expenditure on a 'New Service' during Vote onAccount period can, therefore, be incurred only by obtaining an advance from theContingency Fund in the manner recommended by the Sixth Lok Sabha Committee onthe Papers Laid on the Table, mentioned in paragraph 3 above. Such advances will beresumed to the Contingency Fund on enactment of Appropriation Act in respect ofexpenditure for the whole year.

Hindi version will follow.

(M.D. PAL)DIRECTOR (BUDGET)

To

(1) All Ministries/Departments of the Government of India.

(2) Financial Commissioner (Railways), Financial Advisor (Defence), FinancialAdviser (Communications) and all other Financial Advisers.

(3) Finance Secretaries of Union Territory Administrations (Delhi, Chandigarh,Andaman and Nicobar Islands, Dadra and Nagar Haveli and Lakshadweep).

(4) Controller General of Accounts, Controller General of Defence Accountsand Chief Controllers/Controllers of Accounts.

No. F. 7 (15)-B (RA)/82

Copy forwarded for information to:—

1. Lok Sabha Secretariat (PAC Branch)/Rajya Sabha Secretariat.

2. Comptroller and Auditor General of India and all Directors of Audit/Accountants General.

3. Finance Secretaries of all State and Union Territory Governments.

sd/-

(O.P. KAPUR)DEPUTY DIRECTOR (BUDGET)

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Incorporated as GOI Decision No. 1 below Rule 10 of the DFA

ANNEXURE to O.M. No. F. 7(15)-B(RA)/82 dated 13.4.1982

Financial limits to be observed in determining cases relating to'NEW SERVICE'/‘NEW INSTRUMENT OF SERVICE'

Limits upto which Limits beyond whichexpenditure can be prior approval of

Nature of Transaction met by re-appro- Parliament is re-priation of savings quired for expendi-in a Grant subject to ture from the Report to Parliament Consolidated Fund

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I. CAPITAL EXPENDITURE

A: Departmental Undertakings.

(i) Setting up a new undertaking, or taking All casesup a new activity by an existingundertaking

(ii) Additional investment in an Above Rs. 50 lakhs Above Rs. 1 croreexisting undertaking but not exceeding

Rs. 1 crore

B: Public Sector Companies/Corporations

(i) Setting up of a new Company, or splitting up of All casesan existing Company, or amalgamation of twoor more Companies, or taking up a new activityby an existing Company

(ii) Additional investment in/loans to anexisting company

(a) Where there is no Budget Provision Above Rs. 10 lakhs Above Rs. 20 lakhsbut not exceedingRs. 20 lakhs

(b) Where Budget Provision exists for investment and/or loans

Paid up Capital of the Company

Upto Rs. 1 crore Above Rs. 10 lakhs Above Rs. 20 lakhsbut not exceedingRs. 20 lakhs

Above Rs. 1 crore and Above Rs. 1 crore Above Rs. 2 crore.upto Rs. 25 crore but not exceeding

Rs. 2 crore.

Above Rs. 25 crore and Above Rs. 5 crore Above Rs. 10 croreupto Rs. 100 crore but not exceeding

Rs. 10 crore.

Above Rs. 100 crore Above Rs. 7.5 crore Above Rs. 15 croresbut not exceeding

Rs. 15 crore.

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Note 1: In computing additional requirements for applying the abovelimits, loan and capital investments, over and above the budgetprovisions therefor, should be taken together.

Note 2: For additional fund requirements of term lending institutionswhich are under the audit of the Comptroller and AuditorGeneral of India, the limits will be twice those specified above.

Where an institution does not have paid up capital, the limitswill be applied with reference to Central loans outstandingagainst it at the end of the previous financial year.

Note 3: For financing projects under construction, within the approvedcost estimates already brought to the notice of Parliament,augmentation of budget provisions beyond the monetary limitsprescribed above will be permissible subject to availability ofsavings in the Grant. A report of such cases to Parliament will,however, be necessary.

Note 4: Short term (working capital) loans, repayable within five years,will not be treated as 'New Instrument of Service' but willrequire to be reported to Parliament.

C: Port Trusts, Delhi Municipal Corporation,Khadi and Village Industries Commission,Tea Board and Coffee Board.

Loans: The limits prescribed for public sectorcompanies will apply with reference tocentral loans outstanding against them atthe end of the previous financial year.

