RBI is constituted under section 3 of the Reserve Bank of India Act, 1934.
Gold holdings of RBI, CAG, external auditors and mismatch in Assets register
The Comptroller and Auditor General of India (CAG) does not audit the physical gold holdings of the Reserve Bank of India (RBI). RBI’s gold and forex reserves undergo statutory audits by external auditors appointed by the central bank under the RBI Act, 1934. CAG has previously audited aspects of the government's Gems and Jewellery sector and fiscal liabilities tied to gold.
The Macro-Economic Framework Statement is presented to Parliament under Section 3 of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003
and the rules made thereunder. It contains an assessment of the growth
prospects of the economy along with the statement of underlying
assumptions. It also contains an assessment regarding the GDP growth
rate, the domestic economy and the stability of the external sector of
the economy, fiscal balance of the Central Government and the external
sector balance of the economy. The FRBM Act came into force on July 2, 2004 with the Fiscal Responsibility and Budget Management Rules, 2004.
The
FRBM Act generally bars the Union Government from borrowing from the
Reserve Bank of India (RBI) except in special situations to meet
temporary excess of cash disbursement over cash receipt, subscription of
primary issues and thereafter on grounds of national security, national
calamity, etc., and open market operations in the secondary market.
The Rules were amended by Fiscal Responsibility and Budget Management (Amendment) Rules, 2007 on January 23, 2007. It was amended again on September 5, 2012 by Fiscal Responsibility and Budget Management (Amendment) Rules, 2012, on May 7, 2013 by Fiscal Responsibility and Budget Management (Amendment) Rules, 2013, June 25, 2015 by Fiscal Responsibility and Budget Management (Amendment) Rules, 2015 on October 31, 2015 by Fiscal Responsibility and Budget Management (Second Amendment) Rules, 2015 and on April 2, 2018 by Fiscal Responsibility and Budget Management (Amendment) Rules, 2018.
Notably,
Section 7A of the FRBM
Act, 2003, as amended in May 2012, provided that the Union Government
may entrust the Comptroller and Auditor General (CAG) of India to review
periodically as required, the compliance of the provisions of this Act
and such reviews shall be laid before both Houses of Parliament. Rule 8
was framed and notified in October 2015 to carry out the effect of
Section 7A of the Act. The notified Rule provide that the CAG shall
carry out an annual review of the compliance of the provisions of the
Act and the Rules made thereunder by the Central Government beginning
with the Financial Year 2014-15. The review includes:
(i) analysis
of achievement and compliance of targets and priorities set out in the
Act and the Rules made thereunder, Medium Term Fiscal Policy Statement,
Fiscal Policy Strategy Statement, Macro-economic Framework Statement and
Medium Term Expenditure Framework Statement;
(ii) analysis of
trends in receipts, expenditure and macro-economic parameters in
relation to the Act and the Rules made thereunder;
(iii) comments
related to classification of revenue, expenditure, assets or liabilities
having a bearing on the achievement of targets set out in the Act and
the Rules made thereunder; and
(iv) analysis of disclosures made by the Central Government to ensure greater transparency in its fiscal operations.
In compliance to Section 6 of FRBM Act, along with Budget, six disclosure statements, are placed before the Parliament.
The first Report of CAG-Report No. 27 of 2016-on
compliance of the provisions of FRBM Act in respect of financial year
2014-15 was presented in Parliament in August 2016. This 82-page long
report was based on the audit conducted in conformity with the auditing
standards issued by the CAG of India.
It
recorded understatement about assets. As per the disclosure made by the
Government, the cumulative total of assets at the end of the year
2014-15 was Rs 9,71,354.25 crore. It pointed out inconsistency in the
disclosure pertaining to asset register. The clarification for variation
in the closing and opening figures in respect of assets for financial
years 2012-13 and 2013-14 was not given in the Form D-4 of relevant
years, which indicated absence of transparency in disclosure.
It
recorded inconsistency in figures of loans to Foreign Governments.
