Budgets Routinely Passed Without Discussion And Scrutiny, Data Show  
Nirmala Sitharaman, India’s finance minister, right, walks through a metal detector as she leaves the North Block of the Central Secretariat building in New Delhi, India. (Photographer: T. Narayan/Bloomberg)

Budgets Routinely Passed Without Discussion And Scrutiny, Data Show  

Parliament’s budget session for 2004-05 set an unbecoming precedent--100 percent of the budget of Rs 4.8 lakh crore ($109.7 billion) was passed without discussion, using the guillotine, a parliamentary procedure to fast-track lawmaking. This was repeated in the 2013-14 budget session, and then again in the 2018-19 budget session. In 2019, of budget heads totalling Rs 27.86 lakh crore ($407 billion), 80 percent (worth Rs 22.28 lakh crore or $325 billion) were guillotined.

Each year, the Lok Sabha Business Advisory Committee, which includes leaders of various parties, takes up five ministries for discussion out of the 52 ministries. The remaining are voted upon on the last day of the budget session without discussion, or guillotined.

The five ministries included for discussion in 2019 were road transport and highways, agriculture and farmers’ welfare, rural development, youth affairs and sports, and railways. “Ministries that are taken up for discussion [their budget allocation] in the Lok Sabha aren't debated in the Rajya Sabha,” an administrative official from the Business Advisory Committee in parliament told IndiaSpend. “Due to the lack of time, no more than five ministries can be discussed.”

Furthermore, additional funds required by the government, called “supplementary demands for grants”, are never scrutinised by any parliamentary standing committees, as bills and demands for grants in the annual budget are. These demands are only analysed ex-post facto by the Public Accounts Committee, which consists of selected members of parliament who scrutinise audit reports by the Comptroller and Auditor General of India.

“Parliament does not spend enough time discussing demands for grants, and the situation is worse in state legislatures,” said Avani Kapur, director, Accountability Initiative, a research organisation based in Delhi. “Limited discussion, lack of research support for the MPs is a problem.”

The PAC criticised the manner in which supplementary grants are estimated in its report published in February 2020: “...supplementary grants were obtained without proper assessment with the result that even the additional provision proved inadequate to meet the actual requirements of the funds of the Ministries/Departments concerned.”

For instance, the 2018-19 budget session saw a miscalculation of funds as a result of which the government required additional expenditure of Rs 3 lakh crore ($47.2 billion), which was 12 percent of the entire budget. This was passed later in the winter session as supplementary demand for grants.

The PAC also criticised the excess expenditure incurred over and above the budgetary provisions sanctioned, deeming that it undermined parliamentary control. The total excess expenditure in 2016-17 was Rs 1.9 lakh crore ($29.3 billion), which requires sanction from parliament under Article 115 (1) (b) of the Constitution.

The lack of discussion of the demands for grants for various ministries in parliament and the process of guillotining has led to, on average, only 13 percent of the total budget being discussed in parliament since 2004. This calculation excludes the railways, which were merged in 2016-17 with the Union budget.

No Procedure, Not Enough Time Spent

The procedure to discuss the budget is more partisan than policy-based, according to the official from the Business Advisory Committee: “There does not exist any process to decide which ministry should be discussed in the budget. Parties have their own agenda before suggesting which ministries should be taken up as they would like to raise political issues under the banner of the selected ministries.”

The government can make up to three supplementary demands for grants during a year. “As these are budget projections and the government does not know how much resources will be required, after six months of real budget expenditure and reviewing around the months of October or November, if there is a need for additional resources to be allocated, it will be passed through supplementary demands for grants,” said Nilachala Acharya, research coordinator, Centre for Budget and Governance Accountability, a research organisation based in Delhi.

The number of supplementary demands for grants increased in 2013 as a result of the Fourteenth Finance Commission of India being constituted. After the 14th Finance Commission, centrally-sponsored schemes saw major cuts, said Kapur of Accountability Initiative. But through the year the cuts were met by passing supplementary demands for grants, especially for schemes such as MGNREGA (the national rural jobs scheme) that are more demand-driven, for which supplementary budget has to be released through the year if there is additional demand.

At times, even supplementary grants are not enough and the government goes beyond the amount sanctioned by parliament. In 2016-17, the total amount of excess expenditure was Rs 1.9 lakh crore ($29.3 billion or 9 percent of the budget) in 11 separate cases, which comprised largely of expenditure on the defence ministry along with the railway ministry, according to the February 2020 report on Excesses Over Voted Grants and Charged Appropriations 2016-17 by the PAC.

The PAC found these discrepancies troubling: “The Committee is seriously concerned to find that during the financial year 2016-17 excess expenditure has been incurred even after obtaining supplementary grants in all the 11 cases by the respective ministries to meet their additional requirements. The percentage of excess expenditure over the supplementary grants ranged from 2.46 percent to 1,04,5470.01 percent.”

The government’s budget is based on predicting how much revenue will be received and how much various ministries and agencies will need to spend. “But the fact that there is a need of different ministries to raise supplementary demands thrice reflects a lack of quality of budget planning, the need to improve forecasting and budgetary estimates,” added Acharya of CBGA.