D: Private sector Companies/Private Institutions:

(i) Investments to be made for the first time All cases.except in Units coming under GovernmentManagement with the approval of Parliament.

(ii) Additional investments in or loans to an Above Rs. 50 lakhs Above Rs. 1 crore.existing company/institution including privatebut not exceedingsector units coming under Government Rs. 1 crore.Management with the approval of Parliament:

Note 1: While applying these limits loans and capital investments areto be taken together.

Note 2: In the case of loans to statutory and other public institutions(other than those mentioned under item C above) substantiallyfinanced by grants-in-aid from Government e.g. UniversityGrants Commission to Indian Institute of Technology andjoint sector enterprises, limits as applicable to private sectorcompanies/institutions should be applied.

Note 3: Where there is no Budget provision for investment/loans to acompany/institution, prior approval of Parliament will benecessary for investment/loans exceeding Rs. 10 lakhs exceptin the case of units brought under Government Management.

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E: Expenditure on new Works (Land, Buildings Above Rs. 10 lakhsAbove Rs. 50 lakhsand/or Machinery) but not exceeding

Rs. 50 lakhs.

II. REVENUE EXPENDITURE

F: Grants-in-aid to statutory and other public institutions:

(i) Institutions in receipt of grant-in-aid upto .. Rs. 10 lakhsRs. 1 crore

(ii) Institutions in receipt of grant-in-aid of .. 10% of the Budgetmore than Rs. 1 crore. provision or Rs. 2

crores, whicheverless.

Note 1: These limits will apply with reference to moneys disbursed byan individual Ministry/Department and not by the Governmentas a whole.

Note 2: The above limits will also apply to institutions which aresubstantially financed by grants-in-aid from Government andto public sector undertakings in receipt of grants-in-aid.

Note 3: Where a lumpsum provision is made for providing grant-in-aidunder a particular scheme in the absence of institution-wisebreak up at the time the provision is made, the aforesaid limitswill not apply to releases to such institutions within the budgetedprovision. The details will, however, be reported to Parliament.

G: Grants-in-aid to Private institutions other thanfor export promotion Schemes

(i) Recurring .. Above Rs. 5 lakhs

(ii) Non-recurring .. Above Rs. 10 lakhs

Note 1: In the case of recurring grants exceeding Rs. 5 lakhs per annumthe financial implications should be reported to Parliamentwhere the grant is to be made for 2 years or more.

Note 2: The limits for non-recurring and recurring grants-in-aid willapply with reference to moneys disbursed by an individualMinistry/Department and not Government as a whole.

Note 3: Where a lumpsum provision is made for providing grant-in-aidunder a particular scheme in the absence of institution-wisebreak up at the time the provision is made, the aforesaid limitswill not apply to releases to such institutions within the budgetedprovision. The details will, however, be reported to Parliament.

H: Subsidies and Grants under Export The budget provision should be split up as under:—Promotionless Schemes.

(i) Product Promotion and CommodityDevelopment (this sub-head will accommodatepayments of cash compensatory support onall items of exports including textiles).

(ii) Grants-in-aid to Export Promotion and MarketDevelopment Organisations (this sub-headwould accommodate grants to Export

1 2 3

14

Promotion Councils and other organisationslike Trade Development Authority, IndianInstitute of Foreign Trade, etc. for theirestablishment expenditure as well asdevelopmental activities and also to recognisedexport houses for specified export promotionactivities).

(iii) Export Credit Development (This sub-headwill cover payments made to commercial bankstowards interest subsidy under the Export Creditsubsidy Scheme).

Limits for augmentation of total provisionunder the Export Promotion Schemes:

Above Rs. 50 lakhs Above Rs. 2 croresbut not exceeding Rs. 2 crores.

I: Food subsidy Above Rs. 50 lakhs Above Rs. 2 crores.but not exceedingRs. 2 crores.

J: Other subsidies .. Above Rs. 10 lakhs.

K: Payments against cess collections Limits as applicable to grants-in-aid tostatutory or public institutions will apply.

L: New Commissions or Committees .. Above Rs. 4 lakhs of Enquiry (total

expenditure)

M: Write off of Government loans Above Rs. 50,000Above Rs. 1 lakhbut not exceeding (individual cases)Rs. 1 lakh(individual cases)

Note: This limit will also apply where it is decided to sanction grantto a private institution/individual for repayment of loan.

