FinMin approval needed for all new schemes for efficient management of public expenditure

New Delhi: In order to ensure efficient management of government money, the Finance Ministry has asked various ministries and departments to seek prior approval from it before initiating any new scheme. In an office memorandum on ‘appraisal and approval of public funded scheme and projects’, Department of Expenditure has mandated schemes involving cost of up to Rs 100 crore approval has to be sought from the secretary of the administrative department. For project cost between Rs 100-500 crore, the Minister will have to accord approval. [caption id=“attachment_2705006” align=“alignleft” width=“380”]  Reuters[/caption] For those schemes/projects between Rs 500-Rs 1,000 crore, the projects have to be approved by the Minister in the administrative department and the Finance Minister. For those above Rs 1,000 crore, the clearance has to come from Cabinet. The Expenditure Department said that over the years the Ministries have started operating small and multiple schemes which spread resources too thinly to realise any meaningful outcomes. “…to ensure efficient management of public expenditure at all times, it is directed that henceforth no new scheme or sub-scheme will be initiated without the prior in-principle approval of the Department of Expenditure (DoE),” it said. This will, however, not apply to the project announcements made in any Budget speech. In order to rationalise schemes, the government has brought down the number of central sector schemes to 300 and the number of centrally sponsored schemes to around 30. The Finance Ministry has also asked the ministries and departments to merge, restructure or drop existing schemes that have become redundant or ineffective with the passage of time. “The DoE reserves the right to merge, restructure or drop any existing scheme or sub-scheme in consultation with the administrative department concerned to enhance efficiency and improve economies of scale in the execution of government programmes,” said the office memorandum. It has also asked the ministries to prepare the statement of Budget estimates in accordance with the approved scheme architecture and any deviation would have to be earlier agreed by the expenditure department. Stating that quality of scheme or project formulation is the key bottleneck leading to poor execution, the DoE said that for all new schemes a concept paper should be prepared while seeking in-principle approval. “While submitting proposals of continuation of ongoing schemes, a careful rationalisation must be done through merger and dropping of redundant scheme,” it said. The Finance Ministry also directed all ministries and departments to undertake an “outcome review” and re-submit their schemes for appraisal and approval at the end of the 12th Plan period in March 2017. Finance Minister Arun Jaitley in Budget had said that every scheme should have a sunset date and an outcome review. Finance Secretary Ashok Lavasa has already directed all ministries and departments to prepare an output-outcome framework for each schemes with the approval of NITI Aayog. “NITI Aayog, while approving the output-outcome framework, will kickstart a third party evaluation process for both central sector and centrally sponsored schemes. Extension of schemes from one Finance Commission cycle to another would be contingent on the result of such an evaluation exercise,” said the office memorandum. Similarly project preparation should commence with a feasibility report which would establish that the project is techno-economically sound and resources are available to finance it. In the run-up to the abolition of Plan, non-Plan expenditure differentiation at the end of 12th Plan in March 2017, the DoE said it is imperative that a plan, non-plan neutral appraisal and approval system is put into place. The Finance Ministry has also directed ministries not to float any new company, autonomous body, institution or university or special purpose vehicle without approval of the Cabinet. As regards revised cost estimates, the Finance Ministry said that any increase in costs due to statutory levies, exchange rate variation, price escalation within the time cycle and or increase in costs up to 20 per cent are covered by the approval of the original cost estimates. Besides, a ‘Revised Cost Committee’ would look into any increase in costs beyond 20 percent of the cost estimates.