Chapter 25: ANNUAL FINANCIAL STATEMENT OR BUDGET
President causes to be laid before both
houses the Annual Financial Statement.
This contains the estimated revenues or
expenditures of the government for a financial year.
There are two budgets General or Railways.
Expenditure on revenue account should be
separated from other expenditure. Also expenditure
charged on the consolidated fund should be separated
from the expense made from the fund.
Parliament can reduce or abolish a tax but
can’t increase it.
Demand for grants can be made only on
recommendation of the president.
Expenditures are of two types charged upon
the Consolidated Fund of India or made from the C.F.I.
Charged expense is non votable but can only be discussed
Expense charged upon the Consolidated Fund
It includes salaries, pensions or expenses of
President, UPSC, CAG, SC judge, Pensions of HC judges,
Presiding or deputy presiding officer of LS and RS. Debt
of the Govt of India, Amounts to satisfy any judgments,
expense declared by parliament to be charged on the fund.
Stages of Enactment of Budget:
A) Presentation of budget:
Railway budget is presented in third week of Feb. and
general budget in last working day of Feb. Finance minister
gives a budget speech and at the end of it; the budget is
laid before both houses.
B) General discussions: Only
the general principles of budget or the budget as a whole
can be discussed. No motions of reduction of grants or votes
can be made. Finance minister has the right of reply at end
of discussion. This happens in both houses.
C) Scrutiny by dept committees:
An in-depth scrutiny of demand for grants by department is
made by each departmental standing committee of parliament.
Three to four weeks are given for this and the house remains
in recess. The standing committees make a report to the
house at the end.
D) Voting on the demand for grants:
The MP's of Lok Sabha study and vote on each demand for
grant. The Lok Sabha only can vote on demand for grants and
no voting is allowed on the expenditure charged on the
consolidated fund of India. MP's can move motion for
reduction of a grant called CUT Motions;
E) Appropriation bill and Finance
bills: The appropriation bill contains voted
demand for grants and also expense charged on the
consolidated fund of India. No amendments can be made on
these in any house. After the bill receives assent of the
president it becomes appropriation act. This allows expense
from the consolidated fund.
Finance bill is also presented containing
provisions for taxation. It is like a money bill however
amendment can be moved seeking to reduce or remove a tax.
This allows taxes to be levied.
Policy cut: Reduces allocation of
grant to Re. 1 to indicate disapproval to a policy.
Token cut: Reduce amount by Rs.100 to
ventilate specific grievance
Economy cut: Reduction by specific
amount to suggest economic use of funds.
26 days are allotted for discussions and
voting of the demand for grants at the last day all
remaining demands are put to vote and disposed. This is
referred to as “Guillotine”.
Supplementary grant: Amount
authorised by parliament is found insufficient
Additional grant: extra
amount is needed that wasn’t dealt with earlier
Excess grant: Amount is
spent in excess of the authorised amount; this has to be
approved by the Public accounts committee.
Vote of credit: for meeting
an unexpected demand
sanctioned for a special purpose
Token grant: funds to meet a
new expenditure can be met by transferred from one head to
Funds of India:
Consolidated fund of India: All
revenues credited to the government; all loans received;
all payment received as repayment of loans given; are
credited to this fund. No money can be issued or withdrawn
except by law.
Contingency fund of India: To meet
unforeseen circumstances parliament created this fund. It
is at the disposal of the president. Money can be
issued pending authorization of parliament. However
the finance secretary handles it; it is operated by
Public account of India: Payment
usually of the nature of banking transactions are made
from this account; It is operated by executive action so
parliaments authorization not needed; Provident fund
deposits, judicial deposits, savings bank deposits,
departmental deposits or remittances are credited
Important Committees of Parliament:
They are two types standing [permanent,
constituted every year and continuous work] or adhoc
[temporary and cease to exist when work assigned is
completed]. Below committees are standing committees. Members
are elected by proportional representation. All
committees are advisory in nature with non binding
Public accounts committee:
- 22 members [15 LS + 7 RS]; No minister;
chairman chosen by speaker
- Term-1 year;
- Examines CAG audit reports on appropriation
accounts and finance accounts , audits of autonomous
for excess grants etc
- Examines if wastage, inefficiency or
corruption has occurred.
- CAG is the friend, philosopher and guide.
30 members of LS; no minister; chairman
chosen by the speaker
term of 1 year
Examine estimates included in the budget and
Public undertakings committee
22 members [15 LS +7 RS]; no minister;
chairman chosen by the speaker
term – 1year
Examine CAG reports on public undertakings;
examines reports and affairs of public undertakings.