N: Other Cases of Government expenditureEach case to be considered on merits.

O: P & T The aforesaid limits, including those relatingRailways to Works expenditure, will also apply to theseDefence Departments subject to considerations of

security in the case of Defence.

Note 1: For investment in Ordance Factories, the limit of Rs. 1 crorementioned in item A (ii) will be applicable with reference to

investment in all the factories as a whole.

Note 2: Civil Works, which do not form part of any project of thedepartmental undertakings (Ordnance factories) should betreated as ordinary Defence works. As such, prior approval ofParliament will be necessary if the cost of individual worksexceeds Rs. 50 lakhs and in cases where the individual workscost Rs. 10 lakhs or more but not exceeding Rs. 50 lakhs, areport to Parliament will be required. A list of such worksshould, however, be supplied to Director of Audit, DefenceServices.

1 2 3

15N

atu

re o

f tr

an

sact

ion

Lim

its u

pto

whi

ch e

xpen

ditu

re c

an b

eLi

mits

bey

ond

whi

ch p

rior

appr

oval

of

Par

liam

ent

Rem

arks

w.r.

t. pr

opos

als

me

t b

y re

ap

pro

pri

atio

n o

f sa

vin

gs

is

req

uir

ed

fo

r e

xpe

nd

iture

fro

m t

he

in c

olu

mn

s 2

a a

nd

3a

.in

a G

ran

t su

bje

ct t

o r

ep

ort

to

Co

nso

lida

ted

Fu

nd

Pa

rlia

me

nt

(Exi

stin

g)

Lim

its

pro

po

sed

(Exi

stin

g)

Lim

its p

rop

ose

d a

fte

r ta

kin

ga

fte

r ta

kin

g i

nto

into

acc

ou

nt

vie

ws

of

view

s of

C&

AG

C&

AG

12

2a

33

a4

I. C

AP

ITA

L E

XP

EN

DIT

UR

E

A.

De

pa

rtm

en

t U

nd

ert

aki

ng

s

(i)

Se

ttin

g u

p a

ne

w u

nd

ert

aki

ng

...

...

All

case

sA

ll ca

ses

No

chan

ge f

rom

exi

stin

gta

king

up

a ne

w a

ctiv

ity b

y an

pro

visi

on

exi

stin

g u

nd

ert

aki

ng

(ii)

Ad

diti

on

al

inve

stm

en

t in

Ab

ove

Rs.

50

Ab

ove

Rs.

2.5

0A

bo

ve R

s. 1

cro

reA

bo

ve R

s. 5

cro

reL

imit

s b

ein

g e

nh

an

ced

exi

stin

g U

nd

ert

aki

ng

lakh

s b

ut

no

tcr

ore

bu

t n

ot

to

five

times

the

exi

stin

ge

xce

ed

ing

exc

ee

din

glim

its

as

pe

rR

s. 1

cro

reR

s. 5

cro

re.

O/o

C&

AG

's v

iew

s.

B.

Pu

blic

Se

cto

r C

om

pa

nie

s/C

orp

ora

tion

s

(i)

Se

ttin

g u

p o

f a

ne

w C

om

pa

ny,

or

...

...

All

case

sA

ll ca

ses

No

ch

an

ge

fro

msp

littin

g u

p o

f a

n e

xist

ing

Co

mp

an

y,e

xist

ing

pro

visi

on

.o

r a

ma

lga

ma

tion

of

two

or

mo

reC

om

pa

nie

s, o

r ta

kin

g u

p a

ne

wa

ctiv

ity b

y a

n e

xist

ing

Co

mp

an

y

(iii)

Ad

diti

on

al

inve

stm

en

t in

/loa

ns

to a

n e

xist

ing

co

mp

an

y

(a)

Wh

ere

th

ere

is

no

Ab

ove

Rs.

10

Ab

ove

Rs.

50

la

khs

Ab

ove

Rs.

20

la

khs

Ab

ove

Rs.

1 c

rore

Lim

its

be

ing

en

ha

nce

dB

ud

ge

t P

rovi

sio

nla

khs

bu

t n

ot

bu

t n

ot

to f

ive

times

the

exi

stin

ge

xce

ed

ing

exc

ee

din

glimit

s as

per

O/o

C&

AG

'sR

s. 2

0 l

akh

sR

s. 1

cro

revi

ew

s.

