It's a vexed issue that policymakers and regulators are still grappling with. No the issue in question is not about a complex subject like India's approach to Participatory Notes, but a more mundane stuff of requiring certain regulatory bodies to maintain their surplus funds in the Public Account.

The Government auditor — Comptroller and Auditor General of India (CAG) — has once again rapped certain regulatory bodies for retaining their surplus funds generated through fees and unspent grants outside the Government accounts.

As on end March 2010, the five regulatory bodies — SEBI, IRDA, PFRDA, CERC and PNGRB — had surplus funds aggregating Rs 2,142.47 crore lying outside Government accounts.

This is in contravention of the Constitutional provisions and the Finance Ministry instructions, the CAG has said in its latest report on Government accounts.

In fact, the CAG had in its previous years' audit reports highlighted the retention of funds by IRDA and SEBI outside the Government accounts.

Of the Rs 2,142.47 crore aggregate surplus funds with the five regulators as on end March 2010, the Securities and Exchange Board of India had Rs 1,467.81 crore, the Insurance Regulatory and Development Authority Rs 622.29 crore and Pension Fund Regulatory Development Authority Rs 0.23 crore.

While the Central Electricity Regulatory Commission had surplus funds of Rs 33.55 crore, the Petroleum and Natural Gas Regulatory Board had Rs 18.59 crore.

Norms for SEBI, IRDA funds

The CAG has in its latest report noted that the Finance Ministry had in December 2009 and November 2010 said that the “broad guidelines, enunciating the arrangement relating to operationalising the SEBI and IRDA funds in the Public Account had been framed”.

This had been conveyed to the Controller General of Accounts (CGA) for drawing the detailed accounting procedure.

However, no funds in this regard were opened in the Public Account of the Finance Accounts for 2009-10, the CAG report noted.

The Finance Ministry had in January 2005 directed all ministries and departments to ensure that funds of regulatory bodies are maintained in the Public Account.

Regulatory independence

The erstwhile SEBI Chairman, Mr C.B. Bhave, had a few months ago said at an industry event that regulatory independence would be jeopardised if regulators were to depend on the Executive for release of funds.

The capital market regulator has been depositing the funds collected from settlement charges and also the bidding fees (auction of debt for FIIs) into the Consolidated Fund of India.

>krsrivats@thehindu.co.in

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