Examination of Form D-4 disclosure revealed that a sum of Rs 9,773.73
crore was shown as loans outstanding from foreign governments at the end
of 2014-15. Similar information contained in the Union Government
Finance Account revealed that a sum of Rs 9,210.62 crore was
outstanding as loans from foreign governments at the end of 2014-15.
Thus, there was overstatement of ` 563.11 crore of loans outstanding
from foreign governments in Form D-4 disclosure. It also recorded
inconsistency in disclosure of grants for creation of capital assets
Rule 6 of the amended FRBM Rules requires laying of a statement
providing the Ministry-wise breakup of grants for creation of capital
assets in Form D-6. The disclosure requires providing details of budget
and revised provisions for the current financial year and BE for ensuing
financial year.
Its recommendations were as under:
(i) To address the issues of inconsistency in the FRBM Act/Rules, the Government may carry out suitable amendments.
(ii) The Government should follow the format of Form D-6 as prescribed under the FRBM Rules.
(iii)
Budgetary provisioning as well as their accountal need to be in harmony
with the codal provisions relating to classification structure of
accounts to avoid misclassification of expenditure.
(iv) The Government may transfer specific purpose levies/cess collected to the funds earmarked for the purpose.
(v)
A mechanism for recognizing the result of annual operations of NSSF and
its impact on the Government finances may be put in place.
(vi) To
facilitate correct identification and booking of expenditure as grants
on creation of capital assets, the Government may consider defining the
criteria for classification of expenditure as grants for creation of
capital assets and its compliance by the Ministries/Departments.
(vii)
The Government may exclude such grants, which does not lead to creation
of assets owned by the grantee organisations, from categorising as
grants for creation of capital asset.
(viii) The Government may
strengthen the process of making underlying assumptions for projection
of receipt and expenditure in various fiscal policy statements to
insulate them from frequent changes and to seamlessly integrate the
projection in the Budget.
(ix) Necessary steps may be taken to
append additional statements in the Union Government Finance Accounts as
suggested by the 12th Finance Commission to ensure greater transparency
in the accounts.
(x) Disclosure statements prepared under the FRBM
Act and Rules made thereunder should be complete in all respect and
transparent.
The
conclusion of the first audit report reads: "Transparency in fiscal
operations of the Government is an important ingredient to achieve the
accurate target of fiscal indicators envisaged under the FRBM Act.
However, it was noticed that the Government did not append additional
disclosure statements as recommended by Twelfth Finance Commission to
bring more transparency in its operations. There was lack of adequate
transparency with regard to direct tax receipt figures. Further, the
disclosures made by the Government in various Forms envisaged under the
FRBM Act were not complete and at variance with other publications, such
as Union Government Finance Accounts and Detailed Demands for Grants."
The
audit report was signed by Mukesh Prasad Singh, Director General of
Audit, Central
Government and counter signed by Shashi Kant Sharma, 12th CAG of India
on July 18, 2016. Sharma is an officer of the Bihar cadre.
Ahead
of the finalisation of the very first audit report, Union Government
had constituted a committee in May 2016 under the chairmanship of N. K.
Singh, the former Revenue and Expenditure Secretary to comprehensively
review the working of the FRBM Act over last 12 years. Singh is an officer of the Bihar cadre.
In the Nira Radia tapes,
N.K. Singh can be heard stating that he got the order of the speakers
in the Rajya Sabha changed to give an edge on retroactive tax rebates to
Reliance Industries Limited. On July 9, 2009, N K Singh informed
Nira Radia about Pranab Mukherjee's announcement of tax benefit on the
gas and its indirect withdrawal, because he made it applicable only for
only for NELP-VIII. NELP refers to New Exploration Licensing Policy.
N.K
Singh said, Arun Shourie "was very, very, very critical of this whole
gas thing and said in the BJP parliamentary board meeting, day before yesterday. Now whatever he said in that meeting, day before yesterday, is one aspect. But what attitude BJP will take on this whole issue of the debate on the finance bill, which is beginning from Monday,
in both houses of Parliament is of vital importance. Because if a large
number of opposition MPs and Samajwadi will definitely join in begin to
say that Pranab Mukherjee has given a bad largesse...it will benefit
only one company...then Pranab Mukherjee is in the defensive and
therefore the question of extending it retrospectively goes out of the
window. So this whole managing that stuff in a way and also I think, you
know, Arun is speaking, Shourie is speaking as a listed speaker in the
Rajya Sabha for the BJP."