161

22

a3

3a

4

(b)

Wh

ere

Bu

dg

et

Pro

visi

on

exi

sts

for

inve

stm

en

t a

nd

/o

r lo

an

s

Pa

id u

p C

ap

ital

of

the

Ab

ove

Rs.

10

la

khs

bu

tA

bo

ve R

s. 2

0 l

akh

sC

om

pa

ny

Up

ton

ot

exc

ee

din

gR

s. 1

cro

reR

s. 2

0 l

akh

s

(Pro

po

sed

) U

pto

Rs.

50

cro

re2

0%

of

ap

pro

pri

ati

on

Ab

ove

20

% o

f a

pp

rop

ria

tio

nRa

tion

alis

atio

n p

rop

ose

da

lre

ad

y vo

ted

or

alr

ea

dy

vote

d o

rB

udge

t D

ivis

ion

by r

edu-

Rs.

10

cro

re,

wh

ich

Rs.

10

cro

re,

wh

ich

eve

nci

ng

th

e

nu

mb

er

of

ever

is

less

is le

ssca

tego

ries f

rom

4 t

o 2

ispr

opos

ed t

o be

acc

cept

ed.

Pro

po

sal

als

o c

on

form

sto

C&

AG

's v

iew

s (b

eing

with

in 5

tim

es)

Ab

ove

Rs.

1 c

rore

an

dA

bo

ve R

s. 1

cro

re b

ut

Ab

ove

Rs.

. 2

cro

reu

pto

Rs.

20

cro

ren

ot

exc

ee

din

g R

s. 2

cro

re

Ab

ove

Rs.

25

cro

re a

nd

Ab

ove

Rs.

5 c

rore

bu

tA

bo

ve R

s..

10

cro

reu

pto

Rs.

10

0 c

rore

no

t e

xce

ed

ing

Rs.

10

cro

re

Ab

ove

Rs.

10

0 c

rore

Ab

ove

Rs.

7.5

cro

re b

ut

Ab

ove

Rs.

15

cro

ren

ot

exc

ee

din

g R

s. 1

5 c

rore

(Pro

po

sed

) Ab

ove

Rs.

50

cro

re2

0%

of

the

ap

pro

-A

bo

ve 2

0%

of

ap

pro

-R

at

ion

ali

sa

tio

np

ria

tion

alr

ea

dy

pri

atio

n a

lre

ad

yp

rop

ose

d

Bu

dg

et

vote

d o

r R

s. 2

0vo

ted

or

Rs.

20

Div

isio

n

by

cro

re,

wh

ich

eve

rcr

ore

, w

hic

h e

ver

red

uci

ng

th

e n

um

be

r o

fis

less

is le

ssca

tego

ries

from

4 t

o 2

ispr

opos

ed t

o be

acc

epte

d.P

rop

osa

l a

lso

co

nfo

rms

to

C&

AG

's

vi

ew

s(b

ein

g w

ithin

5 t

ime

s).

C.

All

bo

die

s o

r a

uth

ori

ties

with

inth

e a

dm

inis

tra

tive

co

ntr

ol/

ma

na

ge

me

nt

of

Ce

ntr

al

Go

vern

me

nt

or

sub

sta

ntia

llyfin

an

ced

by

th

e C

en

tra

lG

ove

rnm

en

t.

17L

oa

ns:

Up

to 1

0%

of

the

ap

pro

-M

ore

th

an

10

% o

ver

the

Ce

ilin

g o

f R

s. 1

0 c

rore

pri

atio

n a

lre

ad

y vo

ted

ap

pro

pri

atio

n a

lre

ad

yh

as

pro

po

sed

as

pe

ro

r R

s. 1

0 c

rore

wh

ich

-vo

ted

by

Pa

rlia

me

nt

O/o

C&

AG

vie

ws.

ever

is

less

or R

s. 1

0 c

rore

wh

ich

-ev

er i

s le

ss

No

te:W

he

re a

lu

mp

sum

pro

visi

on

is

ma

de

fo

r p

rovi

din

g '

Lo

an

s' u

nd

er

ap

art

icu

lar

sch

em

e,

the

d

eta

ils

of

sub

sta

nti

al

ap

po

rtio

nm

en

t (1

0%

o

flu

mp

sum

or

Rs.

