Budgetary Procedure:
The budgetary process in India involves four different operations namely,
1. Preparation of the Budget
2. Enactment or Legislation of the budget
3. Execution of the budget
4. Parliamentary Control over Finance
Step 1. Preparation of the Budget:
- Budget is prepared by the Ministry of Finance, Government of India.
- There is a Budget Division of the Department of Economic Affairs of the Ministry of Finance for this purpose.
- The exercise of preparation of budget starts in the month of September every year.
- Different Ministries of the Government of India prepare their estimates of expenditure for the following year and send these to the Finance Ministry by November end.
- The Ministry of Finance co ordinates these estimates of expenditure of different ministries and prepare an estimate of outlay by mid – December.
- During the month of January, Finance Minister consult with various chambers, union, farmers bodies etc.
- Estimates of plan outlay are examined by the Expenditure wing of the Ministry of Finance while the estimates of revenue are prepared by the Department of Revenue,Ministry of Finance in the month of January.
- The budget proposals prepared by the Finance Ministry are examined by the Finance Minister, who has the power of making changes in them with the consultation of the Prime Minister.
- Budget papers are prepared by 1st February. Budget summery is sent to the Prime Minister two days before the presentation of budget.
- Prime Minister approves Summery for President and President recommends it as per Constitution a day before the presentation of the budget.
- The Finance Minister briefs the Cabinet about the budget shortly before it is presented to Parliament.
- The Cabinet approves the budget on the morning of the presentation of budget.
Step 2 : Enactment or Legislation of the Budget:
When the budget is prepared, then it goes to Parliament for legislation. The budget has to pass through the following stages in the Parliament —
1. The Finance Minister presents the budget in Lok Sabha with a budget speech. Simultaneously a copy is laid on the table of Rajya Sabha. Printed copies of the budget are distributed among the members of Parliament to enable them to go through the details of the budget proposal.
2. Just after the Presentation of the budget, The Finance Bill is presented to the Parliament. Finance bill relates to proposal regarding the imposition of new taxes, modification in the existing taxes or continuation of existing rates of taxation for the next year.
3. The proposal on the revenue and expenditure are discussed in the Parliament and all the Members of Parliament actively participate in this discussion.
4. Demands for grants are presented in the Parliament along with the budget statement. These demands for grants show the estimate of expenditures for various departments and they needs to be voted by Parliament.
5. After the demands for grants are voted, the Appropriation Bill is introduces, considered and passed by Parliament. This Appropriation Bill provides the legal authority for withdrawal of funds from Consolidated Fund of India, which is the reservoir of all the revenues of the Government.
6. After passing the Appropriation Bill, the Finance Bill is discussed and passed. At this stage members of Parliament can move amendments in the budget proposal, which the Finance Minister may accept or reject. The Budget is passed when the Finance Bill is passed.
7. Appropriation Bill and Finance Bill are sent to the Rajya Sabha. The Rajya Sabha is required to send back these Bills to the Lok Sabha within Fourteen days with or without some amendments. While it is up to the Lok Sabha to accept or reject these amendments.
8. Finance Bill is then sent to President for his assent. The Bill becomes the statute after President’s assent. However the President does not have any power to reject the Bill. All this exercise is competed by the last week of March.
9. Vote on Account:
The Constitution of India does not allows the government to spend any money without the approval of Parliament. The presentation and legislation of the budget is a long process including various discussion over the provisions and proposals for taxation. In the past, the Parliament was not able to vote and pass the budget before the commencement of the new financial year. While the government needed to have enough funds to run administration of the country. So a special provision was made, by which the government obtained the sanction of Parliament for a sum sufficient to incur expenditure on various items till the budget was finally passed.
This sanction of Parliament for the withdrawal of money by the government from the Consolidated Fund of India to meet its expenses till the budget is finally approved was known as Vote on Account.
Now a day, vote on account is not required as the budget is finally passed by the Parliament by March end.
Question : Write short note on vote on account.
Answer: According to the Constitution, the government can’t withdraw money from the Consolidated Fund of India without proper legal approved. An Appropriation Bill is usually passed during the budget process for this, which might take time.
A vote on account is a permission sought by the government to withdraw money from the Consolidated Fund of India during this period usually two months. It is essentially temporary permission from the Parliament for the government to spend money.
A vote on account estimates the expenses needed before a new government takes over.
It requires majority approval in Parliament.
The vote on account lists only the expenditures borne by the government. It cannot impact tax regime. It is a temporary provision usually for only two months so it is passed by the Lok Sabha without any discussion.
Step 3: Execution of the Budget:
- As the Finance Bill and Appropriation Bill are passed, execution of the budget starts.
- The executive departments get a green signal to collect the revenue and spend the money on approved scheme.
- Revenue department of the Ministry of Finance is assigned to collect revenue. While various Ministries are authorised to draw the necessary amounts and spend them.
- Secretary of the Ministry acts as the chief accounting authority with the assistance and advice of the Finance advisor to the ministry.
- They work together in the matter of distribution of budget allocations among various sections of the ministry, arranging payments and compiling accounts.
- The accounts of various ministries are prepared. These accounts are audited by Comptroller and Auditor General (CAG) of India.
- Thus the audit department scrutinises the expenditure incurred by different ministries / departments so as to ensure that expenditure is incurred properly.
Step 4. Parliamentary Control Over Finance :
The parliament has a considerable amount of control over the budget / finance at various stages :
- Firstly, Parliament, by passing Finance Bill and Appropriation Bill, authorises the government to collect revenue and spend money.
- Secondly, Parliament has the authority of ensuring that the money has been spent for the purpose approved by it.
- The Parliament constitutes its three financial committees namely, the Public Account Committee, the Estimates Committee and the Committee on Public Undertakings.
- The Public Account Committee examines the accounts and audit reports prepared by the Controller and Auditor General (CAG) to see that the money has been spent for the purpose for which it has been sanctioned and the expenditure confirms to the authority which governs it.
- The committee also investigates the excess expenditure incurred and irregularities committed by various Ministries.
- The committee prepares its reports and submits it to Parliament.
- The Estimate Committee ensures that the public expenditure is incurred in a judicious manner. It examines the estimates of various ministries / departments presented to the House, reviews the performance of public expenditure in various fields and suggests improvements in the matter of efficiency or reforms and alternative policies.
- The Committee on Public Undertakings has the responsibility of scrutinising the reports and accounts of public undertakings and the reports of the CAG on such undertakings and suggests improvements in the organisation and management of such undertakings.
- The committee also looks into the irregularities pointed out in the audit reports of CAG.
- It also examines the matter which are specifically referred to it by Parliament.
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