N.K.Singh claimed that they have managed to make Arun Shourie the second speaker after M.Venkaiah Naidu. Pranab Mukherjee had moved the
Finance Bill, 2009 to give effect to the financial proposals of the
Central Government for the financial year 2009-10 on July 29, 2009. The
proceedings of the day reveal that Arun Shourie was not allowed to speak
by Rajnath Singh, the President of BJP although he was asked to prepare
for it. The debate commenced with Ravi Shankar Prasad, followed by
Venkaiah Naidu. Later, N.K. Singh claimed that his Reliance advocacy was for national ‘energy security'.
The
NELP was started in 1999. Bidding of oil blocks and gas blocks under
this policy from then onwards is subject to a profit-sharing contract.
In that profit-sharing contract, a contractor is given the mandate to
explore and find out whether there is any commercial viability with
regard to oil or gas. Whatever expenses are incurred in finding out or
searching oil, they are reimbursed. That is how there is a share of the
Government and of the contractor with regard to the profit that comes
which is known as the profit petroleum. That only comes when oil or gas
is commercially viable.
NELP-VIII
refers to the eighth round of NELP. Under NELP-VIII, 70 areas or blocks
for exploration were offered, the biggest licensing round in India. Out
of these 70 blocks, 24 are deepwater blocks, 28 are shallow water
blocks and 18 are onland blocks. The NELP-VIII bid was launched on April
9, 2009. The bids were opened on October 12, 2009. 76 bids were
received for 36 blocks. The bids were closed on October 12, 2009. Oil
and Natural Gas Corporation (ONGC) won 17 out of the 25 oil and gas
blocks it had bid for along with its partners. ONGC, in partnership with
certain consortia members, had submitted bids for 25 oil and gas
exploration blocks and won 17 of them. Reliance Industries Limited
(RIL), which had won 45 blocks in the previous round of auctions, stayed
away from making any bid in the eight round except for one coal bed
methane block. None of the five top global majors, namely Exxon, Shell, Chevron, Statoil and Conoco Philips had participated with bids.
The
terms of reference of the FRBM Review Committee also included looking
into various aspects, factors, considerations going into determining the
FRBM targets; to examine the need and feasibility of having a ‘fiscal
deficit range’ as the target in place of the existing fixed numbers
(percentage of GDP) as fiscal deficit target and to examine the need and
feasibility of aligning the fiscal expansion or contraction with credit
contraction or expansion respectively in the economy. The Committee had
submitted its four volume report on January 23, 2017. It was published
on April 12, 2017.
The major recommendations made by the Committee included:
• Repeal the existing FRBM Act, 2003 and the FRBM Rules, 2004.
• Enact a new Debt and Fiscal Responsibility Act,
in pursuance of the new Act, enact, and adopt the Debt and Fiscal
Responsibility Rules, as per drafts suggested by the Committee.
•
Adopt a prudent medium-term ceiling for general government debt of 60
per cent of GDP to be achieved by no later than financial year 2022-23.
Within the overall ceiling of 60 per cent, adopt a ceiling of 40 per
cent for the Centre, and the balance 20 per cent for the State.
• Adopt fiscal deficit as the key operational target consistent with achieving the medium term debt ceiling.
•
The path of fiscal deficit to GDP ratio of 3.0 per cent in financial
year 2017-18 to financial year 2019-20, 2.8 per cent in financial year
2020-21, 2.6 per cent in financial year 2021-22 and 2.5 per cent in
financial year 2022-23 be adopted.
• Revenue deficit to GDP ratio to
decline steadily by 0.25 percentage points each year with the path
specified as follows: 2.3 per cent in financial year 2016-17, 2.05 per
cent in financial year 2017-18, 1.8 per cent in financial year 2018-19,
1.55 per cent in financial year 2019-20, 1.30 per cent in financial year
2020-21, 1.05 per cent in financial year 2021-22 and 0.8 per cent in
financial year 2022-23.
