Chapter 25: ANNUAL FINANCIAL STATEMENT OR BUDGET [ARTICLE 112]

Introduction


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 by parliament.


Expense charged upon the Consolidated Fund of India:

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.

Cut Motion

1.      Policy cut: Reduces allocation of grant to Re. 1 to indicate disapproval to a policy.

2.      Token cut: Reduce amount by Rs.100 to ventilate specific grievance

3.      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”.


Other Grants:

1.      Supplementary grant: Amount authorised by parliament is found insufficient

2.      Additional grant: extra amount is needed that wasn’t dealt with earlier

3.      Excess grant: Amount is spent in excess of the authorised amount; this has to be approved by the Public accounts committee.

4.      Vote of credit: for meeting an unexpected demand

5.      Exceptional grant: sanctioned for a special purpose

6.      Token grant: funds to meet a new expenditure can be met by transferred from one head to another.


Funds of India:

1.   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.

2.   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 executive action.

3.   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 here.

 

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 recommendations.

1.   Public accounts committee:


  1. 22 members [15 LS + 7 RS]; No minister; chairman chosen by speaker
  2. Term-1 year;
  3. Examines CAG audit reports on appropriation accounts and finance accounts , audits of autonomous bodies, demand for excess grants etc
  4. Examines if wastage, inefficiency or corruption has occurred.
  5. CAG is the friend, philosopher and guide.

2.   Estimates committee

·         30 members of LS; no minister; chairman chosen by the speaker

·         term of 1 year

·         Examine estimates included in the budget and suggest economies.

 3.   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.

4.   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;

5.   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;

6.   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

  1. Starred - Oral answers given and supplementary questions allowed.
  2. Unstarred - Written answers but no supplementary questions allowed.
  3. Short notice questions - Same as starred. Do not require a long notice to be given
  4. 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 India; and


  • (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 therein.


  • 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


  • The 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 to meet-


  • (a) the grants so made by the House of the People; and


  • (b) the 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 Supreme Court;


  • (ii) the pensions payable to or in respect of Judges of the Federal Court;


  • (III) the pensions payable to or in respect of Judges of any High Court;


  • (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;


  • (g) 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 sanction.


  • 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 [Art. 266(3)].


  • 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)].


  • It follows, accordingly, that the executive cannot spend the public revenue without parliamentary sanction.


  • 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. (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. (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. (3) The Speaker of the House has got the sole and final power deciding whether a Bill is a. Money Bill


    4. (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. (5) The Council of Ministers is responsible to the House of the People and not to the Council [Art. 75(3)].


    6. (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 in force.


  • (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 States.






  • 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 the People


  • 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 its usefulness.






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


  • 2 only


  • 1, 2 and 3



Ans . C


  1. The Budget division is a part of the Department of Economic Affairs. The Finance Secretary coordinates the overall Budget-making process

  2. 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.

Quiz

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