Consolidated Fund, Contingency Fund and Public Account of India: A Comprehensive Overview

The Constitution of India establishes three essential funds for the Central government: the Consolidated Fund, the Public Account, and the Contingency Fund. Each of these funds has distinct purposes and operations that facilitate government financing and spending. Understanding these funds is crucial for grasping how public finances are managed and utilized in India. This section explores their features, operations, and significance.

Funds of the Nation: A Deep Dive

The Constitution of India provides for the following three kinds of funds for the Central government:

Consolidated Fund of India

Establishment: Article 266(1) of the Indian Constitution establishes the Consolidated Fund of India.

• The Government of India consolidates all its revenues, loans, and repayments into a unified fund known as the ‘Consolidated Fund of India’ as per Article 266. 

• • Purpose: Gathers all government revenues, including taxes, fees, duties, loans, and loan recoveries.
  • Expenditure Coverage: Funds government routine expenses such as salaries, pensions, infrastructure projects, defense, and debt servicing.
  • Sources of Income: This includes income from taxes such as Income Tax and GST, non-tax revenues like fees and royalties, loans obtained domestically and internationally, and money received when loans are repaid to the Government of India. 
  • Management and Maintenance: The Consolidated Fund of India is maintained with the  Reserve Bank of India.
  • Parliamentary Control: Access to the fund requires Parliament’s approval through Appropriation Bills, specifying expenditure types and amounts.
• No appropriation without Parliamentary approval
• Transparency and Accountability: Ensures all government revenues and expenditures are integrated into one account, promoting effective financial management.
• State Funds: Each state can establish its own Consolidated Fund of State, reflecting central guidelines.

Components of the Consolidated Fund

• Capital Account (Receipts)
• Capital Account (Disbursements)
• Revenue Account (Receipts)
• Revenue Account (Disbursements)
• Disbursements Charged on the Consolidated Fund

Revenue Sources for the Consolidated Fund

• Indirect Taxes: Significant contributions from taxes like Goods and Services Tax (GST) applied at sale or consumption.
• Direct Taxes: Includes income tax from individuals and corporations, covering salaries, investments, and business profits.
• Government Services Revenue: Income from public services such as administrative fees, licenses, and permits.
• Public Sector Enterprises: Contributions from profits and dividends generated by Public Sector Undertakings (PSUs).
• Disinvestment and Loan Recoveries: Proceeds from selling government assets, recovering loans, and debt repayments.

Public Account of India

Origin of the Public Account: Established post-independence, it was primarily an administrative convenience, lacking a precedent in earlier Government of India Acts.

• Public Account of India: Any funds received by or on behalf of the Government of India, excluding those specified in the Consolidated Fund, are to be credited to the Public Account of India according to Article 266 (2). 
• Sources of Funds: This includes diverse amounts such as Provident fund, postal savings, national small savings fund, etc., which are received by the government and are obligated to be repaid upon maturity.
• Legislative Control: No legislative approval is required for withdrawals from the Public Account, raising concerns about potential misuse.

Structure of the Public Account

• Major Heads of Accounts:

• 1. Small Savings, Provident Fund, and Other Accounts
  2. Reserve Funds
  3. Deposits and Advances
  4. Suspense and Miscellaneous
  5. Remittances

• • Management and Operation: Operated by executive action. 

• Payments do not require Parliamentary appropriation.

Contingency Fund of India

Establishment of the Contingency Fund

• Purpose: A fund created for unforeseen expenditures.
• Initial Amount: ₹50 crores from the Consolidated Fund of India.
• Increased Amounts:
• • • ₹500 crores (from Finance Bill, 2005).
    • ₹30,000 crores (from Finance Bill, 2021).
  • Creation of the Contingency Fund: Parliament has the authority to create the ‘Contingency Fund of India’ through legislation. 
  • Fund Control and Purpose: The fund receives allocations as specified by Parliamentary law, and it is placed under the control of the President to address unforeseen expenses until authorized by Parliament [Article 267].
  • Funding Sources: As a result, funds are transferred to this account through appropriations from the Consolidated Fund of India. 
  • Utilization of Resources: The Central Government utilizes the resources in this account to cover unexpected expenses, such as those arising from natural calamities.
  • Expenditure Authorization:  Amount is spent by the executive but is authorised by the Parliament after the expenditure is incurred. 

• Custody and Withdrawal

• • • Custodian: A Secretary from the Ministry of Finance holds the fund on behalf of the President.
    • Withdrawals: Funds can only be used for unforeseen expenditures until Parliament approves such expenditures through law.

• Rule-Making Authority

• • • Central Government: Can create rules for managing the fund.
    • Publication: Rules are notified in the Official Gazette.

• Parliamentary Oversight:

• • Rules must be presented to both Houses of Parliament for 30 days.
  • If both Houses agree to modify or reject a rule, it will take effect only in the modified form or cease to exist.
  • Validity: Any actions taken under a rule before modification or annulment remain valid.

Expenditure Charged on Consolidated Fund of India

• Article 110(1)(e) specifies that a bill dealing exclusively with declaring any expenditure as charged on the Consolidated Fund of India or increasing such expenditure qualifies as a Money Bill.

• Article 112(3) outlines specific expenditures charged on the Consolidated Fund of India, including:
  • Emoluments and allowances of the President, along with other expenses related to the President’s office.
  • Salaries and allowances of the Chairman, Deputy Chairman of the Council of States, and the Speaker and Deputy Speaker of the House of the People.
  • Debt charges for which the Government of India is liable, including interest, sinking fund charges, redemption charges, and other expenses related to raising loans and servicing debt.
  • Salaries, allowances, and pensions for Judges of the Supreme Court, and pensions for Judges of any High Court.
  • Salary, allowances, and pension for the Comptroller and Auditor General of India.
  • Sums necessary to satisfy any judgment, decree, or award of any court or arbitral tribunal.
  • Any other expenditure declared by the Constitution or by Parliament through law to be charged.
  • Additionally, various other expenses, such as salaries, allowances, and pensions of UPSC members, administrative costs including salaries, allowances, and pensions of staff in the Supreme Court, CAG, and UPSC, are also charged on the Consolidated Fund of India as specified in different articles of the Constitution.
• The importance of “charged” expenditures lies in their non-votable nature in Parliament. 
• While these expenses can be discussed in the houses of Parliament, the Lok Sabha does not vote on them. Instead, they are automatically “charged on the consolidated fund” and must be incurred as mandated.

Conclusion

In conclusion, the Consolidated Fund, Public Account, and Contingency Fund play vital roles in the financial governance of India. 

• While the Consolidated Fund ensures accountability in government expenditures, the Public Account handles funds that require repayment, and the Contingency Fund addresses unforeseen expenses. 
• Strengthening the framework around charged expenditures can enhance transparency and promote responsible use of public resources.

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