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1. INTRODUCTION OF INFORMATION
TECHNOLOGY
Information technology (IT) is "the study, design, development,
implementation, support or management of infotech". Information
technology is a general term that describes any technology that helps to
produce, manipulate, store, communicate, and/or disseminate
information. Information refers to data that has been organized and then
communicated. Information technology is a broad term used to refer to
any form of technology used to create, transfer, or store information in all
of its various forms (text, images, sound, multimedia files).
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other than calculations. Computer science became an academic specialty,
creating computer science departments and classes. As these classes
took shape, separate branches of computer science became distinct areas
of study. Today, Information Technology departments use computers,
data centers, servers, database management system, specialized
software applications and more, managed by system and database
administrators.
From To
IT as a sector IT as an Industry
The most important thing that came out from this was the advent of
information technology as an industry. In the beginning IT was treated at
par with conventional manufacturing industry, but later on it started
receiving the necessary support as a non conventional service industry.
National Association of Software and Service Companies (NASSCOM) was
established in 1988 as the business strategist of InfoTech for the
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Government of India. NASSCOM is dedicated to framing policies that focus
on the interdependence of business opportunities and social environment.
The main focus of NASSCOM for IT is to
Even before this time, during the erstwhile license raj, Tata Consultancy
Services Ltd was established with Mr. F C Kohli at the helm. Mr. Kohli is
many times referred to as the father of Indian Software Industry. Mr. Kohli
was the first person to talk about Tandem, first to import an IBM 3090,
first to maintain that mainframes are not dead, and to question the
openness of open systems-even before most of the world addressed these
concerns.
The birth of software industry in India began in 1970 with the entry of
Tata Consultancy Services Ltd (TCS) into the domain of outsourced
application migration work. In the late 1960’s Tata’s created TCS as a
central service center for TATA group companies. A few MIT trained Indian
professionals were recruited and a large computer system was imported.
With IBM having been thrown out of India, the concept of outsourcing
application development work had become a necessity for Indian
companies. Utilizing its excess computer capacity, TCS began doing
outsourced application work for organizations such as Central Bank of
India and Bombay Telephones. Within a few years TCS began sending
young Indian engineers to a joint venture partner in the United States,
Burroughs for training. The trainee engineers excelled at doing platform
conversions and TCS started earning conversion assignments for its
engineers in Germany and elsewhere. Following the success of TCS many
new companies were set up in India. During the years 1968-1984, four
type of companies interlinked in direct and indirect ways to facilitate body
shopping (Indian engineers going overseas to do software programming
onsite). There were established companies like TCS and Infosys
Technologies which supplied programmers to large multinationals in IT
primarily in the US. These multinationals also recruited programmers
through local US companies established by Indians living in the United
States. Such companies in turn recruited manpower through local search
agents (small companies run by Indians living in the United States). These
agents from several states in the United States would contact local agents
in India from a multitude of small companies and operators. The
responsibility of collecting resumes, forwarding them to U.S. placement
agents preparing visa and contract finalization with the programmers was
done by the agents in India. The programmers were paid low wages.
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Commissions were charged by different members of the supply chain.
Sometimes there were subagents spread in different cities and towns in
India. There was an interesting network among revolving players.
Programmers who returned to India after a stint overseas would join a
pool of software engineers who could be hired by the established
companies in India. Often programmers sent onsite by large Indian
companies would move laterally to another assignment in the United
States through a local US agent to prolong their US experience. Later they
would return to India and be in the market for local Indian agents to hire
them. The Indian Diaspora had played a key role in the bodyshopping
exports. Several reports also suggest several instances where Indian
immigrants in the United States helped US buyers to locate Indian
suppliers. Field interviews with US customers reported that the impetus
for outsourcing to India came from employees of Indian origin.
Bodyshopping was and continues to be an attractive strategy for new
entrants into the industry, requiring nothing more than knowledge and
established relations with few potential clients.
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In this period the Indian government played a facilitating role in advancing
the industry & enabling offshore work in India. Recognizing the growth
potential of the software industry, the government in the 1980s took key
policy actions to open up the sector. Further policy reforms enacted since
1990s have facilitated development of telecommunications and other
infrastructure required for offshore work. In 1990 the government created
software technology parks (STPs) in 39 locations across India to provide
software companies with access to high speed data communications and
single window clearance for regulatory compliance. While few of the larger
firms have made use of STP’s they have provided opportunities for new
firms to launch, and smaller firms to grow, with little investment.