• The deviation from the stipulated fiscal
deficit target shall not exceed 0.5 percentage points in a year in case
of invocation of Escape Clauses.
• Constitute a Fiscal Council with the Terms and Conditions as mentioned in the Report of the Committee.
The
report of the FRBM Review Committee defined ‘general government debt’
as "total liabilities of the Central Government and the State Government
excluding inter-governmental liabilities." It had provided Draft
Statement of Objects & Reasons for the Debt Management and Fiscal
Responsibility Bill, 2017 and Draft Debt Management & Fiscal
Responsibility Bill, 2017. It drew on the debate in the Constitutent
Assembly. Besides the chairman, there were four members of the committee
including Dr. Arvind Subramanian who had given a Note of Dissent
against the report of the FRBM Review Committee. The other members were
Rathin Roy, Director, National Institute of Public Finance and Policy,
Dr. Urjit Patel, Governor, RBI and Sumit Bose, former Finance Secretary.
The report acknowledged Dr. E.A.S. Sarma as the architect of the first
FRBM Act.
The 82-page long report of the CAG of India-Report No. 32 of 2017-on
the compliance of the provisions of the FRBM Act and the Rules made
thereunder by the Central Government for the year ended March 2016. The
report contains significant results arising from the review of
compliance of the provisions of the Act. The instances mentioned in this
report during the test audit are for the period 2015-16. It refers to
matters relating to the period prior to and subsequent to 2015-16 are
included wherever found necessary. It has been referred to as the second
report.
The report records the "arrears of interest receipts
from State/Union Territory Governments and other loanee entities as
disclosed through Union Government Finance Accounts for financial year
2015-1616 was at variance with disclosure made through Form D-2"
It
is recorded that "Ministry of Information and Broadcasting while
furnishing information in respect of Form D-2, did not furnish the
arrears of interest amounting to 3,753.11 crore which was receivable
from Prasar Bharti and clearly appearing in Section 3 of Statement No.15
of UGFA of 2015-16." UGFA refers to Union Government Finance Accounts.
CAG responded:"Ministry of Information and Broadcasting stated (February
2017) that information relating to Prasar Bharti (statutory and
autonomous organisation) was not included in Form D-2 furnished to the
Ministry of Finance, as information was called for only in respect of
State/UT Governments, Public Sector and Departmental Commercial
Undertakings. In view of the reply of the Ministry of Information and
Broadcasting, the information collated and presented to the Parliament
in Form D-2 by the Ministry of Finance is incomplete."
It also
records the incorrect information of coal levy in arrears. It recalled
that Supreme Court had cancelled (September 2014) allocation of 204
captive coal blocks and imposed additional levy @ Rs 295 per tonne on
coal extracted. In the first report of CAG on FRBM (No.27 of 2016), a
para on outstanding amount of coal levy amounting to Rs 3,368 crore (as
on 31 March 2015) and its non-inclusion in the disclosure statement
(Form D-2) pertaining to arrears of non-tax revenue was made. It was
noticed that for the reporting year 2015-16, the outstanding amount of
coal levy furnished to the Ministry of Finance in Form D-2 by the
Ministry of Coal was incorrect, in comparison to information furnished
to Audit.
The report records what Ministry of Finance stated in
June 2017:"Budget Division compiles the information strictly on the
basis of the information furnished by the respective
Ministries/Departments. Ministry further added that Budget Division has
no means to verify the authenticity of the information provided by the
Ministries/Departments independently. Citing the example of inconsistent
information on arrears of non-tax revenue by Ministry of Information
and Broadcasting, Ministry stated that Audit itself has attested error
on the part of the line Ministry. Ministry of Finance however added that
efforts were being made to rectify the errors/ inconsistency." CAG
responded to it saying, "Ministry of Finance, being the nodal Ministry
for the administration of the FRBM Act, should issue appropriate
directions to all the Ministries/Departments to ensure coordination so
that correct and consistent figures are included in the prescribed
disclosure forms and other linked documents.