1 c

rore

, w

hic

he

ver

ish

igh

er)

sh

ou

ld

be

re

po

rte

d

toP

arl

iam

en

t. I

n t

he

ca

se o

f lu

mp

sum

pro

visi

on

of

loa

ns

to S

tate

s, t

he

Sta

te-

wis

e d

istr

ibu

tion

sh

ou

ld b

e r

ep

ort

ed

to

Pa

rlia

me

nt.

D.

Exp

en

ditu

re o

n n

ew

Wo

rks,A

bo

ve R

s. 1

0 l

akh

sA

bo

ve R

s. 5

0 l

akh

sA

bo

ve R

s. 5

0 l

akh

sA

bo

ve R

s. 2

.5 c

rore

Bu

dg

et

Div

isio

n's

(la

nd

, B

uild

ing

s a

nd

/or

bu

t n

ot

exc

ee

d-

bu

t n

ot

exc

ee

d-

or

ab

ove

10

% o

fp

rop

osa

l w

hic

hM

ach

ine

ry)

ing

Rs.

50

la

khs

ing

Rs.

2.5

cro

reth

e a

pp

rop

ria

tio

nco

nfo

rms

to O

/oo

r n

ot

exc

ee

d-

alr

ea

dy

vote

dC

&A

G v

iew

s is

ing

10

% o

f th

ep

rop

ose

d t

o b

ea

pp

rop

ria

tio

na

cce

pte

d.

alr

ea

dy

vote

d,

wh

ich

eve

r is

less

181

22

a3

3a

4

II. R

EV

EN

UE

EX

PE

ND

ITU

RE

E.

Gra

nts

in

aid

to

an

ybo

dy

or

au

tho

rity

All

case

s

No

te:

Wh

ere

a l

um

psu

m p

rovi

sio

n i

sm

ade

for

prov

idin

g “g

rant

s-in

-aid

”u

nd

er

a p

art

icu

lar

sch

em

e,

the

de

tail

s o

f su

bst

an

tia

la

pp

ort

ion

me

nt

(10

% o

f lu

mp

sum

of R

s. 1

cro

re,

whi

chev

er is

hig

her)

sho

uld

be

re

po

rte

d t

o P

arl

iam

en

t.In

th

e c

ase

of

lum

psu

m p

rovi

sio

no

f g

ran

ts t

o S

tate

s, t

he

Sta

te-w

ise

dis

trib

utio

n s

ho

uld

be

re

po

rte

d t

oP

arl

iam

en

t.

F.

Sub

sidi

es

(i)

New

Cas

esN

EW

IT

EM

—N

EW

IT

EM

All

case

s

(ii)

En

ha

nce

me

nt

of

pro

visi

on

NE

W I

TE

MU

pto

10

% o

f th

eN

EW

IT

EM

Mo

re t

ha

n 1

0%

of

the

Ce

ilin

g o

f R

s. 1

0 c

rore

in t

he

exi

stin

g a

pp

rop

ria

tion

ap

pro

pri

ati

on

ap

pro

pri

ati

on

ha

s b

ee

n i

mp

ose

da

lre

ad

y a

pp

rove

da

lre

ad

y vo

ted

acc

ord

ing

to

O/o

by

the

Pa

rlia

me

nt

by

Pa

rlia

me

nt

C&

AG

’s

view

s.o

r R

s. 1

0 c

rore

or

Rs.

10

cro

rew

hic

he

ver

isw

hic

he

ver

isle

ssle

ss

Pa

yme

nts

ag

ain

st c

ess

Lim

its a

s a

pp

lica

ble

All

case

sco

llect

ion

sto

gra

nts

-in

-aid

to

sta

tuto

ry

or

pu

blic

in

stitu

tion

s w

ill a

pp

lyN

ew

Co

mm

issi

on

s o

r—

—A

bo

ve R

s. 4

la

khs

Ab

ove

Rs.

20

la

khs

Co

mm

itte

es

of

En

qu

iry

(to

tal

exp

en

dit

ure

)(t

ota

l e

xpe

nd

itu

re)

19G

.W

rite

off

of

Go

vern

me

nt

Ab

ove

Rs.

