Economic Highlights

New Delhi, 25 May 2010

Rs 19000 Cr Suspense

KEEP TAB ON GOVT’S MONEY MATTERS

By Shivaji Sarkar

Should the governments – either at the Centre or the States – have enormous financial powers? The Constitution has endowed them with immense powers. It has even allowed money bills to be deemed to have been passed after a stipulated period of 14 days. In fact, there is little that could be done to fetter the Government when it comes to money, particularly on its spending.

This has led to many unsavoury situations and expenditures that are virtually above all scrutiny. Such vague procedures lead to inappropriate expenditure. Many a time it leads also to witch hunting and investigations that lead nowhere.

The move to fetter the Government on money aspects has become more acute as more and more of its money is going into “suspense accounts”. Indeed, it is a suspense. The poor citizen may be carefully planning his expenses. Each paisa counts for him. He has also to justify each of it in his tax deeds. There are rules for him. When it comes to the Government, nothing binds it. It dumps large unaccounted expenses largely and some income in the “suspense account”. It is a whopping Rs 19,000 crore in 2008-09.

It is a jump of Rs 12,000 crore over the figures of the previous year. The figure for 2007-08 on this head was Rs 6524.85 crore. Almost all wings and departments are using this method. The budgets of defence, post, telecommunication and civil accounts documenting expenditures of Central ministries are resorting to it.

The civil account for 2008-09 shows Rs 4890 crore on this count. It is almost ten times more than 2007-08. The defence suspense account has Rs 7408 crore, which is almost double than that of the previous year.

The revelation of the account itself has come as a surprise to the nation. The worse is that the Standing Committees of both Houses of Parliament did not find it objectionable. Parliament without going through the details has given its approval. The Houses do not discuss the Union Budget in detail. Since mid-90s the task has been left to the Standing Committees. They go through each departmental budget and on their recommendation suitable amendments are made before the Lok Sabha formally approves it. The Rajya Sabha has recommendatory powers but technically it has no say in the budgetary process.

The Standing Committees were entrusted with the task of scrutinizing the voluminous budgetary document as the houses do not have enough time and members do not have skill to understand the intricate budgetary process. Parliament usually around March 17 goes for a recess so that the committees could do their job. It was perceived that the Standing Committees with a focus on each aspect and powers to summon officials to explain the issues would do a better job of keeping a check on Government accounts.

Now it appears that the very purpose of forming Standing Committees are being lost. Else how such huge and virtually unaccounted expenses could be approved by Parliament. Many State Governments have their annual budget, which is much smaller than this.

It calls for having a fresh look at the budgetary scrutiny and approval process. Even the Comptroller and Auditor General (CAG) is terribly peeved at this official procedure that goes against the norms set by the International Monetary Fund (IMF) and the World Bank (WB).

Both the IMF and the WB want the Government budgetary process to be transparent. It has set universal norms for ensuring such transparency. The procedure includes exclusion of vague terms. The international organizations view lack of transparency as a process that leads to corruption. Over the years many of the procedures have been streamlined. Still those who prepare the Budget find out ways to keep things under shroud.

The suspense account is one such instrument. This is supposed to account for income and expenditures, for which complete information is not available. This is an ongoing accounting procedure, which has to be settled before finalization of the accounts at end of the financial year. In accounting terms it is an ad hoc process. The accounts would not be deemed to have been finalized without parking the amount posted in such account in their proper heads.

It may look like a small erroneous step. But it is graver than that. Many companies have taken this route to siphon off thousands of crores. Satyam has been only the tip of the iceberg. Not only Satyam, Arthur and Adnerson, the chartered accountant firm, has precisely helped number high-end companies to present a sparkling balance sheet that it never was. Enron had in that glory till it collapsed. The CRB bank that was rated the best bank of the year, by a business magazine 12 years back, went bust within three months of getting the tag.

Clearly, Government finances need to be presented in a much more careful and authentic manner. It only reeks of something more serious than the figures merely indicate.

The Union budget does not explain how such faux pas is taking place year after year despite the finance ministry questioning every expense. In many cases, the finance ministry even does not allow legitimate expenditures to be made. In a scenario like this nobody explains the phenomenon.

This needs to be treated not only with circumspection but also strengthens the view that the Government should not be virtually allowed to do a cakewalk during the budgetary session. Despite lots of procedural wrangling, the Opposition has no power to stall an inappropriate, forget illegitimate, expenditure on any count.

The Opposition and the civil society should make it an issue to amend the Constitution to make passing of the budget, both at the Centre and in States, more difficult. This would put a check on unsavoury expenses being made on occasions such as the  Commonwealth Games.

The clauses that give the Government powers on money bills must be looked into afresh so that the citizen’s tax contributions are properly accounted for and also spent on heads that are necessary. The Government budgetary process, if not streamlined, would turn into being the fountain head of corruption. The nation needs to start a process of deliberation so that the Government is subjected to checks on monetary issues. ---INFA

(Copyright, India News and Feature Alliance)