The report records
that in the Annual Financial Statement and Union Government Finance
Accounts, the estimates and actual collection from Tax Revenue are
reflected after taking into account the amount of refunds (including
interest on refunds). Analysis of direct tax receipt of the Union
Government, revealed that substantial portion of tax collected are
refunded every year. In financial year 2015-16, amount of refunds
included Rs 6,886 crore as expenditure on interest on refunds. Though
the amount of refunds was substantial, no information about the quantum
of refunds was disclosed either in the Annual Financial Statement or in
the Union Government Finance Accounts. As such, the accounts of the
Government were not transparent in respect of information on Tax Revenue
collections.
The Ministry stated (June 2017) that in Finance
Accounts revenue receipts are categorized as ‘Tax Revenue Receipts’ and
‘Non-tax Revenue Receipts’ and figures for Direct Taxes are not shown
separately. It added that in Finance Accounts, tax collections are
accounted/shown at the minor head level which are net of refunds. Refund
of revenue is accounted for at one level below, viz. sub head level.
CAG
responded: "Reply of the Ministry does not address the audit concern
relating to transparency in accountal of gross tax collection and
refunds made therefrom in a year, although net collections are captured
in the accounts. The Union Government Finance Accounts are prepared at
Minor Head level, whereas the amount of refunds despite being
significant are recorded at a lower level of classification and thereby
refunds get obscured in this compilation. Appropriate disclosure of this
information in the Union Government Finance Account or in Budget
documents would address the transparency requirement as envisaged in the
FRBM Act."
The details of liabilities are also reflected through
Union Government Finance Accounts (UGFA) showed variation in the
position of liabilities of the Government at the end of financial year
2015-16, as reflected through Receipt Budget and UGFA. The gross
liabilities on account of National Small Savings, Provident Funds, Other
Accounts in Public Account in the UGFA 2015-16 have been reflected as
Rs 12,31,500 crore. However in Receipt Budget, the National Small
Savings, Provident Funds, Other Accounts liabilities though shown on
gross basis, has a variation of Rs 43,139 crore on account of
non-inclusion of amount of investment of Post Office Insurance Fund
through Private Fund Managers.
Responding to these findings, the
Ministry stated in June 2017 that "the observation regarding variation
in the amount of total liabilities is being examined and comments/reply
in this regard will be communicated shortly." It is not clear whether
the Ministry communicated its promised reply regarding variation in the
amount of total liabilities.
The report has recorded variation
in expenditure on grants for creation of capital assets. In the Budget
document, figure of actual expenditure incurred on grants for creation
of capital assets appears in Budget at a Glance and Ministry-wise
details thereof are appended with Expenditure Budget, Volume-I. In Union
Government Finance Accounts, compiled by the Controller General of
Accounts (CGA) under the Ministry of Finance, this figure appears in
Appendix to Statement No. 9 as a disclosure statement. Accounts at a
Glance is another document published by the CGA providing macro level
overview of financial information of the Government for relevant year.
While comparing the actual figure of expenditure on grants for creation
of capital assets for financial year 2015-16, variation was noticed
between the Budget documents and documents compiled/prepared by CGA.
The
Ministry stated (June 2017) that information provided in the Budget
Statement on grants for creation of capital assets was based on the
inputs/information provided by various Ministries/Departments. It
further submitted that Budget Division has no means to verify the
authenticity of the information provided by the Ministries/Departments
independently. Ministry however intimated that efforts are being made
to rectify the errors/ inconsistency.
CAG observed: "Ministry of
Finance, being the nodal Ministry for the administration of the FRBM
Act, should ensure that information being collected and disclosed under
the Act is complete, accurate and consistent with other Government
documents brought out by the various arms of the same Ministry." It is
not clear whether CAG's advice has been paid heed to.
The audit report made the following recommendations:
i. Deferment of fiscal targets needs to be carried out through appropriate amendment in the Act.
ii.
