Budget Procedure and Transfer of Funds

Transfer of funds are presently made to PRIs under a number of budget heads, often in packets of small allotments. There may be a demand for a particular segment of the beneficiary (e.g. special component plan for Schedule Casts) where allocation may come from a number of separate budget heads. Such a complicated procedure for allocation makes the accounting boundaries confusing. Even for an auditor, examining such diverse allocations becomes a difficult task. The budget indexing and accounting procedure for allocation of funds by the State Government to PRIs needs to be simplified and made user and audit-friendly. The Panchayats also need to maintain their accounts with transparency at a low cost. Therefore, there should be a separate Panchayat sector line in the state budget. The State budget under each head should be divided into State-wise allocation and District-wise allocation. The allocation for each district should be shown separately in the district-wise allocation. District allocations under various heads should be brought together which will evolve into a district budget. This district budget can have amounts under: i. Control of departments at State level, for valid reasons based on established principles ii. Schemes transferred to the Zila Parishad for execution iii. Devolved funds at the disposal of Panchayats The mode of funds transfer to Panchayats from the State Government is also an important issue for effective functioning of the Panchayats. In 2005, the Ministry of Panchayati Raj set up a committee to examine the feasibility of electronic fund transfer to Panchayats. The committee recommended that it was indeed feasible to transfer funds rapidly to approximately 2.4 lakhs Panchayats across the country through banks. In Karnataka, the State Government has created an arrangement involving six nationalized and twelve Grameen banks in which all the 5800 Panchayats of States at all levels hold accounts. As of now in Karnataka, the Twelfth Finance Commission’s fund and the States untied statutory grants to Panchayats go from the Panchayati Raj Department to all the Panchayats through these banks without any intermediary. This arrangement has reduced the maximum time taken for transfer of funds from the State Headquarters to a Panchayat from two months to twelve days. The Ministry of Panchayati Raj has developed a software on this process. State Governments should be encouraged to adopt it and speed up their fund transfer procedure. At present, the State Governments do not adhere to a time frame for release of funds to PRIs. Often the allotment is released towards the close of the financial year, leaving very little time to the local bodies to carry out actual work. On many occasions their funds remain undrawn/unspent. The Panchayats have to indulge in a lot of paper work to get these funds revalidated in the next financial year. Such delays are due to the fact that the funds received from the Union Government for specific national schemes become a part of the ‘ways and means’ of the State Government. The State Government should take steps to release grants to the PRIs according to a pre-fixed time-table so that it becomes possible to utilise the funds during the currency of the year. The fund release could be in the form of equitably spaced instalments. The release could be made in two instalments; one at the beginning of the financial year and the other by the end of September of that year.