The Indian software industry is now in its third phase- that of take off.
Today most leading companies are operating in the high end software
services business and are also making efforts to enter the products
segment. A new breed of companies, led by second generation software
entrepreneurs, is setting up product-oriented companies. The industry has
weathered ups and downs in the global market, maintaining a high rate of
growth. The industry moved centre stage in the domestic media because
of its visibility in the United States, high market capitalization, and wealth
creation for its employees.
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1.5 Impact of Information Technology Industry on Indian
Economy
The success of the Indian software industry has had wide-ranging effects
across the Indian economy. Policy changes to enhance exports are
facilitating rapid development of a domestic IT market, offering efficiency
gains through adoption of information technologies. In sharp contrast to
even 15 years ago, Indian business, government, and consumers have
ready access to the newest software products and imported hardware.
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In their quest to climb the value chain, Indian software firms ensured
product quality and reliability by adopting internationally recognized
standardized work processes. An increasing number of firms have met
international certification requirements for key quality standards. For
many, this was an exercise in brand building but the processes put in
place left their hallmark on the quality of software products and services.
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play a role in reducing enterprise costs, not merely with cost cutting but
by changing business processes, workforce practices and information use.
Movement toward SaaS and cloud computing, shared services, and more
selective outsourcing will take firmer shape as near-term priorities to
address constrained IT budgets.
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India’s technology and business services industry has flourished in the last
decade and a half. A bright future lies ahead and the industry has much to
look forward to, with the potential to quadruple its revenues over the next
decade. Several macro-economic and social trends will support the rise of
the IT-BPO sector in the future, in core and emerging markets. The
government needs to continue nurturing this industry with incentives and
a simplified tax structure that will promote investments, and also will need
to drive the domestic industry by spending on e-Governance projects.
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services in India. The company is listed on Bombay Stock Exchange and
National Stock Exchange in India. TCS offers a consulting led, integrated
portfolio of IT and IT enabled services. The areas of business of TCS
include IT services, IT infrastructure services, enterprise solutions,
consulting, business process outsourcing, business intelligence and
performance management, engineering and industrial services, IT and
business solutions for small and medium business enterprises. The
industry verticals of TCS include banking and financial services, insurance,
telecom, media and information services, government, healthcare and life
sciences, energy and utilities, retail and FMCG, travel, transport and
hospitality, Manufacturing, high tech and professional services. TCS has
more than 50 direct and indirect subsidiaries. TCS is headquartered in
Mumbai and operates in more than 50 countries through more than 170
offices. In the year 2009-2010 TCS earned consolidated revenue of Rs.
30,029 crore, an operating profit of Rs. 8018 crore, and a PAT of Rs. 7001
crore. It is by far the market leader in India’s software industry.
As per the words of Mr. N Chandrasekaran, Chief Executive Officer and
Managing Director TCS, Tata Consultancy Services plans to keep its focus
on simple things like remaining close to its customers while helping them
to enhance efficiency and enable their growth. TCS understands that it
must remain frugal and efficient to prosper under changing dynamics of
the market. With increasing verticals across Banking, Financial Services
and Insurance (BFSI), Telecom, Manufacturing and Retail sectors TCS has
all it takes for growth. The company is also looking at expanding overseas
as well as developing talent. High profile contracts from the Indian
government have ensured domestic growth for TCS. Thus Tata
Consultancy Services looks all set to enjoy a long and fruitful life.
2.2 Vision
Global Top 10 by 2010.
2.3 Mission
To help customers achieve their business objectives, by providing
innovative, best-in-class consulting, IT solutions and services.
2.4 Values
Leading change. Integrity. Respect for the individual. Excellence. Learning
and Sharing.
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2.5 Things that specifically happen at TCS Gandhinagar:
TCS Gandhinagar is a part STP (Software Technology Park) and part non
STP. The domain within TCS Gandhinagar where I worked is non STP. The
critical point worth mentioning here is that in an STP only export work can
be done. Thus if TCS is developing same kind of solutions for a domestic
client and a foreign client, the former will come under non STP whereas
the latter will come under STP.