Departmental standing committees: 31
members [21 LS + 10 RS]; no minister; chairman chosen by
the speaker and term of 1 year; examines demand for grants
of various ministries;
Committee on welfare of SC and ST’s: 30
members [20 LS + 10 RS]; no minister; chairman chosen by
the speaker and term of 1 year; examines report of the
national commissions of SC and ST; Examines safeguards for
welfare of SC/ST’s;
Committee on empowerment of women: 30
members [20 LS + 10 RS]; no minister; chairman chosen by
the speaker and term of 1 year; examines report of the
national commissions of women; Examines safeguards for
welfare of women;
Adhoc committees are
advisory or inquiry. Inquiry committees are constituted by
house or by speaker or chairman to inquire or report on
specific subjects. Advisory committees are select or joint
committees to report on particular bills.
A Minister is not
eligible for election or nomination to the Financial
Committees, Departmental Standing Committees, and
Committees on Empowerment of Women, Government
Assurances, Petitions, Subordinate Legislation and
Welfare of Scheduled Castes and Scheduled Tribes.
Question Hour and the Types of Questions
- Starred - Oral answers given and supplementary questions allowed.
- Unstarred - Written answers but no supplementary questions allowed.
- Short notice questions - Same as starred. Do not require a long notice to be given
- Questions to private members.
The estimates of expenditure embodied in the annual financial statement shall show separately-(a) the sums required to
meet expenditure described by this Constitution as expenditure charged upon the Consolidated Fund of
(b) the sums required to meet other
expenditure proposed to be made from the Consolidated Fund of India.
(a) So much of the estimates as relates to expenditure charged upon the
Consolidated Fund of India shall not be submitted to the vote of Parliament
but each House is competent to discuss any of these estimates.
(b) So much of the estimates as relates to other expenditure shall be
submitted in the form of demands for grants to the House of the People, and
that House shall have power to assent, or to refuse to assent, to any demand,
or to assent/to any demand subject to a reduction of the amount specified
No demand for a grant shall however be made except on the
recommendation of the President [Art. 113].
In practice, the presentation of the Annual Financial Statement is
followed by a general discussion in both the Houses of Parliament
estimates of expenditure, other than those which are charged, are then placed
before the House of the People in the form of 'demands for grants'
No money can be withdrawn from the Consolidated Fund except
under an Appropriation Act, passed as follows:
As soon as may be after the demands for grants have been voted by
the House of the People, there shall be introduced a Bill to provide for the
appropriation out of the Consolidated Fund of India of all moneys required
(a) the grants so made by the House of the People; and
expenditure charged on the Consolidated Fund of India.
This Bill will then be passed as a Money Bill, subject to this condition
that no amendment shall be proposed to any such Bill in either House of
Parliament which will have the effect of varying the amount or altering the
destination of any grant so made or of varying the amount of any
expenditure charged on the Consolidated Fund
The following expenditure shall be expenditure charged on the
Consolidated Fund of India [Art. 112(3)]
the emoluments and allowances of the President and other expenditure
relating to his office;
(b) the salaries and allowances of the Chairman and the Deputy Chairman of the Council of States and the Speaker and the Deputy
of India of the House of the People;
(c) debt charges
for which the Government of India is liable;
(d) (I) the
salaries, allowances and pensions payable to or in respect of Judges of the
(ii) the pensions payable to or in respect of Judges of the
(III) the pensions payable to or in respect of Judges of any
(e) the salary, allowances and pension payable to or in respect
of the Comptroller and Auditor-General of India;
any sums required to
satisfy any judgment, decree or award of any court or arbitral tribunal;
any other expenditure declared by this Constitution or by Parliament by law
to be so charged.
Both Appropriation and Finance Bills being Money Bills, the special procedure relating to
Money Bills shall have to be followed.
It means that they can be introduced
only in the House of the People and after each Bill Is passed by the House of
the People, it shall be transmitted to the Council of States which Shall have
the power only to make recommendations to the House of the People within a
period of 14 days but no power of amending or rejecting the Bill
It shall lie
at the hands of the House of the People to accept or reject the recommendations
of the Council of States.
In either case, the Bill will be deemed to be
passed as soon as the House of the People decides whether it would accept
or reject any of the recommendations of the Council of States and thereafter
the Bill becomes law on receiving the assent of the President.
As regards revenue, it Is expressly laid down by our Constitution that no tax shall be levied or collected except by authority of law.
The result is that the executive cannot impose any tax without legislative
If any tax Is imposed without legislative
authority, the aggrieved person can obtain his relief from the courts of law.
As regards expenditure, the pivot of parliamentary control Is the
Consolidated Fund of India.