The disclosure relating to liability on annuity projects may be
modified suitably to reflect the amount of unpaid annuity liability at
the end of a particular financial year.
iii. An appropriate mechanism
needs to be put in place by the Government to avoid instances of
inconsistencies in estimation and correct reporting of components of
expenditure having bearing on deficit indicators.
iv. The Government may transfer specific purpose levies/cess collected to the designated funds.
v.
A mechanism for recognising the result of annual operation of NSSF and
its impact on the Government finances may be put in place.
vi.
Criteria for classification of expenditure as grants for creation of
capital assets may be prescribed for appropriate compliance by the
Ministry/Department. Assets created out of such grants but not owned by
the grantee organization may be excluded from categorizing as grants for
creation of capital assets.
vii. The Government may strengthen the
process of making underlying assumptions for projections of receipt and
expenditure in various fiscal policy statements to insulate them from
frequent changes and to seamlessly integrate the projections in the
Budget.
viii. The Government should ensure adequate transparency and
consistency in its fiscal operations so that fiscal indicators are
computed accurately and disclosure forms as mandated under the Act
contain correct information.
Its recommendation reads:"The
Government should ensure adequate transparency and consistency in its
fiscal operations so that fiscal indicators are computed accurately and
disclosure forms as mandated under the Act contain correct information."
Its
conclusion reads:"Transparency in fiscal operations of the Government
is an important ingredient to achieve the accurate target of fiscal
indicators envisaged under the FRBM Act. However, there was lack of
transparency in disclosing the deficit figures in Budget at a Glance and
Annual Financial Statements. Expenditure on grants for creation of
capital assets as disclosed through Union Government Finance Accounts
and Expenditure Budget was at variance. Further, gross liability
position of the Government shown through Union Government Finance
Accounts and Receipt Budget were also at variance. Though a significant
amount of refund is made from gross direct tax collection, its
depiction is obscured in the Government Finance Accounts and other
publications. The disclosures made by the Government through various
Forms envisaged under the FRBM Act were not complete and at variance
with corresponding information contained in Union Government Finance
Accounts"
The report was signed by Mukesh Prasad Singh, Director
General of Audit, Central Government and counter signed by Shashi Kant
Sharma, 12th CAG of India on July 14, 2017. Sharma demitted the office
of CAG of India on September 24, 2017. While being in that position had
assumed the office of Chairman of United Nations Board of Auditors on
January 11 2017 and demitted it when he ceased to be the CAG of India.
The 89 page long report of the CAG-Report No. 20 of 2018-discusses
the compliance of the provisions of FRBM Act, 2003 and the Rules made
thereunder by the Union Government for the financial year 2016-17. Audit
has examined a few cases of off budget financing and analyzed impact of
such operations on overall fiscal operations. It has underlined that
"Government has increasingly resorted to off-budget financing for
revenue as well as capital spending." It pointed out that "There is
mismatch between the provision under FRBM Act and corresponding
provision under FRBM Rules in respect of liability targets." It
observed:"The Government could not meet the mid-year fiscal deficit and
Revenue deficit target of 70 per cent of Budget Estimate for the year
2016-17 even after relaxing this target twice from 45 per cent in
2004-05 to 60 per cent in 2012-13 and 70 per cent in 2015-16. Further,
factors responsible for such deviation vis-à-vis expenditure and
receipt, and specific corrective measures, which Government was to take
in the year, were not presented in the statement to the Parliament." For
some reason this report is referred to as the third report of the CAG
on the compliance of the provisions of the Act and the Rules made
thereunder by the Union Government for the year ended March 2017.
It
records: "Taking into account the understatement of Public Account
liability of 7,63,280 crore, total liability of the Central Government
at the end of the financial year 2016-17 would be ` 76,69,545 crore
which is 50.5 per cent of GDP rather than 45.5 per cent against the
projection of 47.10 per cent in MTFP statement 2016-17." It also
records: "Misclassification of expenditure, short/non-transfer of
levy/cess to earmarked funds in the Public Account from the CFI, etc.
resulted in understatement of revenue expenditure at least by 50,999
crore and hence revenue deficit was understated by the same amount." It
records: Refunds of 1,72,894 crore (including interest on refunds of
taxes) were made from gross direct tax collection in financial year
2016-17 but no corresponding disclosure was available in the Government
accounts." It pointed out: "Disclosure statements mandated under the
FRBM Act and the Rules made thereunder placed before Parliament
reflected inconsistencies relating to disclosure of non-tax revenue and
assets." The report was signed by Mamta Kundra, Director General of
Audit, Central Government on July 25, 2018 and counter signed by the
Rajiv Mehrishi, the 13th CAG of India on July 25, 2018. Just prior to
the signatures is a recommendation which reads: "Government may ensure
explicit disclosures of all transactions having fiscal implications and
avoid presenting mis-matched figures."