2. INDUSTRIAL ANALYSIS
It is extremely difficult to ascertain the exact future demand for IT
services as the industries across the world are immense and their services
requiring IT support galore. But the present status of the demand can be
ascertained by knowing the exact number of clients of different
companies. TCS has a client base of 1034 active clients, Infosys which is
the next biggest software service provider has an active client base of
575, Wipro has a client base around 350, HCL technologies has a client
base of around 300. These 4 are the top IT services providers of the
country. They offer software services and consulting services. However
Wipro and HCL also offer hardware which neither TCS nor Infosys offer.
But as per the international norms hardware as well as software is a part
of Information Technology. Apart from these 4, several other companies
such as Mahindra Satyam, Patni Computer Systems, i-flex Solutions, L/T
Infotech etc are also some of the big names of the Indian Information
Technology industry. The technology in the IT industry is a fast changing
one as it acts as a way of unique positioning by different companies. One
more thing worth mentioning is that starting an IT firm is not at all difficult
from the technology point of view. Any person with a bit of computer
knowledge can start an IT firm and can then scale the way up. This has
been precisely the reason for so many garage startups of IT firms all over
the world. Even from investment point of view starting an IT firm is not at
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all difficult, as all one requires is a room and some computers. But once
started, the scale up does require lots of investments. These investments
arise due to marketing, adapting to the latest technology, surviving in a
highly competitive industry etc. It is because of this reasons that only a
handful of companies have become a force to reckon with.
IT Industry In India
Political:
• Political stability: Indian political structure is considered Stable
enough expect the fact that there is a fear of hung Parliament (no
clear majority). (+ve)
• U.S. government has declared that U.S companies that Political
outsource IT work to other locations other than U.S. will not get tax
benefit. (-ve)
• Government owned companies and PSUs have decided to Give
more IT projects to Indian IT companies. (+ve)
• Terrorist attack or war. (-ve)
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Economical:
• Global IT spending (demand). (-ve)
• Domestic IT Spending (Demand): Domestic Market grow by 20% &
reach approx USD 20 billion in 2008-09 Nasscom (+ve).
• Currency Fluctuation (-ve)
• Real Estate Prices: Decline in real estate prices has resulted
reducing the rental expenditure (+ve).
• Attrition: Due to recession, the layoffs and job-cuts have resulted
in low attrition rate (+ve).
• Economic attractiveness: Due to cost advantage and other factors
(+ve)
Social:
• Language Spoken: English is widely spoken language in India.
English medium is the most accepted medium of education.(+ve)
• Education: Large number of technical institutes and universities
over the countries provide IT education. (+ve)
• Working age population. (+ve)
Technological:
• Telephony (+ve)
• India has the world lowest call rates
• Expected to have total subscribers base of about 500 million
by 2010.
• India has the second largest telephone network after china.
• Enterprise telephone services, 3G, Wi-max, VPN, poised to
grow.
• Internet Backbone: Due to IT revolution in 90’s india is well
connected with undersea optical cables. (+ve)
New IT Technologies: Technologies like SOA, web 2.0, High
definition content, grid computing, and innovation in low cost
technologies is presenting new challenges & opportunities for Indian
IT industry.(+ve)
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Today's business environment is extremely competitive and in economics
parlance where perfect competition exists, the profits of the firms
operating in that industry will become zero. However, this is not possible
because, firstly no company is a price taker (i.e. no company will operate
where profits are zero). Secondly, they strive to create a competitive
advantage to thrive in the competitive scenario. Michael Porter,
considered to be one of the foremost gurus' of management, developed
the famous five-force model, which influences an industry.
In
the
case
of
both
software outsourcing and BPO, for TCS there are few important suppliers,
because TCS’s inputs are standard commodities and there is little
opportunity for differentiation on the input side.
The four forces that are most problematic are the bargaining power of
customers, the threat of new entrants, the threat of substitutes, and the
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competitive rivalry with existing players. We examine each of these four
forces in their turn for both software services outsourcing and BPO.
In the early days of the software exporting business, the software vendor
market was dominated by a few large global suppliers such as IBM. Indian
firms were viewed as too small to matter for obtaining significant
business. In addition, they competed actively with each other at the low-
end. The result was that TCS and its Indian peers chose components of
the business that were relatively low value-added and relatively simple to
do.