50

,00

0A

bo

ve R

s. 5

0,0

00

Abo

ve R

s. 1

lak

hs A

bove

Rs.

1 l

akhs

No

ch

an

ge

fro

mb

ut

no

t e

xce

ed

ing

bu

t n

ot

exc

ee

din

g(i

nd

ivid

ua

l ca

ses)

(in

div

idu

al

case

s)e

xist

ing

pro

visi

on

.R

s. 1

lak

hsR

s. 1

lak

hs(i

nd

ivid

ua

l ca

ses)

(in

div

idu

al

case

s)

H.

Oth

er

Ca

ses

of

Go

vern

me

nt

Ea

ch c

ase

to

be

co

nsi

de

red

on

me

rits

. e

xpe

nd

iture

I.P

&T

Th

e a

fore

said

lim

its,

incl

ud

ing

th

ose

re

latin

g t

o W

ork

sT

he

afo

resa

id l

imits

, in

clu

din

g t

ho

seR

ailw

ays

exp

en

ditu

re,

will

als

o a

pp

ly t

o t

he

se D

ep

art

me

nts

rela

ting

to

Wo

rks

exp

en

ditu

re,

will

als

oD

efe

nce

sub

ject

to

co

nsi

de

ratio

ns

of

secu

rity

in

th

ea

pp

ly t

o t

he

se D

ep

art

me

nts

su

bje

ct t

oca

se o

f D

efe

nce

.co

nsi

de

ratio

ns

of

secu

rity

in

th

e c

ase

of

De

fen

ce S

erv

ice

s E

stim

ate

s.

20

Note 1: For investment in Ordnance Factories, the limit ofRs. 1 crore mentioned in Item A (ii) will be applicable with referenceto investment in all the factories as a whole.

Note 2: Civil Works, which do not form part of any project of thedepartmental undertakings (Ordnance Factories) should be treatedas ordinary Defence works. As such, prior approval of Parliamentwill be necessary if the cost of individual works exceeds Rs. 50lakhs and in cases where the individual works cost Rs. 10 lakhs ormore but not exceeding Rs. 50 lakhs, a report to Parliament will berequired. A list of such works should, however, be supplied toDirector of Audit, Defence Services.

(Existing) Limits proposed after taking into account views of C&AG

Note 1: For investment in Ordnance Factories, the limit of Rs. 5crore mentioned in Item A (ii) will be applicable with reference toinvestment in all the factories as a whole.

Note 2: Civil Works, which do not form part of any project of thedepartmental undertakings (Ordnance Factories) should be treatedas ordinary Defence works. As such, prior approval of Parliamentwill be necessary if the cost of individual works exceeds Rs. 2.5crore and in cases where the individual works cost Rs. 50 lakhs ormore but not exceeding Rs. 2.5 crore, a report to Parliament will berequired. A list of such works should, however, be supplied toDirector of Audit, Defence Services.

APPENDIX II

F.No. 1(4) E.II(A)/05Ministry of Finance

Department of ExpenditureE.II (A) Branch

******

New Delhi, dated 9th November, 2005

OFFICE MEMORANDUM

SUBJECT: Revision of norms of re-appropriation pursuant to the Fiscal Policy StrategyStatement presented to the Parliament under the FRBM Act, 2003 and theFiscal Responsibility and Budget Management Rules of 2004.

**********

The undersigned is directed to refer to Lok Sabha Secretariat's O.M. No. 24/1/1/2005/PAC dated 28.9.2005 on the above subject, and to furnish the following information.

2. With regard to the justification for review of norms of re-appropriation, it isstated that the proposed norms are intended to give greater delegation of authorityand flexibility to the administrative Ministries in managing their departmental budgetsand their financial affairs.

Presently, though the administrative Ministries have been given full powers forre-appropriation under Schedule IV of Delegation of Financial Power Rules (DFPRs),1978, exercise of these powers by the administrative departments is subject to thevarious restrictions imposed under Rule 10 of these Rules and the Government ofIndia decisions (GIDs) issued thereunder. Some of these limits/restrictions imposedunder the above rule—like the existing limit of 'Rs 1 crore or more' for proposalsrequiring approval of Secretary (Exp.) [mentioned in para 2(i) of our OM ibid], and thenorms for "New Service (NS)/New Instrument of Service (NIS)" [mentioned in para 2(iii) of our letter] were delegated/framed way back in 1990 and in 1982 respectively.These limits merit upward revision in the light of normal increase in price index andinflation since then.

