DHARAM VIR

F

Under the Constitution, all government receipts, tax, non-tax and borrowings as well as moneys received back in repayment of previous government loans, must necessarily be credited to the state’s Consolidated Fund.1 No amount shall be withdrawn from the Consolidated Fund except in accordance with law and for the purposes and in the manner provided in the Constitution.2 This is enacted in an Appropriation Act passed by the legislature3 and fixes the purposes of expenditure.4

The government must approach the legislature with a supplementary budget if the amount provided in the original budget is found to be inadequate during the year or if a need arises for expenditure on new service.5 The supplementary budget must be passed during the financial year itself and before the expenditure is incurred.

A further mechanism of recourse to the Contingency Fund is available for meeting any unforeseen expenditure of an emergent nature. It is in the nature of an imprest placed at the disposal of the governor to enable advances being made for the purpose of meeting unforeseen expenditure pending its authorisation by the legislature.6 Any amount advanced from the Contingency Fund is returned to that fund after the legislature authorises the expenditure. State governments have established elaborate expenditure monitoring and control systems to prevent overspending. Additionally, the state accountant general, who compiles the accounts of government,7 keeps cautioning the government against any possible likelihood of the budget being overshot.

If despite all this, the government ends up overspending, it must approach the legislature for obtaining what is called an “excess grant”.8 The objective is to secure that no amount of expenditure shall remain outside the scrutiny and approval of the legislature. The excess grant is obtained after the expenditure has been incurred and the financial year is over, as distinguished from supplementary grant, which must be obtained before the close of the financial year.

During the debates in the Constituent Assembly, apprehensions were expressed that the mechanism of excess grant might undermine the effectiveness of legislature’s control over expenditure and the budget would cease to have any sanctity. Ambedkar defended and justified the inclusion of this mechanism in the Constitution with the observation that “the passing of an excess grant is nothing but an immunity act passed by Parliament (legislature) to exonerate certain officers who have in good faith done something which is contrary to the law for the time being”.

It is one of the duties of the comptroller and auditor general (CAG) of India, to report whether the moneys shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied. The CAG reports cases of excess expenditure both through his audit reports and as part of the appropriation accounts audited and certified by him and submitted to the governor who causes them to be laid before the legislature.9

Public Accounts Committee

The post facto examination of government accounts conducted by the Public Accounts Committee (PAC) is intended to further strengthen legislative oversight. It represents the legislature in miniature and functions on non-partisan lines.

The PAC makes searching inquiries into the circumstances that caused excess expenditure, whether the excess expenditure occurred because of flawed budgeting, or due to failure of the prescribed expenditure monitoring and control system or for any other reason, the necessity and urgency of expenditure, the reasons why the extra requirement could not have been met through supplementary budget or an advance from the Contingency Fund and so on. While making its recommendations for regularisation of the excess expenditure, the PAC also recommends remedial and corrective action and submits its reports to the legislature, setting the stage for the government to approach the legislature.

Government departments are required to revert to the PAC with reports of action taken by them on its recommendations. The objective is to hold the executive accountable for overspending and to learn and implement lessons for the future.

The design of the system ensures that while any expenditure from out of the Consolidated Fund can ordinarily be incurred only after prior authorisation by the legislature, the executive is not hamstrung in cases of emergency. However, this excellent system is being undermined because of overspending by the state governments and their failure to seek post facto authorisation.

According to the audit reports of the CAG for the year ended March 31, 2005, the states had not been merely overspending but they had also not obtained excess grants for a whopping amount of Rs 2,65,356.59 crore up to the year 2004-05 out of the amounts that they had overspent. In some of the cases excess expenditure of over Rs 8,300 crore related to the period prior to the year 1992-93; in Meghalaya from 1971-72, in Bihar from 1977-78 and so on. West Bengal topped the list with an excess expenditure of Rs 50,073 crore for which it

Economic and Political Weekly February 17, 2007 had not obtained the post facto approval of the legislature; followed by Uttar Pradesh with its unregularised excess expenditure of Rs 32,396 crore. State-wise and year-wise details are given in the table.

Supremacy of the legislature and public accountability have been hit by a double whammy; first by the violation of the appropriation laws, and second by the failure to abide by the provisions of the Constitution which mandate that the executive must explain the overspending to the legislature for post facto approval and regularisation.

Concerned at this state of affairs, Era Sezhian, a former chairman of the Central Public Accounts Committee had moved the Supreme Court by way of a public interest litigation (PIL). Spurred perhaps by this, some of the state governments like Assam, Bihar and Punjab rushed to seek excess grants for the amounts that had been overspent over the years: Assam for the years 1995-96 to 1999-2000, Bihar for the years 1977-78 to 1997-98 (part) and Punjab for the years up to 2000-01. This might have completed a formality but it is doubtful whether such “mass regularisation” served the purpose of effectively holding the executive accountable for the excess expenditure or learning and implementing lessons for the future.

