Division of the Annual Financial Statement
The "Annual Financial
Statement" or "Budget" consists of the following divisions.
1. Consolidated Fund of the State.
2. Contingency Fund of the State
3. Public Account of the State.
1. Consolidated Fund of the State:
The term
"Consolidated Fund" is an expression introduced by the Constitution
of India vide Article 266(1). The Consolidated Fund of the State is formed out
of all revenues received by the State Government, all loans borrowed from
Government of India, from other Autonomous Institutions and the Public and
loans raised through the issue of Treasury Bills, or ways and means advances
and all moneys received by the Government in recovery of loans and advances.
The transactions relating to the
receipts and expenditure out of the Consolidated Fund are accounted for in
three different Sections:
(a) Revenue Account
(b) Capital Account
a. Revenue Account/ Revenue Receipts:
Revenue Receipts Comprise:
(1) Tax Revenue:
Examples: Collections under Land
Revenue, Stamps and Registration Fees, Sales Tax, State Excise, Taxes on
Vehicles, Entertainment Tax, etc. and also share in Central Taxes.
(2) Non-tax Revenue:
Examples: Interest Receipts, Dividends
on Capital investments, Receipts of various departments like Fees for
Examinations, Tuition Fees, Receipts on Forest Produces, Receipts from Mines
and Minerals, etc. and also 'User Charges' collected by the Departments for
providing services.
(3) Grants-in-aid and Contributions:
Examples: Grants-in-aid from the
Central Government for various Plan and Non-Plan Schemes, Statutory grant under
Article 275 of the Constitution, State Share of Union Excise Duties.
Revenue Expenditure:
The expenditure under Revenue
Account incurred for administering the different departments of the Government,
for payment of interest charges on the borrowings of the Government, for relief
measures on natural calamities and on the maintenance and repairs of various
capital assets like buildings, roads, irrigation sources etc. Broadly speaking expenditure
which does not result in creation of assets is treated as revenue expenditure.
Revenue Surplus or Deficit
When the expenditure on revenue
account is less than the revenue receipts, the difference is called the
"Revenue Surplus" for the year and when it is more, the difference is
called the "Revenue Deficit".
b. Capital Account:
- The Capital Account is the account of the expenditure of the capital nature i.e on acquisition of concrete assets of a lasting nature like purchase of land, construction of building, etc., which yield revenue or which avoid a recurring expenditure to Government.
- All Irrigation and Electricity Projects which are lasting assets and which yield revenues to Government fall under Capital Assets and expenditure on construction of such projects is accounted for under Capital Account.
- The Buildings which save the Government from recurring expenditure on rents are also considered as Capital Assets and the expenditure on construction of these buildings is classified under Capital Account.
- The expenditure on any work the cost of which exceeds Rs.1 lakh or any group of works belonging to a comprehensive scheme, the cost of which exceeds Rs.5 lakhs is being exhibited under the Capital Account.
- The expenditure on roads including cost of machinery and tools is also treated as Capital expenditure, if they exceed the above limits.
- The investments of the State Government in various Public Undertakings, Co-operative Institutions, etc., are also treated as Capital Expenditure.
- Any receipts on Capital Account by way of recoveries or sale of Capital Assets are taken as recovery of expenditure on Capital Account.
c. Loan Account:
The Loan Account is the account of
Public Debt incurred and discharged and of loans and advances by the State
Government to Local Bodies, Public Sector
Undertakings,
Government servants and others and recoveries from them. Besides incurring the
expenditure on Revenue Account dealt with in previous paragraphs, the
Government have to find money for expenditure on Capital Works. The Revenue
Surpluses, if any, will not be adequate for meeting all these developmental
needs and there are no sufficient reserves for meeting these items of
expenditure. Government have therefore, to borrow money from the Public in
Open-market, from the Government of India or other autonomous Corporations like
Life Insurance Corporation of India, General Insurance Corporation of India,
National Co-operative Development Corporation, Indian Dairy Corporation,
Reserve Bank of India, etc. These loans have to be repaid on due dates. The
moneys already lent to the Co-operative Institutions, Municipalities, Public
Sector Undertakings, Government Servants etc., are recovered in installments on
due dates. All these transactions are accounted for under Loan Account.
2. Contingency Fund of the State:
According to Article 266 (3) of the
Constitution of India, no money shall be drawn from the Consolidated Fund of
the State without authorization by the Legislature for supplementary or
additional expenditure not contemplated in the Annual Financial Statement for
that year.
Article 267(2) of the Constitution of India provides that the
Legislature of a State may by Law establish a Contingency Fund in the nature of
an imprest into which shall be paid from time to time such sums as determined
by Law and the said Fund shall be placed at the disposal of the Governor of
State to enable him to sanction advances out of such Fund for meeting unforeseen
expenditure arising in the course of the year pending authorization by the
Legislature.
3. Public Account:
- "Public Account" of the Government relates to the transactions in respect of which Government acts as a banker, incurs a liability to repay the moneys received or recovers the amounts paid.
- It also includes suspense and remittance heads which are operated as mere adjusting heads pending final clearance either by transfer to final heads of account or payment or recovery.
- All Public Moneys received by or on behalf of the State Government which are not creditable to the Consolidated Fund of the State are accounted for under the "Public Account".
- Moneys are deposited in Government treasuries by contractors, merchants etc., as Security Deposits.
- Deposits are also made in Courts in connection with litigations. Local Bodies, Panchayati Raj Institutions keep their funds in Government treasuries.
- Various Corporations, Companies, Boards etc., are required to keep the funds released by Government for various purposes in Public Account till they are actually utilized by them.
- The Provident Fund accumulations of Government servants are retained by Government till the funds become due for payment to the subscribers.
- All such moneys do not actually belong to Government. But they have to be accounted for in the same way as Government money and they have to be paid to the parties concerned on the due dates.
- All these transactions are entered in the "Public Account" as distinct from the Consolidated Fund. The repayment of these amounts do not require the vote of the Legislature, as they are in the nature of ordinary banking transactions.
Demands for Grants:
The estimates of expenditure from
the Consolidated Fund included in the Budget Estimates and required to be voted
by the Legislature are presented to the Legislative Assembly in the form of
demands for grants- vide Article 203(2) of the Constitution of India.
Generally,
for each of the major services a demand is presented. Each demand normally
includes the total provisions required for a service i.e. provision on account
of the Revenue Expenditure, Capital Expenditure and Loans and Advances relating
to the Service. Where, however, expenditure on a service includes both voted
and charged items of expenditure, the charged items of expenditure also are
included in the demand presented for that service but the voted and charged
provisions are shown separately in that demand.
In the present accounting and
budgetary procedures certain classes of receipts and receipts of capital nature
are taken in reduction of the expenditure of the receiving Department. The
major head-wise estimates of expenditure included in the Annual Financial
Statement are for the net expenditure i.e after taking into account the
recoveries.
The estimates of expenditure included in the demands for grants
however show the gross amounts, recoveries, and the net expenditure.