This Is the reservoir into which all the revenues
received by the Government of India as well as all loans raised by it are
paid and the Constitution provides that no moneys shall be appropriated out
of the Consolidated Fund of India except in accordance with law
This law means an Act of Appropriation passed in conformity
with Art. 114.
Whether the expenditure is charged on the Consolidated
Fund of India or it is an amount voted by the House of the People, no
money can be Issued out of the Consolidated Fund of India unless the
expenditure Is authorised by an Appropriation Act [Art. 114(3)].
accordingly, that the executive cannot spend the public revenue without
While an Act of Appropriation ensures that there cannot be any
expenditure of the public revenues without the sanction of Parliament,
Parliament's control over the expenditure cannot be complete unless it is
able to ensure economy in the volume of expenditure.
On this point,
however, a reconciliation has to be made between two conflicting principles. namely. the need for parliamentary control and the responsibility of the
Government in power for the administration and Its policies.
Though our Council of States does not occupy as important a place in the constitutional system as the American Senate, its
position is not so inferior as that of the House of Lords as it stands to-day, Barring the specific provisions with
respect to which the lower House has special functions
e.g., with respect to money Bills, the Constitution proceeds on a theory of equality of status
of the two Houses.
The Constitution also makes no distinction between the two Houses in
the matter of selection of Ministers.
The exceptional provisions which impose limitations upon the powers
of the Council of States, as compared with the House of the People are:
(1) A Money Bill shall not be introduced in the Council. Even a Bill
having 'Like financial provisions cannot be tntroduced in the Council
(2) The Council has no power to reject or amend a Money Bill. The
only power It has with respect to Money Bills is to suggest 'recommendations'
which may or may not be accepted by the House of the People, and
the Bill shall be deemed to have been passed by both Houses of Parliament,
without the concurrence of the Council, if the Council does not return the
Bill within 14 days of its receipt or makes recommendations which. are not
accepted by the House.
(3) The Speaker of the House has got the sole and final power deciding
whether a Bill is a. Money Bill
(4) Though the Council has the power to discuss, it has no power to
vote money for the public expenditure and demands for grants are not
submitted for the vote of the Council
(5) The Council of Ministers is responsible to the House of the People
and not to the Council [Art. 75(3)].
(6) Apart from this, the Council suffers by reason of its numerical
minority. in case a joint session is summoned by the President to resolve a
deadlock between the two Houses Art. 108(4)1.
On the other hand, the Council of States has certain special powers
which the other House does not possess and this certainly adds to the
prestige of the Council:
(a) Art. 249 provides for temporary Union legislation with respect to a
matter in the State List, if it Is necessary in the national interest, but in this matter
a special role has been assigned by the Constitution to the Council. Parliament
can assume such legislative power with respect to a State subject only if the
Council of States declares, by a resolution supported by not less than two-thirds
of its members present and voting, that it Is necessary or expedient in the
national interest that Parliament should make laws for the whole or any part of
the territory of India with respect to that matter while the resolution remains
(b) Similarly, under Art. 312 of the Constitution, Parliament is empo-
wered to make laws providing for the creation of one or more All-India
Services common to the Union and the States, if the Council of States has
declared by a resolution supported by not less than two-thirds of the
members present and voting that it is necessary or expedient in the national
Interest so to do.
In both the above matters, the Constitution assigns a special position to
the Council because of its federal character and of the fact that a resolution
passed by two-thirds of its members would virtually Signify the consent of the
It is not possible for the Council of States, by
reason of its very composition, to attain a status of equality with the House of
Even though there is no provision in the Constitution,
corresponding to Art. 169 relating to the upper Chamber in the States, for
the abolition of the upper Chamber in Parliament
There has been, since the
inauguration of the Constitution, a feeling in the House of the People that
the Council serves no useful purpose and is nothing but a 'device to flout
the voice of the People'
This led even to the motion of a Private
Member's Resolution for the abolition of the Council. It was stayed for the time being only at the intervention of the then Prime Minister Pandit Nehru
on the ground that the working of the Council was yet too short to adjudge
Q.With reference to the Union Government consider the following statements.
1. The Department of Revenue is responsible for the preparation
of Union Budget that is presented to the parliament
2. No amount can be withdrawn from the Consolidated Fund of India
without the authorization of Parliament of India.
3. All the disbursements made from Public Account also need the Authorization
from the Parliament of India
Which of the following statements given above is/are correct? (UPSC CSAT 2015)
1 and 2 only
2 and 3 only
1, 2 and 3
Ans . C
The Budget division is a part of the Department of Economic Affairs. The Finance Secretary coordinates the overall Budget-making process
Prior authorization is required for withdrawing from Consolidated Fund of India. For Contingency fund of India, withdrawal can be authorized by the Parliament afterwards too. For Public Account, no such authorization is needed.
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