The financial framework of the Central Government of India is structured around three primary funds – the Consolidated Fund of India, the Contingency Fund of India, and the Public Account of India. Each of these funds serves distinct purposes and is essential for the fiscal management of the country. This article aims to study in detail these three types of funds for the Union Government, their structure, composition, purpose, and critical roles in Indian public finance.

Funds for Union Government

• In order to cater to the diverse financial needs and priorities of the Union Government and ensure effective resource utilization, the Indian Constitution provides for the following three types of specialized funds for the Union Government.
• Consolidated Fund of India
• Contingency Fund of India, and
• Public Account of India
• They allow the Union Government to maintain transparency, accountability, and efficient utilization of public resources in pursuing its developmental and administrative objectives.
• They also help to strike a balance between the government’s need for flexibility and the legislative oversight required for the responsible use of public funds.

Constitutional Provisions Related to Funds for Union Government

The Constitutional Provisions related to the Funds for Union Government can be seen as follows:

Article 266(1) in Part XII

• Article 266(1) in Part XII of the Indian Constitution provides for the establishment of the Consolidated Fund of India.

Article 266(2) in Part XII

• Article 266(2) in Part XII of the Indian Constitution provides for the establishment of the Public Account of India.

Article 267 in Part XII

• Article 267 in Part XII of the Indian Constitution provides for the establishment of the Contingency Fund of India.

Each of these funds has been discussed in detail in the following sections.

1. Consolidated Fund of India

The Consolidated Fund of India is the primary fund for the Union Government to which all receipts are credited and all payments are debited.

Sources of Revenue for Consolidated Fund of India

The sources of revenue for Consolidated Fund of India include:

• • All revenues received by the Government of India,
  • All loans raised by the Government by the issue of treasury bills, loans or ways and means of advances, and
  • All money received by the government in repayment of loans.

Expenditures from Consolidated Fund of India

All the legally authorized payments on behalf of the Government of India are made out of this fund.

Operation of Consolidated Fund of India

The Consolidated Fund of India is operated as per Parliamentary law. It means that no money out of the Consolidated Fund of India can be appropriated (issued or drawn) except in accordance with the parliamentary law.

2. Public Account of India

The Public Account of India is the fund for the Union Government to which all other public money (i.e. public money other than those that are credited to the Consolidated Fund of India) received by or on behalf of the Government of India is credited.

Sources of Revenue for Public Account of India

The sources of revenue for Public Account of India include:

• • Provident Fund Deposits,
  • Judicial Deposits,
  • Savings Bank Deposits,
  • Departmental Deposits,
  • Remittances, etc.

Expenditures from Public Account of India

• • The Public Account of India includes funds that the government holds on behalf of other entities, including individuals, institutions, and other governments.
  • These funds are separate from the government’s revenues and are not available for general governmental expenditure.
  • Thus, expenditures from the Public Account of India involve disbursements made to return funds to their rightful owners or to meet specific obligations.
    • They are mostly in the nature of banking transactions.

Operation of Public Account of India

The Public Account of India is operated by Executive Action, which means, that the payments from this account can be made without the parliamentary appropriation.

3. Contingency Fund of India

The Contingency Fund of India acts as a reserve for emergency expenditures, providing the government with financial flexibility to address unforeseen situations.

Sources of Revenue for Contingency Fund of India

Amounts determined as per the Contingency Fund of India Act, 1950 are credited to the Contingency Fund of India, from time to time.

Expenditures from Contingency Fund of India

The fund is used for urgent and unforeseen expenditures.

Operation of Contingency Fund of India

• • The Contingency Fund of India is operated by Executive Action, pending its authorization by Parliament.
  • The Fund is placed at the disposal of the President of India and is held by the Finance Secretary on behalf of the President of India.

Significance of Funds for Union Government

Significance of Consolidated Fund of India

• • Promotes Legislative Oversight: By requiring parliamentary approval for all withdrawals, the Consolidated Fund of India promotes transparency and prevents unauthorized expenditure.
    • This, in turn, promotes legislative oversight of public finances.
  • Promotes Expenditures Planning: Expenditures from the Consolidated Fund of India through budgetary appropriation facilitates structured financial planning.
    • This, in turn, enables effective allocation of resources, aligning spending with national priorities and legal mandates.

Significance of Contingency Fund of India

• • Financial Flexibility: The Contingency Fund of India provides critical financial flexibility, allowing the government to respond swiftly to unforeseen expenditures or emergencies.
    • This ensures that urgent needs are met without procedural delays, stabilizing government functions during crises.
  • Rapid Response Capability: The Contingency Fund of India allows for immediate financial intervention in case of natural disasters, economic crises, or other unexpected events, enabling the government to address emergencies promptly without waiting for parliamentary approval.

Significance of Public Account of India

• • Efficient Management of Public Fund: The Public Account of India ensures proper management of public funds, maintaining public trust and accountability.
  • Dedicated Handling of Special Funds: The Public Account of India supports the efficient operation of financial transactions involving public money held in trust, providing clear segregation from the main government revenue stream and ensuring that these funds are used appropriately.

Overall Significance of Funds for Union Government

• • Enhanced Financial Clarity – By maintaining a clear distinction between the three funds for Union Government – Consolidated Fund of India, Contingency Fund of India, Public Account of India – the financial framework enhances clarity and accountability in the use of government and public funds, fostering trust in government financial practices.

        The three funds for the Union Government – Consolidated Fund of India, Contingency Fund of India, and Public Account of India – form vital components of the country’s financial architecture. Collectively, they ensure that the Union Government’s financial operations are conducted efficiently and transparently. This robust financial architecture not only supports the government in meeting its financial obligations but also fosters public confidence by upholding principles of accountability and responsible governance in the management of national finances.

Charged Expenditure

The government expenditures from the Consolidated Fund of India consist of two types of expenditures:

• Expenditures ‘Charged’ upon the Consolidated Fund of India – Also known as Charged Expenditures, they are non-votable by the Parliament.
• They can only be discussed by the Parliament, but cannot be voted upon.
• Expenditures ‘Made’ from the Consolidated Fund of India – Also known as Non-Charged Expenditures, they have to be voted upon by the Parliament.

List of Charged Expenditures

The list of the charged expenditures is as follows:

• Emoluments and allowances of the President and other expenditures relating to his/ her office.
• Salaries and allowances of the Chairman and the Deputy Chairman of the Rajya Sabha and the Speaker and the Deputy Speaker of the Lok Sabha.
• Salaries, allowances, and pensions of the judges of the Supreme Court.
• Pensions of the judges of High Courts.
• Salary, allowances, and pension of the Comptroller and Auditor General of India.
• Salaries, allowances, and pension of the chairman and members of the Union Public Service Commission.
• Administrative expenses of the Supreme Court, the office of the Comptroller and Auditor General of India, and the Union Public Service Commission including the salaries, allowances, and pensions of the persons serving in these offices.
• The debt charges for which the Government of India is liable, including interest, sinking fund charges, redemption charges, and other expenditures relating to the raising of loans and the service and redemption of debt.
• Any sum required to satisfy any judgment, decree, or award of any court or arbitral tribunal.
• Any other expenditure declared by the Parliament to be so charged.