The Rise And Rise Of Financial Anarchy

The fodder scandal in Bihar, in which crores of public funds have been drawn from the government treasury without budgetary appropriations, has made a mockery of the financial provisions outlined in the Indian Constitution. But the latest audit report of the comptroller and auditor general (CAG) points out that excess drawl over voted provisions has been the practice from as far back as 1977-78.

During the 18-year period from 1977-78 to 1994-95, an excess drawl of over Rs 5,383.68 crore took place without being regularised by the state legislature. In the earlier years, the amount of excess drawl was not significant (Rs 14.51 crore in 1977-98); it jumped to Rs 1,228.67 crore in 1991-92 and Rs 1,462.10 crore in 1992-93 and 1993-95.

 

Significantly, a large part of this excess expenditure has been for grants relating to animal husbandry. In eight years from 1987-88 to 1994-95, the excess drawl in this department was of the order of Rs 505.12 crore against a budgetary allocation of Rs 442.13 crore. In fact several other departments like pensions and general services, public works and medical have also been flouting budgetary limits with impunity.

What has the state finance department, which is responsible for presenting the budget to the legislature and exercising control over government funds, been doing all these years? If money can be drawn from the government treasury in total disregard of a state legislature-approved budget, what use are the provisions of Article 202, 203 and 204 of the Constitution? These require that an annual financial statement be laid before the houses of the legislatures and an appropriation bill be passed and that no money can be withdrawn from the Consolidated Fund of the state except appropriation made by law.

Perhaps this situation, in which money has been drawn from the treasury in total disregard of budgetary ceilings approved by the state legislature, has been allowed to continue due to a misunderstanding of the true import of Article 205 (b) of the Constitution (Article 115(b) in case of the central government) which states that if any money has been spent on any service during a financial year in excess of the amount granted for that service and for that year a statement be presented to the House for a demand of such excess.

Article 115(b) and 205(b) are basically enabling provisions that permit excess expenditure in grants (such as repayments of public debt) to be regularised in cases in which an accurate forecast of expenditure is difficult to make.

Nowhere do the financial rules framed by the central and state governments allow spending departments to exceed the budgetary allotments voted by the legislature. The Delegation of Financial Power Rules issued by the ministry of finance of the government of India permit only a limited reappropriation of savings within a grant.

The Financial Rules of Bihar stipulate that the authority administering a grant is ultimately responsible for watching the progress of expenditure on public services under its control and for keeping the expenditure within the grant.

After the budget is passed, each head of the department makes an allotment under various sub-heads to the individual drawing and disbursing officers spread all over the state indicating the ceilings within which expenditure can be incurred. It is, therefore, difficult to understand how individual field officers can spend money beyond their allotment unless the entire financial control machinery in the state has collapsed.

Legislative control over national finance will be meaningful only if there is an effective machinery to monitor the fact that the money has been spent against each expenditure head voted by the legislature, and there is a time period within which such reports are made available to the legislature.

This brings in the role of the comptroller and auditor general and the Public Accounts Committee (PAC). Under Article 151 of the Constitution, the annual accounts of the Union government as well as state governments together with the CAGs audit report are required to be laid before each House of Parliament or state legislature and thereafter examined by the PAC.

It is the PACs duty to confirm whether the money shown in the accounts as having been disbursed was legally available for, and applicable to, the service or purpose to which they have been applied or charged. For the system of parliamentary control to function effectively, it is necessary that the appropriation accounts certified by the CAG and the PACs report are placed in Parliament or the state legislature within a strict time schedule.

Unfortunately, this seldom happens. The CAGs Appropriation Audit Report for 1994-95 was placed in Parliament in July 1996, and would hopefully be examined by PAC in the next few months as the new PAC was constituted by the House only in early September 1996.

As the Bihar scandal indicates, the position is, however, far from satisfactory as far as state governments are concerned. In some states, the appropriation accounts are placed in the legislature several years after the closure of the financial year and the PAC does not meet for years together to regularise the expenditure.

To remedy the situation, Parliament needs to prescribe a date by which the CAGs Appropriation Audit Report should be placed in the House, say, by December of the following financial year. In the United Kingdom, the National Audit Act has made it mandatory that the CAGs reports be laid before the House of Commons by January 31 of the following year. There is also need for a provision that the PAC will examine the Appropriation Accounts and submit its report within a time frame, say, by February 15 so that excess grant if any could be regularised before next years budget is presented.

In Bihar, as matters stand today, a staggering sum of Rs 5,383 crore has been spent (upto March 1995) beyond what has been voted by the legislature and thus without any legal authority. It is unlikely that the current PAC of Bihar will recommend the regularisation of this excess expenditure, nor does it seem possible for the Bihar legislature to approve it under Article 205(b) of the Constitution. Will this not create a constitutional impasse? Should the central government remain a passive spectator to the situation? Does the situation warrant an imposition of a financial emergency as provided for in Article 360 of the Constitution? Legal and constitutional experts should debate the issue and suggest a way out.

(The author is former chairman, Audit Board and deputy comptroller & auditor general)In Bihar, as matters stand today, a staggering sum of Rs 5,383 crore has been spent (upto March 1995) beyond what has been

voted by legislature and thus without any legal authority. It is unlikely that the current PAC of Bihar will recommend the regularisation of this excess expenditure.