TCS also faced a client market that was dominated by the large banks and
insurance companies. While it actively sought alliances with larger
vendors as a competitive strategy, its most successful strategy was to
directly approach clients and accept the lower rates that its competitive
position necessitated.
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competition through product differentiation, in each market segment
there continue to be numerous players.
However, there are some risks to this strategy. TCS’ large size suggests
that it may have already maximized economies to scale in applications
development. Adding scope, however, offers the potential for large gains
since it necessarily involves higher value-added activities. In the early
days, this was difficult, partly due to the technical difficulty in de-
integrating the value-chain beyond the modularization of applications
programming. Over the past few years, however, engineering services,
systems design, and systems integration work have increasingly been
outsourced (within the U.S.), suggesting that, if the skills are at hand, such
work could be done in India.
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sufficiently dissimilar to overseas client conditions that local domain
expertise is of low relevance.
The threat of substitutes in software services does exist as technology
tools to speed coding etc. However, at this time the threat of substitutes
seems rather remote.
3.3 SWOT Analysis of Industry
STRENGTHS:
WEAKNESSES:
OPPORTUNITIES:
THREATS:
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•Increased competition from foreign firms like Accenture, IBM etc.
•Increased competition from low-wage countries like China,
Indonesia etc.
Strength:
Weakness:
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•Limited Product Line
Opportunities:
Threats:
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• Policy matters relating to Information Technology, Electronics and
Internet.
• Initiatives for development of Hardware / Software industry
including knowledge based enterprises, measures for promoting
Information Technology exports and competitiveness of the
industry.
• Promotion of Information Technology and Information Technology
enabled services and Internet.
• Assistance to other departments in the promotion of E-Governance,
E-Infrastructure, E-Medicine, E-Commerce, etc.
• Promotion of Information Technology education and Information
Technology-based education.
• Matters relating to Cyber Laws, administration of the Information
Technology Act. 2000 (21 of 2000) and other Information
Technology related laws.
• Interaction in Information Technology related matters with
International agencies and bodies
• Promotion of Standardization, Testing and Quality in Information
Technology and standardization of procedure for Information
Technology application and Tasks.
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units. The STP Scheme has been extremely successful in fostering the
growth of the software industry. The exports made by STP Units have
grown many folds over the years. Today the exports made by STPI
registered units are INR 215571 Crores about 90% of total software
exports from the Country. Under Software Technology Parks scheme apart
from exemptions available for capital goods (with a few exemptions) there
are also exemptions from service tax, excise duty, and rebate for
payment of Central Sales Tax. But the most important incentive available
is 100 percent exemption from Income Tax of export profits, which has
been extended till 31st March 2011. The strength of the scheme lies in the
fact that, it is a virtual scheme, which allows, software companies to set
up operations in the most convenient and cheapest locations and plan
their investment and growth solely driven by business needs. STP Scheme
is a pan India Scheme, which has centers spread across India; over 8000
units are registered under STP Scheme.
The scheme is ideal for bigger Industries and has a significant impact on
future Exports and employment. The SEZ Scheme offers similar benefits
to SEZ units as compared to those under STPI in respect of indirect taxes,
with some minor differences in operational details. There is a however a
significant difference, in respect of income tax holiday. In SEZ Scheme the
exemption from income tax is tapered down over 15 years from the date
of commencement of manufacture. There is 100% exemption of export
profits from income tax for the first five years, 50% for the next five years
and 50% for the five years subject to transfer of profits to special
reserves.
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oriented businesses. The SEZ Act 2005 envisages key role for the State
Governments in Export Promotion and creation of related infrastructure.
The diagram above shows the relative market share of major companies
in the IT industry. As seen TCS as a company has the largest market
share. Although the share of others appears to be huge, on dividing this
segment into hundreds of companies one will understand that the relative
share of each company in this segment will be small. Companies like
Infosys and Wipro are giving a good battle to TCS. Cognizant has also
emerged as a tough competitor in recent times.
