Law and You > Constitutional Law > Types of Central Government Fund (Ss. 266 and 267)
The capital spent by the Government, comprising of overall expenditure, is acquired from a consolidated fund account. Consolidated Fund of India means the fund to which all revenues and payments are credited and debited. Parliament is responsible for approving the Government to withdraw finances from this account. The Consolidated Fund of India was established under Article 266(1) of the Indian Constitution.
The Indian Constitution mentions three types of central government funds:
- The Consolidated Fund of India (Article 266),
- The Contingency Fund of India (Article 267), and
- The Public Accounts of India (Article 266).
The Consolidated Fund of India (Article 266):
The most crucial types of funds in India is the consolidated fund of India which is made up of
- All revenues received by the government of India;
- All loans raised by the government through the issue of treasury bills, loans, or other ways and means of advances; and
- All money received by the government in repayment of loans. This fund is used to make all legally authorized payments on behalf of the Indian government.
- All government expenditure is made from this fund, except exceptional items which are met from the Contingency Fund or the Public Account.
- No money from this fund can be allocated (issued or drawn) unless a parliamentary statute authorizes it.
- It is constituted under Article 266 (1) of the Constitution of India.
- Each state can establish its own Consolidated Fund with identical features.
- The Comptroller and Auditor General of India audits the consolidated funds and reports on their management to the appropriate legislatures.
Parts of Consolidated Fund of India:
The Consolidated Fund of India is separated into five elements namely:
- Revenue account (receipts)
- Revenue account (disbursements)
- Capital account (receipts)
- Capital account (disbursements)
- Disbursements charged on the Consolidated Fund.
Charged Expenditure:
Charged Expenditure refers to non-votable expenditures from consolidated fund of India while presenting the annual budget. The government of India cannot spend any money from the Consolidated Fund unless and until it is approved by the Lower House of Parliament or the State Assemblies. However, there are some charged expenditures that do not require a vote and are charged from the consolidated fund, pursuant to Article 112(3) and Article 202 (3) of the Indian Constitution.
- Salary, pension, and allowances for the President, Governors of States, Speaker and Deputy Speaker of the House of People, Comptroller General of India, and all Judges of India’s Supreme and High Courts are among the exceptional expenses.
- Government of India debt charges- It means that regardless of whether the budget is approved or not, charged expenses must be paid.
The Contingency Fund of India:
A contingency fund is a sum of money set up for use in the event of national or state emergencies such as terrorist attacks, riots, or natural disasters such as floods, cyclones, and other natural disasters. Its purpose is to stabilise the nation’s financial ability by acting as a safety net to fill up the gaps during a national emergency. Provision for this fund is made in Article 267(1) of the Constitution of India. Parliament established the contingency fund of India in 1950 under the “Contingency Fund of India Act, 1950″ to meet the financial needs during any contingency. Each state can have its own contingency fund established under Article 267(2). Initially, the corpus for the contingency fund of India was Rs 5 crore which was later increased to Rs 500 crores or 5 billion in 2005. Recently, the budget 2021-2022 proposed enhancing India’s contingency fund from Rs 500 crore to Rs 30,000 crore through finance bill 2021. The government has also changed the rules for the contingency fund of India, allowing the finance secretary to have 40% of the overall corpus at his disposal. The corpus for state contingency funds varies across states of India, and the state legislature decides its quantum.
On behalf of the President of India, the finance secretary (Department of Economic Affairs) holds the contingency fund, and the fund is operated under the President’s execution. But without parliament’s approval, the government cannot withdraw funds. Similarly, for the state contingency fund, any expenditure requires approval from the state legislature.
Public Accounts of India:
Public Accounts of India is constituted under Article 266(2) of the Constitution. All other public money (other than those covered under the Consolidated Fund of India) received by or on behalf of the Indian Government are credited to this account/fund. The government does not need permission to take advances from this account. Each state can have its own similar accounts. The audit of all the expenditure from the Public Account of India is taken up by the CAG
The Fund is made up of:
- Bank savings account of the various ministries/departments
- National small savings fund, defence fund
- National Investment Fund (money earned from disinvestment)
- National Calamity & Contingency Fund (NCCF) (for Disaster Management)
- Provident fund, Postal insurance, etc.
- Similar funds
Controller General of Accounts (CGA)
The CGA is the Government of India’s Principal Accounting Advisor. The office is located under the Ministry of Finance’s Department of Expenditure.
Duties of CGA:
The Allocation of Business Rules 1961 gives the duties and responsibilities of the CGA, as mentioned below:
- General accounting principles related to the Central and State governments and form of accounts, and framing/revising rules and manuals.
- Reconciling cash balance of GOI with the Reserve Bank of India in general, and the reserve deposits about civil ministries or departments in particular.
- Supervising whether adequate standards of accounting are maintained by central civil accounts offices.
- Consolidating monthly accounts, preparing a review of trends of revenue realization and significant features of expenditure, etc. & preparing annual accounts, annual receipts, and disbursements.
- Administering the Central Government Account (Receipt and Payment Rules 1983) and Central Treasury Rules.
- Coordinating and assisting in the introduction of management accounting systems in civil ministries and departments.
- Cadre management of Group ‘A’ (Indian Civil Accounts Service) and Group ‘B’ Officers of the Central Civil Accounts Offices.
- Matters about the Central Civil Accounts staff belonging to Group ‘C’ and ‘D’.
- Disbursing pension to central civil pensioners, high court judges, ex-presidents, ex-MPs, and freedom fighters.
Conclusion:
The Consolidated Fund of India is one of the most critical funds in the country’s financial system. It’s defined under Article 266 of the Constitution of India. All revenues received by the government, such as taxes, duties, fines, fees, and income from government investments, are credited to the Consolidated Fund of India. Similarly, all expenditure incurred by the government, including salaries, pensions, debt servicing, subsidies, and grants, are paid from this fund. The Consolidated Fund of India is under the direct control of the Parliament. No money can be withdrawn from this fund without the authorization of the Parliament. The government presents the annual budget to the Parliament, detailing the estimated receipts and expenditure from the Consolidated Fund. The Consolidated Fund ensures transparency and accountability in government finances. All transactions related to government revenues and expenditures are recorded in this fund, which is subject to audit by the Comptroller and Auditor General of India (CAG) and scrutiny by the Parliament’s Public Accounts Committee (PAC).
The Contingency Fund of India exists to provide immediate financial assistance to the government in case of unforeseen expenditure, such as natural calamities, emergencies, or other urgent needs. It serves as a readily available source of funds for such contingencies. It is established under Article 267 of the Indian Constitution. The President of India administers this fund. It is maintained separately from the Consolidated Fund of India, which is the primary account of the government. The size of the Contingency Fund is determined by the Parliament. It is relatively small compared to the Consolidated Fund and is typically maintained at a level considered sufficient to meet urgent or unforeseen needs. The Finance Ministry manages the Contingency Fund on behalf of the government. Unlike the Consolidated Fund of India, which covers regular government expenditure and requires parliamentary approval for withdrawals, the Contingency Fund is specifically earmarked for emergencies and can be accessed by the government without prior legislative authorization for urgent needs.
The Public Accounts of India is essentially a record of all transactions related to money received by or on behalf of the Government of India, other than those relating to the Consolidated Fund or the Contingency Fund. It includes money held in trust, such as provident funds, small savings, and other deposits.