The CAG's report made the following recommendations:
(i)
The Government may ensure adherence to the medium term fiscal path as
specified under FRBM Act/Rules and align its annual achievements
accordingly.
(ii) Mid-year benchmarks for comparison with pro-rata
performance against the budget estimates should be realistic and
mid-course corrections should enable achievement of year-end targets,
which should be disclosed transparently to Parliament.
(iii)
Government may consider putting in place a policy framework for
off-budget financing, which, amongst others, should include disclosure
to Parliament:
a) The rationale and objective of off-budget
financing, quantum of off-budget financing and budgetary support under
the same project/scheme/programme, instruments and sources of financing,
means and strategy for debt servicing of off budget financing, etc.
b)
Details of off budget financing undertaken during a financial year
by/through all the bodies/companies substantially owned by Government;
and
c) Government may consider disclosing the details of off-budget
Borrowings through disclosure statements in Budget as well as in
Accounts.
(iv) Government may ensure that all transfers/funds meant
to be kept in the designated funds in Public Account, including those
for meeting future liability, specific-purpose cesses, etc. are not kept
in the Consolidated Fund to avoid overstatement of revenue receipts.
(v)
Government may lay down guidelines for treating which items created out
of grants for creation of capital assets qualify as Capital Assets and
expenditure only for those assets should be considered as grants for
creation of capital assets.
(vi) Government may ensure explicit
disclosures of all transactions having fiscal implications and avoid
presenting mis-matched figures.
The 96-page long report of the CAG for the years 2017-18 and 2018-19-Report No. 6 of 2021-on
the compliance of the provisions of the FRBM Act and the Rules made
thereunder by the Union Government for the year ended March 2016
contained significant results arising from the review of compliance of
the provisions of the Act. The instances mentioned in the report are
those, which came to notice in the course of test audit for the period
2015-16. The matters relating to the period prior to and subsequent to
2015-16 were included, wherever deemed necessary. It dealt with the
years ending in March 2018 and March 2019. The report was signed by
Manish Kumar, Director General of Audit, Finance & Communication,
CAG of India on June 30, 2021counter signed by Girish Chandra Murmu, the
14th CAG of India on July 5, 2021. Murmu was the CAG till November 20,
2024. This report has been mentioned as the second report of the CAG on
the compliance of the provisions of the Act and the Rules made
thereunder by the Union Government for the year ended March 2017.
Notably,
just prior to the signatures is an audit summation which reads: "Audit
noticed variations in RD and FD figures between those depicted in the
Budget at a Glance(BAG) and those depicted in the Union Government
Finance Accounts (AFS) for both years,due to netting of certain receipts
and expenditure in the BAG. The balances under National Small Savings
Fund (NSSF) do not explicitly disclose the substantial accumulated
deficit in the fund and significant amounts loaned for funding revenue
expenditure of the Government which would have to be serviced through
budgetary support. Further, there were inadequacies in disclosures in
Form D-2 - Arrears of Non-Tax Revenue and D-4 - Asset Register."
