Why is it in the news?

• Parliament’s Public Accounts Committee (PAC) approved the Finance Ministry’s proposal to increase financial limits on spending for ‘New Service’ and ‘New Instruments of Service’.

Reasons for Increase

• Increased Demands for Supplementary Grants: Low financial limits for new policy-related expenditure led to a rise in supplementary proposals from ministries, causing delays in project execution.
• Growth in Budget Size: Anticipated GDP growth of 6-7% year-on-year necessitates a larger budget, prompting an upward revision in financial limits.
• Excessive Ministerial Expenditure: Instances of ministries exceeding allocated amounts despite receiving substantial supplementary grants during FY 2019-20.
• Unnecessary Re-appropriations: Growing instances of supplementary re-appropriations without adherence to NS/NIS limits, highlighting the need for stricter controls.

New Limits Approved

• New Policy-Related Expenditure: Increased limit from Rs 50 crore to Rs 100 crore. Expenditure exceeding Rs 100 crore requires prior approval from Parliament.
• New Instrument of Service (NIS): Reporting limit set at up to 20% of the original appropriation or up to Rs 100 crore, whichever is higher. Exceeding this limit mandates prior approval from Parliament.

Significance of Changes

• Efficient Planning: Encourages ministries to accurately estimate budgetary requirements, reducing the frequency of supplementary grant demands.
• Simplification: Facilitates easier identification of expenditure deviations by PAC, enhancing parliamentary control over executive spending.
• Expeditious Decision-making: Speeds up decision-making processes for the government and improves scheme implementation efficiency.