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’.
| About the terms
· New Service (NS): Expenditure resulting from a new policy decision not previously brought to Parliament’s notice, including new activities or investments. · New Instrument of Service (NIS): Significant expenditure arising from the expansion of an existing policy. |
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.
