Finance Minister Nirmala Sitharaman on Saturday said that the government managed to save over ₹20,000 crore through new accounting mechanisms to provide funds for various schemes.
The government has seen good amount of reforms in the not-so-glamorous side of reforms, said Sitharaman while replying to a discussion on ‘White Paper’. Some of these reforms include preponement of budget to February 1 from last day of February and classification of expenditure to capital and revenue from plan and non plan expenditure.
“Earlier, when Union Budget used to be presented on last day of February, States presenting the budget in the same month had no idea what will be their shares. They used to make some provision only to change later,” she said while adding that now there is greater clarity because of Union Budget being presented on the first day. Similarly, using the classification of expenditure into capital and revenue only ended discretionary power of allocation and brought transparency while empowering States to plan their budget.
She highlighted the benefit of changes in accounting system which is ensuring timely fund release. “Treasury Single Account (TSA) system, which we brought, has given an estimated savings of ₹10,000 crore and that is being used to fund bigger schemes,” she said. The Single Nodal Account system (SNA), another unglamorous reform, which the government brought in has given an estimated saving of ₹10,592 crore, she added.
Earlier, funds were allocated and disbursed to various ministries, departments, autonomous bodies and States after approval. Sitharaman said the system needed a change because funds were not being utilised and sitting idle in bank accounts, while the government had to borrow and incur interest. Accordingly, the TSA system was designed.
According to an International Monetary Fund (IMF) Working Paper, TSA is a unified structure of government bank accounts that gives a consolidated view of government’s cash resources. Based on the principle of unity of cash and the unity of treasury, a TSA is a bank account or a set of linked accounts through which the government transacts all its receipts and payments. The principle of unity follows from the fungibility of all cash irrespective of its end use.
While it is necessary to distinguish individual cash transactions for control and reporting purposes, this purpose is achieved through the accounting system and not by holding/depositing cash in transaction-specific bank accounts. This enables the treasury to de-link management of cash from control at a transaction level.
Under the Just-in-Time fund mechanism, SNA is meant for Centrally Sponsored Scheme (CSS), where Centre and States contribute in a ratio, funds. Under the new system, each State is to identify and designate a SNA for every scheme. All funds for that State in a particular scheme will be credited in this bank account, and all expenses will be made by all other Implementing Agencies involved in this account. It ensures that allocation of funds to States for the CSS are made in a timely manner and after meeting various stipulations.
Meanwhile, the Minister said that the Modi-led government toiled for 10 years to bring the economy back on track, taking India from ‘fragile five’ to 5th largest economy of the world. She said that India is soon going to become the world’s third largest economy. Giving reasons for coming out with the White Paper now, Sitharaman said a similar exercise earlier would have impacted the confidence of institutions, investors, as well as the people.