Finance Ministry to extend Cash Management System to 23 Departments and Ministries

The Finance Ministry on 9 November 2011 decided to bring 23 more departments and ministries for grants under its monthly monitor with an aim at improving cash management and controlling expenditure. From 2012-13 onwards, the cash management system would apply to 46 ministries and departments.

The cash management system has been in operation since 2007-08 with an objective to ensure evenness in the budgeted expenditure and reduce rush of spending in the last quarter of financial year. It also monitors the expenditure pattern and reduces the tendency of parking funds by departments.

Also, the cash management system helps the government in planning its market borrowing calender.

Under the cash management system, the departments and ministries are required to submit monthly expenditure plan (MEP) to the Finance Ministry. They are not allowed to issue cheques beyond their quarterly limit. The maximum expenditure for the last month of the fiscal has been set at 15 per cent of the budgeted provision of the department. It is 33 per cent for the last quarter. It was decided that departments of atomic energy, home, defence, forest and environment, railways would be added to the Finance Ministry's surveillance.

The decision was taken in the wake of government finances coming under pressure because of slowdown in the industrial production, which affects its tax revenue. Indirect tax collections in October 2011 dropped by 2.5 per cent to Rs 30278 crore. Industrial production growth was only 4.1 per cent in August.