From UPSC perspective, the following things are important :
Prelims level : Contingency Fund of India
Mains level : Not Much
The government has tweaked spending norms for Contingency Fund of India, allowing 40% of the total corpus to be placed at disposal of the Expenditure Secretary.
What are the proposed changes?
- Budget 2021-22 proposed to enhance the Contingency Fund of India from ₹500 crore to ₹30,000 crore through Finance Bill.
- An amount equivalent to 40 per cent of the Fund corpus shall be placed at the disposal of the Secretary, Ministry of Finance, Department of Expenditure.
- This would serve the purpose of meeting unforeseen expenditure.
What is Contingency Fund of India?
- Contingency is a negative event which may occur in future, like recession or pandemic.
- The Constitution has a provision for a contingency fund. Its corpus is always kept intact.
- Article 267 of the Constitution mandates formation of a corpus under Contingency Fund of India to deal with any emergency situation.
- It is placed at the disposal of the President of India.
- Government cannot withdraw funds from it without authorization of the Parliament.
- And the corpus has to be replenished with the same amount later.
Management of the fund
- The fund is held by the Department of Economic Affairs on behalf of the President of India and it can be operated by executive action.
- The fund can be increased through a Finance Bill when Parliament is in the session.
- Or through Ordinance if the House is not in session and situation warrants.
- Withdrawal from the fund takes place with the approval of the Secretary of Department of Economic Affairs, in terms of the Contingency Fund of India Act, 1950.
- An amount equivalent to 40% of the corpus has now been placed at the disposal of the Expenditure Secretary.
- All further Contingency Fund releases beyond this limit will require the approval of the Expenditure Secretary in addition to the Economic Affairs Secretary’s approval.
Consolidated Funds of India
- The provision for this fund is given in Article 266(1) of the Constitution of India.
- The government meets all its expenditure from this CFI.
- It receives money from:
- Direct and indirect taxes Loans taken by the Indian government
- Returning of loans/interests of loans to the government by anyone/agency that has taken it
- The government needs parliamentary approval to withdraw money from this fund.
- Each state has its own Consolidated Fund of the state with similar provisions.
- The Comptroller and Auditor General of India audits these funds and reports to the relevant legislatures on their management.
Public Account of India
- 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.
- It is constituted under Article 266(2) of the Constitution.
- This is made up of:
- Bank savings account of the various ministries/departments
- National small savings fund, defense fund
- National Investment Fund (money earned from disinvestment)
- National Calamity & Contingency Fund (NCCF) (for Disaster Management)
- Provident fund, Postal insurance, etc.
- Similar funds
- The government does not need permission to take advances from this account.
- Each state can have its own similar accounts.
- CAG makes audit of all the expenditure from the Public Account of India.