Management of State Finance Sib Sankar Banik, W.B.A.&A.S Internal Audit Officer Finance (Internal Audit) Deptt.

Functions of the Finance Deptt To provide financial resource for carrying on different activities of the Govt. To raise financial resource through various means To prepare the Annual Financial Statement or the Budget for the next financial year. To conduct pre-auditing for according administrative & financial sanction against a proposed expenditure.

Functions of the Finance Deptt(Contd) To lay down Financial Rules & Service Rules and to oversee implementation of these Rules. To function as the nodal Deptt for the Finance Commission (Central) & also for the State Finance Commission. To function as the nodal Deptt for different matters relating to CAG’s audit. To carry on internal audit of different Govt Deptts. To co-ordinate with financial institutions to oversee institutional finance.

Directorates/Wings under the Finance Deptt Directorate of Treasuries. Directorate of Commercial Tax. Directorate of Registration. Directorate of Excise. Directorate of agricultural income-tax. Directorate of Entry Tax. Internal audit wing. West Bengal Infrastructure Dev & Finance Corporation.

Govt Accounts maintained in 3 parts Consolidated Fund. Contingency Fund. Public Accounts.

Three types of inflow & outgo Revenue. Capital. Loan.

Accounting Code Controller General of Accounts, an officer of the Finance Ministry of the GOI, prescribes the accounting code which is more or less uniform for the whole country. In West Bengal we follow a 14-digit code for Receipts & a 17/19 digit code for expenditure.

Accounting code for Expenditure Major Head-4digits-classification of expenditure according to function Sub-major Head—2 digits; sub-classification Minor Head—3 digits; programme NP/SP Scheme Head—3 digits; name of the scheme V/C Detailed Head-2 digits Sub-detailed Head—2 digits; not required always.

Accounting Code for Receipts. 14 digits. Example 0049 Interest Receipts-04Interest Receipts of State Government -190 Interest from Public Sectors & other undertakings-048 Interest on Loans to West Bengal State Electricity Distribution co Ltd -07 interest.

Accounting code (contd) Major Head for Revenue Receipts starts with 0020 and ends at 1603. The first digit of Major Head of Revenue Expenditure is either 2 or 3. The first digit of Major Head of Capital Expenditure is either 4 or 5. The first digit of Major Head of Loan Head is 6 or 7. The accounting code under Loan Head is the same both for Receipts & Expenditure.e.g. advance for purchase of motor car is given under7610-00-202-NP-001-26 Loans and the loan is recovered under the same Head. The first digit of Major Head under Public Account is 8. Major Head for P.L A/C is 8443; that for L.F A/C is 8448. Interest is paid under2049; Interest receipts is credited under 0049. Pension payment is made under 2071. Reimbursement from GOI against IAS Officers’ pension is credited under 0071. New Scheme Head can be opened with the approval of F.D & A.G.

Govt Receipts-Tax&Non-Tax and other Receipts. Sales Tax/ Vat, Excise Duty on liquor, Stamp Duty/Registration Fees, Motor Vehicles Tax etc are tax revenue of the State Govt. Land Revenue & Cess, Royalty on minerals. Non-Tax Revenue– user charges and fees. Interest Receipts. Loan Receipts. Finance Commission Grants, Plan Grant, other plan and non-plan grants given by different Ministries.

Central Devolution The State Govt gets a share of Central Taxes as Central Devolution, as decided by the Central Finance Commission.The Central Devolution is released in 14 monthly instalments (in March 3 instalments are released)& credited to the State exchequer on the first of every month.

Borrowings Central Loans—EAP,NSSF etc (Head of A/C 6003) Internal Debt—Market Borrowing, RIDF Loan etc (Head of A/C 6001) No State Govt can borrow without the permission from the Ministry of Finance. All external loans are routed through the DEA on back to back basis. The size of the annual borrowing is fixed by the Planning Commission at the time of plan discussions.