Till the year 2007 IT industry was booming. Every one, right from
companies, clients, employees, shareholders, students was gaining. But
with the advent of global financial meltdown, the growth in revenues of
these industries went down drastically. So the past couple of years were
turbulent for the industry on a whole as budgets on IT worldwide were
reduced. However from around May 2009, the situation has improved and
now the industry looks set to enjoy another bout of growth for a long time
to come. However the focus of corporate clientele has changed. Clients
are becoming increasingly unwilling to offer high prices for software
support as in the past. As per an article published on June 23, 2010 in The
Economic Times, the Indian tech firms will be facing decrease in margins
over the next 2-3 years. The article stated explicitly that despite of growth
in revenues, the profit margins will be under pressure. However as per the
article this was not at all a cause for worry. Apart from this the article also
stated that the corporate clients are increasingly shifting from heavy
implementation projects to a SaaS (Software as a Service) model. Thus
though the future offers lots of opportunities, they won’t come without
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challenges for this industry. Having said that this industry’s one phase has
reached maturity and now another phase is all set to start from the
introductory stage. One more challenge for each firm will be to take care
of the high attrition rate that has plagued the entire industry. Each firm
will have to review its HR strategy in the light of new developments.
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4.2 What is Public Financial Management?
Having used the term Public Financial Management for quite some time, it
becomes necessary to explain the exact nature of it so as to get a better
understanding of IFMS.
• Fiscal Management:
– Aggregate fiscal position and risk are monitored and
managed.
• Budget Realism:
– The budget is realistic and implemented as intended in a
predictable manner.
• Comprehensive, Policy-based Budget:
– The budget captures relevant fiscal transactions, and is
prepared with due regard to government policy.
• Information:
– Adequate fiscal, revenue and expenditure records and
information are produced, maintained and disseminated to
meet decision-making, control, management and reporting
purposes.
• Control:
– Arrangements are in place for the exercise of control and
stewardship in the use of public funds.
• Accountability and Transparency:
– Arrangements for external transparency and scrutiny of public
finances are operating.
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GOALS CRITERIA
PFM –
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4.4 How IFMS can help to realize PFM Goals?
With an Integrated Financial Management System in place, the
Government will have an enhanced ability to manage cash, debt and
liabilities and fiscal risk. This enhanced ability will be realized through up
to date and predictive disaggregated information on monitory flows and
balances and proper information on current and predicted contingent
liabilities. The government will be in a better position to allocate resources
as it will have all the historic information on expenditures and their impact
at its beck and call. The budgets will be prepared using a tool that
realistically models relationships, is based on reliable information on
starting points, and enables alternative scenarios to be modelled. Apart
from these advantages, utilizing IFMS will help the Government reduce
financial transaction costs, enable it to compare costs between
units/activities and performance targets leading to greater efficiency.
It would be appropriate to mention here that there are certain things that
an IFMS cannot do. For instance IFMS will not be able to resolve unrealistic
budgets, weak fiscal management, inefficient use of resources, corruption
etc. IFMS is primarily a tool to upgrade systems that are sound but have
their limitations.
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The RFP process brings structure to the procurement decision and allows
the risks and benefits to be identified clearly upfront.
The RFP may dictate to varying degrees the exact structure and format of
the supplier's response. The creativity and innovation that suppliers
choose to build into their proposals may be used to judge supplier
proposals against each other. Effective RFPs typically reflect the strategy
and short/long-term business objectives, providing detailed insight upon
which suppliers will be able to offer a matching perspective.
Key Objectives to be met through generating Request for Proposals to (IT
service providers):
• Obtain correct information to enable sound business decisions.
• Decide correctly on strategic procurement.
• Leverage the company's purchasing power to obtain a favorable
deal.
• Enable a broader and creative range of solutions to be considered.
Key Benefits of generating Request for Proposals to (IT service providers):
• Informs suppliers (vendors) that your company is looking to procure
and encourages them to make their best effort.
• Requires the company to specify what it proposes to purchase. If
the requirements analysis has been prepared properly, it can be
incorporated quite easily into the Request document.
• Alerts suppliers that the selection process is competitive.
• Allows for wide distribution and response.
• Ensures that suppliers respond factually to the identified
requirements.
• By following a structured evaluation and selection procedure an
organization can demonstrate impartiality - a crucial factor in public
sector procurements.
An RFP typically involves more than a request for the price. Other
requested information may include basic corporate information and
history, financial information (can the company deliver without risk of
bankruptcy), technical capability, product information such as stock
availability (in case of IT manpower availability) and estimated completion
period, and customer references that can be checked to determine a
company's suitability.