Excess expenditure upsets the budgetary allocations and priorities approved by the legislature. The passage of time renders it increasingly difficult to explain the circumstances that caused excess expenditure, more so if the persons responsible have moved elsewhere in the mean time. Also, the valuable opportunity for lessons learnt is missed and the system and other deficiencies and failures that cause excess expenditure are likely to persist. The culture of casualness is insidiously nurtured and the accountability of the executive is a casualty.

According to a report of the CAG, timely investigation into and follow up action on cases of excess expenditure of the animal husbandry department that occurred and were reported year after year might have prevented the continuance of what is popularly known as the fodder scam in Bihar.10

States like Assam, Bihar and Punjab that had taken recourse to “mass regularisation” had once again piled up significant amounts of excess expenditure that had not been regularised. The other states had probably remained unshaken even by the PIL. Repeated reporting of excess expenditure in the audit reports of the CAG has apparently come to be regarded as nothing more than a mere ritual not worthy of serious notice and action.

Underlying Reasons?

The main underlying reason is that the Constitution does not prescribe any timeline by which the government must approach the legislature for seeking regularisation of excess expenditure. The timelines for presentation of notes for regularisation of excess expenditure to the PAC are prescribed by executive instructions, and these are not always adhered to. On the other hand no timeline has been prescribed for the PAC to make its recommendations. A recommendation made by the Constitution Review Commission that the follow-up action on audit reports of the CAG should be completed within 12 to 18 months has remained largely unimplemented.11 Thus delays could occur because of the failure of the executive to present the notes for regularisation to the PAC in time, or because of the time taken by the latter to make its recommendations, or a combination of both. An atmosphere of what might be described as apathy, complacency and casualness appears to have come to prevail. Interestingly, the situation has prevailed irrespective of the political party or parties in power.

Amendments to the Constitution

Ideally, the budget for the second financial year should be presented and passed only after the cases of excess expenditure relating to the second preceding year have been regularised. Thus the budget for the year 2007-08 should not be presented and passed till excess expenditure for and up to the years 2005-06 has been regularised. If this is considered to be too stringent a conditionality, the least that can be prescribed is that, while presenting the budget for the financial year, the government must also table a statement before the legislature showing the year-wise amounts of excess expenditure for and up to the second preceding financial year for which excess grants are still to be obtained, the reasons for the delay and the timeline by which it will approach the legislature for regularisation of excess expenditure. Such a statement should continue to be tabled before the legislature on the first working day of every session of the legislature in the second financial year (i e, during 200708 in the above example).

However, there can be no justification for delay in the regularisation of excess expenditure beyond the second following year. The budget for the third following year, including even the vote on account,12 should not be allowed to be presented and passed till excess expenditure for and up to the third preceding year has been explained to and regularised by the legislature. In other words the budget, for example, for the financial year 2007-08 shall not be presented and passed till excess grants have been obtained for any excess expenditure for and up to the year 2004-05. The governor shall be automatically bound to refuse to recommend any Appropriation Bill for the consideration of the legislature if any amount of the excess expenditure for and up to the third preceding year has not been regularised.

Currently, the timeline for presentation of notes on excess expenditure to the PAC is prescribed by executive instructions, which are not always implemented and sometimes conveniently ignored. The timeline may be laid down in the rules of procedure so that any instance of delay automatically attracts the consequences of contempt of the legislature for the departmental secretary and the finance secretary. The rules of procedure may also prescribe the timeline by which the PAC must complete its examination of cases of excess expenditure and render its recommendation to the legislature. These timelines should be so fixed that the regularisation of excess expenditure can invariably be completed before the budget for the third following financial year is due to be presented.

If the PAC is in arrears in following up the audit reports of the CAG (and this is the position in several states), its examination of cases of excess expenditure need not be held up for that reason. Examination of cases of excess expenditure and other matters included in the audit reports need not necessarily remain linked. There is no constitutional or statutory requirement for this and excess expenditure should be delinked and fast-tracked to meet the timelines suggested above.

Similar acute situations have not been encountered at the union government level so far, but corresponding amendments in the Constitution should also be considered for the provisions relating to the union government budget.13

The statement required to be tabled before the legislature explaining the circumstances why government has not been in a position to apply for excess grants for the amounts overspent would provide an opportunity for introspection to government as well an opportunity to the legislature to assert itself and hold the executive accountable. With this there may not be any occasion for the more extreme remedy of denying any further spending after the second following year till the overspending of the past is explained and got regularised. The latter may as well remain a reserve or sleeping provision, but a necessary and effective one.

The budget is not a mere statement of income and expenditure of government. It represents the hopes and aspirations of the people as articulated through their representatives in the legislature. The legislature’s control over the executive is not a mere formality; it is basic to the country’s polity. If the good faith assumed by Ambedkar has been found to be misplaced, it is time that the supremacy of the legislature is restored through necessary amendments to the Constitution and the Rules of Procedure framed thereunder.

EPW

Email: dharamvir2003@yahoo.co.in