The government has tweaked spending norms for Contingency Fund of India, allowing 40% of the total corpus to be placed at disposal of the Expenditure Secretary.

What are the proposed changes?

• Budget 2021-22 proposed to enhance the Contingency Fund of India from ₹500 crore to ₹30,000 crore through Finance Bill.
• An amount equivalent to 40 per cent of the Fund corpus shall be placed at the disposal of the Secretary, Ministry of Finance, Department of Expenditure.
• This would serve the purpose of meeting unforeseen expenditure.

What is Contingency Fund of India?

• Contingency is a negative event which may occur in future, like recession or pandemic.
• The Constitution has a provision for a contingency fund. Its corpus is always kept intact.
• Article 267 of the Constitution mandates formation of a corpus under Contingency Fund of India to deal with any emergency situation.
• It is placed at the disposal of the President of India.
• Government cannot withdraw funds from it without authorization of the Parliament.
• And the corpus has to be replenished with the same amount later.

Management of the fund

• The fund is held by the Department of Economic Affairs on behalf of the President of India and it can be operated by executive action.
• The fund can be increased through a Finance Bill when Parliament is in the session.
• Or through Ordinance if the House is not in session and situation warrants.
• Withdrawal from the fund takes place with the approval of the Secretary of Department of Economic Affairs, in terms of the Contingency Fund of India Act, 1950.
• An amount equivalent to 40% of the corpus has now been placed at the disposal of the Expenditure Secretary.
• All further Contingency Fund releases beyond this limit will require the approval of the Expenditure Secretary in addition to the Economic Affairs Secretary’s approval.

Back2Basics:

Consolidated Funds of India

• The provision for this fund is given in Article 266(1) of the Constitution of India.
• The government meets all its expenditure from this CFI.
• It receives money from:

1. Direct and indirect taxes Loans taken by the Indian government
2. Returning of loans/interests of loans to the government by anyone/agency that has taken it

• The government needs parliamentary approval to withdraw money from this fund.
• Each state has its own Consolidated Fund of the state with similar provisions.
• The Comptroller and Auditor General of India audits these funds and reports to the relevant legislatures on their management.

Public Account of India

• All other public money (other than those covered under the Consolidated Fund of India) received by or on behalf of the Indian Government are credited to this account/fund.
• It is constituted under Article 266(2) of the Constitution.
• This is made up of:

• 1. Bank savings account of the various ministries/departments
  2. National small savings fund, defense fund
  3. National Investment Fund (money earned from disinvestment)
  4. National Calamity & Contingency Fund (NCCF) (for Disaster Management)
  5. Provident fund, Postal insurance, etc.
  6. Similar funds

• The government does not need permission to take advances from this account.
• Each state can have its own similar accounts.
• CAG makes audit of all the expenditure from the Public Account of India.

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