Form
D-2 is one of the disclosure forms which provides details of arrears of
Non-Tax Revenue (NTR). Disclosure Form D-4 relates to physical and
financial assets of the Government. Receipt Budget 2020-21 provides
details of assets of the Union Government as at the end of reporting
year 2018-19. As per the disclosure made by the Government, the
cumulative total of assets at the end of the year 2017-18 and 2018-19
was `15,10,277.64 crore and 16,99,853.14 crore respectively. During
audit, errors in compilation of assets by various Ministries were also
noticed. Assets were found to be overstated by `5,90,875 crore. In
addition, inconsistency was noticed in figures of loans to Foreign
Governments. Examination of Form D-4 revealed that a sum of 14,077.04
crore was shown as loans outstanding from Foreign Governments at the end
of 2017-18. Similar information contained in the Union Government
Finance Accounts (UGFA)2017-18, revealed that a sum of 13,433.02 crore
was outstanding as loans from foreign Governments. Thus, there was a
variation of `644.02 crore of loans outstanding from foreign
Governments. Similar examination of Form D-4 for 2018-19 revealed that a
sum of 14,093.67 crore was shown as loans outstanding from Foreign
Governments whereas information contained in the UGFA 2018-19 revealed
that a sum of 13,558.87 crore was outstanding as loans from foreign
Governments. Thus, there was a variation of 534.80 crore of loans
outstanding from foreign Governments. Variation in figures of closing
and opening balances of assets On examination of Form D-4 appended with
Receipts Budget 2019-20 and 2020-21, variations were noticed in the
closing and opening balances of assets.
Significantly, opening
balance of assets for 2018-19 was less by 3,116.36 crore as compared to
the carry-over balance of assets at the end of 2017-18. The Ministry of
Finance explained (June 2020 and December 2020) that the same was due to
revision in the opening balance on account of factors such as a)
inclusion of “Railway Safety Fund” by Ministry of Railway, b) omission
of investment in HEFA and c) reporting of assets by additional Missions
in Ministry of External Affairs. The reasons for the variation disclosed
by Government lack adequate transparency as instead of an item wise
quantitative reconciliation of the variation of `3,116 crore, only
instances were mentioned without quantification. The Ministry further
replied that footnotes are also provided below the statements to insure
clarity and transparency. However, effort shall be made to insure
greater comprehensiveness in the footnote of statement of asset
register. HEFA refers to Higher Education Financing Agency is a joint
venture of Ministry of Education, Government of India and Canara Bank
for financing creation of capital assets in premier educational
institutions in India. HEFA is registered under Section 8
(Not-for-profit) under the Companies Act 2013 as a Union Govt company
and as Non–deposit taking Systematically Important (NBFC-ND-SI) with
RBI. HEFA incorporated on May 31, 2017, is a joint venture of Ministry
of Education, Government of India and Canara Bank with an agreed equity
participation in the ratio of 90.91% and 09.09% respectively.
Section
2 (a) of the FRBM Act defines "fiscal deficit". It means "the excess of
total disbursements, from the Consolidated Fund of India,
excluding repayment of debt, over total receipts into the Fund
(excluding the debt receipts), during a
financial year."
Section
2 (bc) defines "gross domestic product". It means "the sum of the gross
value added by all resident
production units plus that part of taxes, less subsidies, on products,
which is not included in the
valuation of output, during a financial year, reckoned at current market
prices, as published by the
Central Statistics Office from time to time." Section 2 (ca) defines
"real gross domestic product". It means "gross domestic product,
reckoned at constant prices,
as published by the Central Statistics Office from time to time." These
definitions were inserted on March 31, 2018.
The FRBM Act was amended by Finance Act, 2018.
The words “achieving sufficient revenue surplus and” omitted from the
long title of the original FRBM Act by section 210 of Act 13 of 2018
with effect from March 29, 2018.
Significantly, through the Jan Vishwas Act, 2023, more than 180 legal provisions were
decriminalized. Now through the Jan Vishwas (Amendment of Provisions) Act, 2026 over 1,000 offences have been "rationalized" and minor procedural violations across 79 Central Acts have been decriminalized. The Act amends 784 provisions administered by 23 Ministries. It turns 717 provisions into civil penalties and removes criminal/imprisonment terms for minor, technical, or procedural defaults. First-time and minor lapses are now typically addressed through formal advisories or warnings rather than immediate financial penalties or court trials. The Act introduces a structured adjudication mechanism, allowing civil penalties to be imposed by executive authorities (like Deputy Commissioners) rather than through courts.