Resource for the Budget Own tax & non-tax anticipated rev and other revenue receipts, central devolution, non-plan grants from the GOI like the Finance Commission grants & Plan grants of different Ministries like BADP, JNNURM less anticipated Non-Plan revenue expenditure is called Balance From Current Revenue or BCR. This plus surplus/ deficit, if any, from the Public Account plus the borrowing, as fixed by the Planning Commission, and plan grant as decided in the CM- Dy Chairman meeting in the Planning Commission determines the State plan size. Centrally sponsored schemes like ICDS. Central Sector Schemes like Establishment of fast Track Courts.

Allocation of funds to different Deptts Once the plan size is finalised, Dev & Planning Deptt in consultation with the Finance Deptt, finalizes the plan size of individual Deptts and intimate to them around Feb end asking them to submit detailed Budget estimate for Plan to the F.D. Accordingly the Deptts submit their Budget estimates for the next F.Y. along with Revised estimates for the current year under their respective Demand Nos allocated by the A.G. The non-plan size of each Deptt is finalized by the Finance Deptt much before when the resource estimates are prepared. That time (around Oct) non-plan budget estimates for the next F.Y as well as Revised Estimates for the current year are furnished to F.D by each Deptt.

Placement of AFS & Introduction of Bills Thereafter the Finance Minister prepares the AFS & introduces the same in the Assembly. He also introduces the Finance Bill (containing new Taxation proposals for raising the anticipated revenue ) and the Appropriation Bill,seeking approval of the Expenditure Budget. He introduces another Appropriation Bill (Vote on Accounts Bill), seeking approval for incurring expenditure for the first 4 months of the F.Y, pending completion of Budget discussions on individual demands. At the same time Departmental Ministers place their Budget speeches, seeking approval of their respective demands, in the Assembly & they introduce their demands on the alloted Dates. Once the Demands are discussed and passed, they become Grants. F.D. makes quarterly allotments to the Deptts for incurring expenditure.

Various Deficits Balance From Current Revenue (BCR): Rev Receipts less Non-plan Rev Expenditure. Rev Deficit: Rev Receipts less Rev Expenditure. Fiscal Deficit: Rev Deficit + Capital Expenditure +Net lending. This is met by borrowing. Fiscal Deficit is generally expressed as a percentage of GDP.

Calculation of Fiscal Deficit from the Budget Document of 2012-13. Revenue Deficit: Rs 6858.01cr page 13,vol 9 Capital expenditure -page 2,vol 9 - Social services/Rs2885.83cr GeneralservicesRs 358.12 cr -Economic services/Rs5036.92cr -On a/c New program Rs 122.00cr ---------------------------Rs8402.87-cr---------------------- Net Lending RS716.01cr less Rs 53.60cr(loan recovery) page 1,vol 9 i.e Rs 662.41cr -Fiscal Deficit--------Rs 15,923.29cr—page 13,vol 9---------------------------------------------------------------------

How the fiscal deficit is being met Market Loans Rs 20071.40cr Loans from GOI/ 695.79cr page 1 Other loans Rs 5775 .54cr Total Rs26,542.73cr Less Repayment/R7,452.24cr page 2 Less other receipt/R3173.20cr page 4 Less closing balance of prev year Rs 3cr page61of FM’s speech TOTAL Rs 15,914.29cr Fiscal deficit Rs 15,923.29cr This means there is a gap of Rs 9 cr which tallies with the figure at page 61 of FM’s Budget speech.

Daily Statement from CAS, Nagpur Previous day’s closing balance Receipts at RBI during the day Payments at RBI during the day Receipts at authorised bank branches Payments at authorised bank branches Inter Govt transactions during the day(IGA). Closing balance

Receipts Tax Receipts Non-tax Receipts Other Receipts. Devolution from the Centre Plan Grants from the Ministry of Finance Grants from different Ministries routed through CAS, Nagpur. Loan release by DEA under different EAPs. Loan from the Centre. Internal Debt.

Payments Salary payments Payments against non salary items Payments against pensionary benefits Plan expenditure Expenditure of engineering Deptts against LOC Central loan repayment, interest payment. Other loan repayments/ interest payments.

RBI Advances A minimum balance of Rs 2 cr is to be kept with RBI. If the closing balance becomes negative, RBI provides Ways & Means Advance—Normal & Special—up to a pre –determined limit. If the balance is still negative, RBI Provides Overdraft to be cleared in 12 working days.