Role of Parliament in Financial Oversight

As per the Constitution of India, Legislature, Executive and Judiciary are the essential branches of the Indian political structure. Among these three branches, the significance of the Executive and the Legislature is very high due to the administrative, political and financial functions they perform.

Against this backdrop, let us try to understand the existing financial functions of the Parliament and the steps that should be taken to improve its financial oversight.

Primarily, the Indian Parliament performs four major functions –

i. Representation of aspirations of citizens

ii. Enactment of Laws

iii. Holding the executive accountable for its policies and actions

iv. Oversight of the Government’s financial activities

Among these four functions of the Parliament, the oversight of the Government’s financial activities is considered as the most important as it is directly linked to the development of the nation.

Probable Questions for IAS Main Exam

Q1. “Merging of Railway Budget with the General Budget will hamper the Parliament's financial oversight of Indian Railways.” Comment.
Q2. “Over the years, the quality of Parliament’s financial oversight of the Executive has declined.” Discuss.
Q3. Enumerate the steps that should be taken to improve the Parliament’s financial oversight of the Executive.

The Parliament’s oversight of the government’s financial activities primarily involves two functions, namely, scrutinising and sanctioning the government’s expenditure proposals and examining the efficiency of government functioning in terms of spending the money allocated.

Existing mechanisms of financial oversight

The existing mechanisms of financial oversight are – scrutiny of the budget presented in the Parliament by the Finance Minister and the review of the budget by the Parliamentary Committees.

Scrutiny of the Budget

The Parliament represents the will of the people. It has the necessary authority and is responsible to ensure that the money collected from the public in the form of taxes and cesses is spent efficiently and effectively. The Parliament achieves this objective by scrutinizing the budget, which involves four crucial steps –

i. General discussion of Budget proposals

ii. Study of Demands of Grants by Department Related Standing Commitees (DRSCs)

iii. Voting on Demands for Grants

iv. Passage of Appropriation and Finance Bills

• The general discussion on the Budget is held a day after its presentation by the Finance Minister in the Lok Sabha. However, the discussion at this stage is confined to the general examination of the Budget and policies of taxation and does not involve a vote.

• After the general discussion, Parliament goes into recess for about 3 weeks. During this time,  the DRSCs examine detailed estimates of different ministries’ expenditure proposed, which are known as the Demands for Grants.

• The submission of reports is followed by a discussion on the Demands for Grants of ministries after which the Lok Sabha votes on these.

• After the passage of the Demands for Grants, they are consolidated into an Appropriation Bill.  This bill seeks to withdraw funds from the Consolidated Fund of India (CFI) for the sanctioned expenditure.

• Finally, the Finance Bill, which relates to the imposition and rates of taxation, and the Appropriation Bills are voted upon.

Review by Parliamentary Committees

Parliamentary committees are the most important instruments of the legislature. Broadly, there are two types of committees relevant to the budgetary process – Departmentally Related Standing Committees (DRSCs) and Financial Committees.

While DRSCs are responsible for pre-approval scrutiny of the proposed Demands for Grants, the Financial Committees are involved in the post-facto examination of the usage of the allocated funds.

Departmentally Related Standing Committees (DRSCs)

These committees scrutinise Demands for Grants of ministries and table the reports for discussion in the Lok Sabha. However,  the committees cannot suggest cut motions.

In the Budget Session of 2014-15, due to the paucity of time, the Demands for Grants were not referred to DRSCs. Being an election year, the Committees had also not been constituted in time for such a review.

Financial Committees: They scrutinise and exercise parliamentary control over the finances of the executive and table the findings in the Parliament. This elicits a response from the government highlighting the recommendations of the committee. Based on this, the committee prepares an Action Taken Report (ATR) and lays it on the table of the House.

There are three Financial Committees – Public Accounts Committee (PAC), Estimates Committee and Committee on Pubilc Undertakings.

While the PAC ensures that the government is spending money for the purpose for which Parliament voted upon, the Estimates Committee examines that whether the money allocated conforms to and is well within the limits of the policy implied in the estimates.  Similarly, the Committee on Public Undertakings examines the reports of the Comptroller and Auditor General of India (CAG) on public undertakings.

Steps to strengthen financial oversight by Parliament

Following are some of the measures that can be implemented to strengthen the financial oversight by the Parliament over the executive.

Linking Financial Outlays to Outcomes

• At present, there is no direct linkage between the amount allocated for a ministry or department and the outcomes.

• This tendency has been resulting in the wastage of precious financial resources and the efforts of the administration.

• Hence, in order to bring the principle of – Authority should Commensurate with Responsibility – in to practice, adequate measures should be taken to link allocation in the Budget to actual outcomes.

Establishing Parliamentary Budget Office (PBO)

• Typically, a Parliamentary Budget Office is a specialised body involved in budget-related and financial research for the Parliament.
• These kinds of offices  are already existing in the developed countries such as the US, the UK and Australia.

Strengthening Public Accounts Committee

• Reports of the PAC must be discussed in the Lok Sabha through a formal motion moved by the Finance Minister.

• This measure is expected to ensure that reports of the committee are debated and discussed in the House in detail.

• Further, steps should be taken to increase the number of reports tabled by the PAC. For instance, the average number of reports submitted by the PAC has fallen to 10-20 reports per year since the 6th Lok Sabha.

Strengthening Estimates Committee

The  National Commission to Review the Working of the Constitution (NCRWC) recommended that the Estimates Committee should start examining a strategy paper detailing the objectives of the Budget. This initiative is expected to better inform the general debate.

Scrutiny of Supplementary Demands for Grants

• At present, the Supplementary Demands are not scrutinised by the DRSCs.

• Hence, an appropriate system should be evolved by which these grants are discussed by DRSCs, and consequently, the Parliamentary oversight is strengthened.

• Besides, the Estimates Committee should also examine why there was a need for Supplementary Demands, and why these could not be anticipated in the initial Demands itself.

Conclusion

Over the last three decades, the expectations of citizens from the government has increased multifold due to the social, economic and technological changes took place in the Indian society. These expectations can be met only when the Government spends the tax payer’s money in an efficient and effective manner. Towards this end, the Parliament must play a key role in the coming years.