While, the upward revision of limits of NS/NIS, as recommended, would ensurethat administrative Ministries have greater flexibility/accountability in the delegationof powers for re-appropriation, discipline of meaningful and realistic budgeting wouldbe maintained, and the original objective of the budgeted scheme would not besubstantially altered by the exercise of delegated powers without prior approval of theParliament. In the revised limits, powers of administrative Ministries have beenrationalized and recast as per contemporary requirements.

Furthermore, it has been observed that with the imposition of various restrictionsunder Rule 10 ibid and GIDs issued thereunder, Ministries are required to seek approvalof this Department even for re-appropriation of funds for their ‘committed’ liabilitiesviz. expenditure towards Salary, wages, Pensionary Charges, Medical Expenses and

21

SERVER5\5162LS\5162LS 21

22

Rent Rate and Rent Rate and Taxes. As the expenditure on these heads is of‘committed’ nature , it has been proposed to give full powers of re-appropriation toadministrative departments for expenditure towards these heads, within the budgetedamount placed at their disposal.

3. It may also be clarified here that the delegation through the proposed revisednorms is not in view of any irregularities noticed under the existing norms, but is in factaimed at enabling administrative departments in having efficient management of theirdepartmental budgets with a view to improving the quality of implementation, andenhancing the 'efficiency' and 'accountability' of delivery mechanism through quickerdecision making. It is also intended to reduce references to the Ministry of Finance onmatters affecting day to day routine affairs so that expenditure control is enforcedthrough scales of expenses and budgetary ceilings rather than getting involved inmicro-management of the departmental affairs. Greater delegation would also implygreater responsibility to manage the affairs within the budget with consequent greateraccountability.

4. As regards the issue of financial control (point iii), it is stated that as per theScheme of 'Integrated' Financial Adviser of the Department of Expenditure, the FinancialAdviser is responsible both to the administrative Ministry and to the Ministry ofFinance, and functions under the general guidance of the Finance Ministry. Therefore,the procedure, guidelines and rules etc., issued from time to time by the Ministry ofFinance are required to be observed by him/her, while examining the re-appropriationproposals/other proposals of the administrative Ministry/Department concerned. Theproposal to be considered under the revised norms also, as recommended by us,would require the concurrence of the Financial Advisers of the administrativeDepartment concerned.

5. It may also be stated that the proposed revised norms, have been finalizedafter consulting various Ministries, and after obtaining the concurrence of O/o C&AG.

6. This issue with the approval of Secretary (Expenditure)

sd/-

(RUBINA ALI)

Under Secretary to the Govt. of India.

Lok Sabha Secretariat,[Kind attention: Ms. Anita B. Panda, Under Secretary]Parliament House Annexe, New Delhi.

APPENDIX III

OBSERVATIONS AND RECOMMENDATIONS

SI. Para Ministry/ Observations/RecommendationsNo. No. (Department)

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1. 13 Finance The Committee have been given to understand(Department that a Fiscal Policy Strategy Statement was laidof Expenditure) before the Parliament by the Finance Ministry on

26th February, 2005 under Fiscal Policy StrategyStatement Responsibility and BudgetManagement Act, 2003. Pursuant to this, theMinistry of Finance (Department of expenditure)have sought approval of the PAC for revision ofnorms for re-appropriation of funds. Theproposals inter-alia include that the limit ofRs. 1 crore or those for re-appropriations of fundsunder various sub-heads of the Grant, whichrequire approval of Secretary (Expenditure), maybe enhanced to Rs. 5 crore of more. Also, fullpowers are sought to be delegated to theMinistries/Department to re-appropriate fundsfrom the head ‘Salary’ for augmentation of head‘Salary’ across the schemes (sub-heads) within agrant. It is further proposed that financial limitsfor obtaining approval of Parliament under NewService/New Instrument of Service may beenhanced/revised.

