NEW DELHI: Seeking to improve cash management, the finance ministry has allowed ministries and departments to fully leverage existing sanctions to fund central sector schemes (CSSs), before seeking fresh ones.
Sanction orders will be released to new agencies under the Public Finance Management System (PFMS), a mandatory requirement to receive central funding, by a token money of Re 1 to facilitate this.
The Central Nodal Agency (CNA) for each scheme could then assign them drawing rights from the existing pool of resources.
Currently, CNAs for CSSs get funds equivalent to sanctions by the ministry. For example, if the sanction is Rs 1,000 crore for a scheme through five agencies, CNA gets that sum. CNA then distributes the drawing rights among the five who draw funds just-in-time for actual spending.
However, often drawing rights are not utilised fully and funds lie idle with CNA. Even if three new agencies are to be given funds under a scheme during the year, the departments have to go through the budget process which takes longer time. This often leads to underutilisation of CSSs allocation by the end of the year.
To overcome this, the ministry on October 6 relaxed norms to allow departments to generate sanction orders in PFMS for Re 1 token amount in each case to bring new agencies under the PFMS platform through which all government sanctions and expenditures are monitored on a real-time basis.
After PFMS enrolment, the departments could now give drawing rights, say worth Rs 2,000 crore, to eight entities including three new ones against the fund availability of Rs 1,000 crore with CNA. This would reduce fund floating with CNA and would lead to faster utilisation of existing funds available. Just before available funds are exhausted, additional funds will be sanctioned for the scheme by factoring in the requirement of new entities.
“The leveraging of initial allocations could make spending pace 2x from 1x without making available additional funds immediately,” an official said.
Along with the just-in-time release policy, the new cash management instructions would further the goal of linking the government’s borrowing to actual spending to reduce the interest burden.
The move by the government assumes importance as officials indicate that fresh sanctions for many schemes are not being given due to the underutilisation of existing sanctions by many implementing agencies. The relaxations in norms to allocate drawing rights to new entities would fast-track spending on such schemes, they reckon.
The central sector schemes include both revenue and capital spending including for defence forces. The Budget outlay for CSSs is Rs 14.7 trillion for FY24, up from Rs 14.1 trillion in FY23RE and Rs 13.6 trillion in the covid year FY21.
Call it a reward for fiscal discipline. The Centre has earned a neat Rs 4,000 crore as interest from states in FY23, thanks to tighter norms for funds lying idle with them under centrally sponsored schemes (CSS).
Source: The Financial Express
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