The PAC noted in a similar vein: “...despite the recommendations of the PAC, year after year, no sincere efforts have been made by the ministries/departments to adequately visualise and prepare their budget estimates even at the supplementary grants stage”.

India Scored 48 Out Of 100 In Budget Transparency

India was ranked 53 out of 115 countries in the Open Budget Index 2017 of the non-profit International Budget Partnership. India scored 48 out of 100 in budget transparency, 48 out of 100 in budget oversight and 15 out of 100 in public participation.

The survey checks the provision of budget documents such as the pre-budget statement, citizens’ statement, executive budget, mid-year review report, and audit reports to the public and the timely production of these documents.

“India does not have a pre-budget statement and in 2017, mid-year review was produced with a time lag while in 2016, the mid-year review report was not published at all which was the reason behind India’s low rank in the survey,” added Acharya of CBGA.

Proposed Solutions

“Advancing the budget session by one month will help parliament to get in the nitty-gritty of the budget,” Acharya said. “There should be more flexibility in parliament to discuss the important demands. Discussion should only be on a budget and public financing issues, but politics makes its way even into the budget sessions. Discussion time is lost on non-budgetary issues.”

The government has recently tried to involve the public in the budget process by inviting suggestions at large. “Finance ministry has started sharing a citizen’s version of the budget this year called the ‘jan jan ka budget’ which brings thematic areas together and collates the key highlights and briefs for policy discussion to make it more people-friendly, which is a positive move,” said Kapur of Accountability Initiative.

One proposed reform is the introduction of a parliamentary budget office. This would “increase the potential for better quality discussion. Such a discussion can raise the quality of debates”, Kapur said.

Need To Strengthen Standing Committees

The recommendations by standing committees are not discussed on the floor of the house, and the government has the prerogative to reject or accept them. Although standing committees conduct ministry-wise examinations of the budget, they receive unsatisfactory replies from ministries or no replies at all to their recommendations.

When scrutinising the 2018-19 health ministry budget, the standing committee had suggested that the current health expenditure of the Centre at 0.3 percent of the gross domestic product would not meet the goals of the National Health Policy, which requires total public health expenditure (including states’ spending) up to 2.5 percent of the GDP by 2025. It further recommended that attention needs to be given to the cause of delays in transfer of funds. The committee found the government’s reply to this recommendation “poor”: the department of health and family welfare “has not indicated any solid roadmap for generating and earmarking additional financial resources for the health sector with a view to raising public spending on health to 2.5 percent of the GDP is achieved.” Of 19 government replies to the standing committee’s recommendations, the committee accepted only three and rejected 11; five replies were awaited.

Similarly, agriculture was another ministry discussed on the floor of the Lok Sabha in the 2018-19 Union budget. “The Committee are of view (sic) that the Government has not taken their recommendation in letter and spirit,” said the action-taken report pertaining to the rise in import of agricultural commodities. The committee was also not convinced with the justification that the government offered. In that action-taken report, the committee accepted eight replies by the government, rejected two, and had not received five.

“Standing committees were delayed in being formed last year [2019], and although there is an action-taken report on the standing committee recommendations, these action reports are vague in nature, and there is no real accountability,” said Kapur of Accountability Initiative.

A paper by Subhash C. Kashyap, former secretary-general of the Lok Sabha, sums up what is needed to improve parliamentary scrutiny of public finances: simplify budget presentation, strengthen executive control and parliamentary scrutiny of expenditure, analyse demands for grants before they are voted upon in the house, and examine supplementary demand for grants in detail.

Unrelated Matters Passed As Finance Bills

The Finance Bill is introduced and passed every year during the budget session and it contains the annual taxation proposals, especially the changes in income-tax rates. Being a money bill, it goes through negligible inspection in parliament and is not sent to any committee for analysis; and nor can the Rajya Sabha make any amendments to it.

In 2018, the Finance Bill was passed by the Lok Sabha within 18 minutes without discussion. This was the least time spent on discussing the Finance Bill since 2000. The longest time spent discussing the finance bill was in 2003, when parliament spent a total of 12 hours on it.

Some examples of the Finance Bill containing unrelated matters:

  • The Finance Bill of 2016 contained provisions amending the Reserve Bank of India Act of 1934. The Aadhaar Bill of 2016 was also passed as a money bill during this session. Although the Supreme Court upheld the passing of the Aadhaar Act, it has subsequently referred the matter to a larger bench in November 2019 and many legal analysts have questioned the constitutionality of passing the Aadhaar Bill as a money bill.
  • The Finance Bill of 2017, which was passed as a money bill, contained provisions related to structural changes to existing tribunals. Amendments were made to the Reserve Bank of India Act of 1934, Representation of Peoples Act of 1951, Income Tax Act of 1961 and Companies Act to make way for the electoral bonds scheme, which has since come in for criticism.
  • The Finance Bill of 2018 had 218 clauses, half of which were matters unrelated to the imposition of taxes.
  • The Finance Bill of 2019 amended the Reserve Bank of India Act of 1934, the National Housing Bank Act of 1987 and the Insurance Act of 1938. In addition, it proposed amendments to enable the Reserve Bank of India to take measures for the management of non-banking finance companies.

This copy was published in a special arrangement with IndiaSpend.

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