2. 14 Finance The Ministry have explained that there is an(Department imperative need for such a review in view ofof Expenditure) inflation and price rise since 1990s. According to

the Ministry, the proposed norms are intended togive greater delegation of authority and flexibilityto the Administrative Ministries in managing theirdepartmental budgets and their financial affairs.The revised norms are stated to be aime at enablingAdministrative Departments in having efficientmanagement of their departmental budgets with aview to improving the quality of implementation,

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and enhancing the 'efficiency' and 'accountability'of delivery mechanism through quicker decisionmaking. It is also intended to reduce references tothe Ministry of Finance on matters affecting dayto day reoutine affairs so that expenditure controlis enforced through scales of expenses andbudgetary ceilings rather than getting involvedin micro-management of the departmental affairs.Greater delegation would also imply greaterresponsibility to manage the affairs within thebudget with consequent greater accountability.

3. 15 Finance As these proposals have been finalized after(Department consulting various Ministries and obtaining theof Expenditure) concurrence of the Office of the Comptroller &

Auditor General of India, and there is adequatejustification and need therefor, the Committee arein agreement with the proposed revision in thenorms for re-appropriation of funds. At the sametime, the Committee would like to impress uponthe Ministry of Finance (Department ofExpenditure) to divise an effective mechanism forproper and continuous monitoring of the revisednorms in order to ensure strict adherence to thesame by each and every Minisitry/Department.The Committee also expect the Financial Advisorsof all the Ministries/Departments to ensure thatthere is no violation in implementation of the saidrevised norms for re-appropriation of funds andany slackness in complying with the said normsis strictly dealt with.

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MINUTES OF THE FIFTEENTH SITTING OF THE PUBLIC ACCOUNTSCOMMITTEE (2005-2006) HELD ON 12TH DECEMBER, 2005

The Committee sat from 1630 hrs. to 1735 hrs. on 12th December, 2005 in RoomNo."139", Parliament House Annexe, New Delhi.

PRESENT

Dr. K. Malaisamy — in the Chair

MEMBERS

Lok Sabha

2. Shri Ramesh Bais

3. Shri Madan Lal Sharma

4. Shri Brijbhushan Sharan Singh

5. Dr. Ramlakhan Singh

6. Kunwar Rewati Raman Singh

7. Shri Tarit Baran Topdar

Rajya Sabha

8. Shri Prasanta Chatterjee

SECRETARIAT

1. Shri S.K. Sharma — Additional Secretary

2. Shri A. Mukhopadhyay — Joint Secretary

3. Shri Ashok Sarin — Director

4. Smt. Anita B. Panda — Under Secretary

5. Shri M.K. Madhusudhan — Under Secretary

OFFICER OF THE OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA

1. Shri U. Bhattacharya — ADAI (RC)

2. Shri A.K. Thakur — DG of Audit

3. Shri Roy S. Mathrani — Pr. Director (AB)

4. Shri R.K. Ghose — AG(Audit), Delhi

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REPRESENTATIVES OF THE MINISTRY OF URBAN DEVELOPMENT

**** **** ****

REPRESENTATIVES OF DELHI DEVELOPMENT AUTHORITY

**** **** ****

REPRESENTATIVES OF DEPARTMENT OF EDUCATION, GOVERNMENT OF NCT OF DELHI

**** **** ****

2. As the Chairman (PAC) was unwell and could not attend the sitting, theCommittee chose Dr. K. Malaisamy to act Chairman for the sitting.

3. At the outset, the acting Chairman, welcomed the Members and the AuditOfficers to the sitting of the Committee. The Chairman informed the Members thatpursuant to Fiscal Policy strategy statement laid by FM before Parliament under FiscalResponsibility and Budget Management Act, 2003 the Ministry of Finance (Departmentof Expenditure ) has submitted a note seeking approval of the PAC which includedproposals for review of norms for re-appropriation of funds. The Chairman furtherinformed that these proposals were finalised by the Ministry in consulation with theOffice of C&AG of India. ADAI (RC) informed that Office of C&AG had alreadyexamined aforesaid proposals for review of norms for re-appropriation of funds andtheir comments/views had been incorporated in the Ministry's proposal.

The Committee then took up for consideration the Memorandum prepared bythe Secretariat explaining inter-alia the proposals submitted by the Ministry as alsoneed and justification therefor. After some deliberations the Committee approved theproposals submitted by Ministry of Finance (Department of Expenditure).

4. **** **** ****

5. **** **** ****

6. **** **** ****

(The Committee then adjourned.)

MGIPMRND—5162LS—27-2-2006.