The Constitution of India has designated three funds to manage the accounts of the government of India. It provides for a manner in which the accounts of the Government are to be maintained and managed efficiently. The three funds designated solely for government funds are the Consolidated fund of India, Contingency Fund of India, and Public Accounts Fund.
All revenues received, loans raised and every penny received by the government towards repayment loans are all credited in the Consolidated Fund of India, and all the expenditures incurred by the Government of India are also charged from this fund. The Contingency Fund on the other hand equips the Government to meet unforeseen expenditures which cannot wait for Parliamentary approval. Public Accounts Fund covers under its arena all funds received by the government except those that are not included in the Consolidated Fund of India.
Consolidated Fund of India:
The Consolidated Fund of India is constituted under Article 266(1) of the Indian Constitution. Loans and Borrowings constitute the revenue received by the government through taxes and expenses under this fund. It is a part of the Annual Financial Statement accompanied by the Contingency Fund and the Public Account Fund. Consolidated Fund caters to all the expenditures of the government of India leaving behind a few which are looked after by the contingency fund. It is regarded as the most notable part of the Financial Statement. Like the centre, every state also has its own Consolidated Fund.
The Consolidated Fund gets its fund from:
- Direct taxes such as income tax, corporate tax, etc.
- Indirect taxes such as GST, customs, and excise duties.
- Revenue generated from the dividends and profits earned from the Public Sector Undertakings.
- Money is earned through the general services rendered by the government.
- Revenue earned through disinvestment receipts, debt payments, and loan recoveries.
Most of the expenditures incurred by the government are met by the Consolidated Fund of India. Parliamentary Appropriation is to be obtained by the government before any withdrawal from this fund. The Comptroller and Auditor General of India audit every aspect of these funds and submit their report to the legislature on the effective management of these funds.
The Fund can be divided into two parts: Revenue Account and Capital Account. The revenue account deals with proceeds of taxation and other receipts classified as revenue while the capital account deals with expenditure incurred either in the form of increasing concrete assets or reducing liabilities.
Certain expenses like salaries and allowances of government officials are also charged from this fund. It includes the salaries and allowances of the President, Speaker and Deputy Speaker of the Lok Sabha, Chairman and Deputy Chairman of the Rajya Sabha, Judges of the High Court and Supreme Court, etc.
Contingency Fund of India:
The Contingency Fund of India Act 1950 introduced and enacted the Contingency Fund of India.
- It is vested under Article 267 (1) of the Indian Constitution.
- This fund is reserved to encounter emergencies and unplanned expenditures, its nature is imprest.
- This fund can be operated by executive action, it does not require prior parliamentary approval to withdraw money from this fund.
- The fund is controlled by the President of India, he can make effective use of the fund to meet unprecedented circumstances. The fund is maintained by the Finance Secretary (Department of Economic Affairs) on behalf of the President.
- The Fund can be increased through a Financial Bill when the Parliament is in session or through an Ordinance if the House is not in session and the situation demands a change.
- The government enhanced the Contingency Fund of India from Rs 500 crores to Rs 30,000 crores through the Financial Bill 2021.
- The amount withdrawn from the Contingency Fund of India is returned to the fund to keep the corpus of the fund intact. This amount used to fill in the deficit is charged from the Consolidated Fund of India which requires prior Parliamentary approval to prevent any misuse of funds from the Contingency Fund of India.
- Withdrawal from this fund requires the approval of the Secretary of the Department of Economic Affairs. While increasing the corpus of the fund last year, the government has also conferred more powers to the Expenditure Secretary in dealing with this fund. An amount equivalent to 40% of the corpus has been placed at the disposal of the Expenditure Secretary any amount exceeding this would require the approval of the Expenditure Secretary and Economic Affairs Secretary.
- The amount of the Contingency Fund varies across states and the amount is decided by the state legislatures.
Public Accounts Fund:
Article 266(2) of the Indian Constitution constitutes the Public Accounts Fund of India. All types of public money are covered under the arena of this fund, except for those covered by the Consolidated Fund of India. The Government of India performs the role of a banker in the transactions associated with this fund.
The Public Accounts Fund gets its fund from:
- The savings account in the bank of the various ministries and departments.
- The money earned by the Government of India through disinvestment, National Investment Fund.
- The National Small Savings Fund and the Defence Fund.
- The National Calamity and Contingency Fund are reserved for disaster management.
- Provident Funds and all other similar types of funds.
Public Accounts Fund do not require Parliamentary appropriation, they are operated through executive action as these funds do not belong to the government and they have to be paid back to the rightful owners. These payments are like banking transactions. Every state can have its account. Every expenditure incurred under the Public Accounts Fund is audited by the Comptroller and Auditor General of India, to prevent misallocation of funds.
All the three funds together constitute the account of the Government of India. Each of them has been designated to serve a purpose thereby enhancing the administration and well-being of the citizens of the country. The Constitution of India has laid down effective checks and prior approvals to prevent the misuse of funds and to ensure just and potent utilization of the funds, thereby elevating the quality of Indian democracy.