RFPs often include specifications of the item, project or service for which a
proposal is requested. The more detailed the specifications, the better the
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chances that the proposal provided will be accurate. Generally RFPs are
sent to an approved supplier or vendor list.
The bidders return a proposal (in case of IT companies a response) by a
set date and time. Late proposals may or may not be considered,
depending on the terms of the initial RFP. The proposals are used to
evaluate the suitability as a supplier, vendor, or institutional partner.
Discussions may be held on the proposals (often to clarify technical
capabilities or to note errors in a proposal). In some instances, all or only
selected bidders may be invited to participate in subsequent bids, or may
be asked to submit their best technical and financial proposal, commonly
referred to as a Best and Final Offer (BAFO).
Thus an RFP becomes a very important instrument for getting new
projects in an IT industry. The RFP’s that I was required to read as a part
of my project included information about the client (or the purchaser), the
requirements the purchaser wanted in the system (both functional and
technical), scope of the project, current system of doing things and the
improvements in the existing system.
It is only after reading an RFP that one can fully understand the
requirements to be met through the new system.
A part of my project also included designing a response for New Pension
Scheme system which is being developed by TCS as a part of Integrated
Financial Management System. This system might be used by the
Government of Gujarat or any other state Governments as the processes
in all the state governments will be the same. In the later part of this
report I have mentioned in detail about NPS.
4.6 IFMS developed for Government of Gujarat: Some
inputs of the client
Department of Finance, Government of Gujarat, as part of its ongoing
reforms in the e-Governance sector, has taken initiative to achieve
optimum utilization of Information Technology in its functional areas.
It proposes to evolve a Comprehensive Integrated Financial Management
System by integrating various internal and external departments and
applications under its purview.
The scope of this project is to implement an Integrated Financial
Management System for Finance Department for Government of Gujarat
that will provide a long-term solution for carrying out Budgetary, treasury
and pension functions of Government of Gujarat and provide consolidated
and consistent information about the expenditures and revenues across
all the treasuries.
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i. Number of Users : 20000 Users
ii. Number of locations : 251 Offices
• 25 Admin Depts.,
• 1 Director Accounts and Treasury,
• 1 Director Pension and Provident Fund,
• 1 Examiner Local Fund,
• 25 District Treasury Offices,
• 2 Pay & Accounts Offices,
• 1 Pension Payment Office,
• 21 District Local Fund Office and
• 174 Sub-Treasury Offices
iii. Size of Data Generated :
• # of bills – 1100000
• # of challans – 250000
• # of cheques – 1050000
• # of Pensioners – 375000
• # of Employees (Pay Fixation) – 516000
• Size of Database over the period of 1 yr – 300 GB (6 months)
Requirement Analysis
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year or more). In India, the Central Government issues both Treasury Bills
and bonds or dated securities while the State Governments issue only
bonds or dated securities, which are called the State Development Loans
(SDLs). Government securities carry practically no risk of default and,
hence, are called risk-free instruments. Government of India also issue
savings instruments (Savings Bonds, National Saving Certificates (NSCs),
etc.) or special securities (Oil bonds, FCI bonds, fertilizer bonds, power
bonds, etc.) but they are usually not fully tradable and are not eligible for
meeting the SLR requirement.
The reason for studying about the Government Securities by me was that
TCS is developing a system for Gujarat Government which as a state
government raises loans from the markets as well as invests in
borrowings of the central government. In order to understand and
effectively design a computer system which will meet the stated needs of
the state governments, it becomes necessary to go through extensive
literature published by various government agencies.
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for issuance of 91 day and 182 day Treasury Bills is Rs.500 crore each
whereas the notified amount for issuance of 364 day Bill is higher at
Rs.1000 crore. Government, at its discretion, can also decide to issue
additional amounts of the Treasury Bills by giving prior notice. An annual
calendar of T-Bill issuances for the following financial year is released by
the Reserve Bank of India in the last week of March. The Reserve Bank of
India also announces the issue details of Treasury bills by way of press
release every week.
States also invest in long term or dated government securities. The states
also issue such securities for their own funding needs.
Fixed Rate Bonds: These are bonds on which the coupon rate is fixed for
the entire life of the bond. Most Government bonds are issued as fixed
rate bonds. For example – 8.24%GS2018 was issued on April 22, 2008 for
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a tenor of 10 years maturing on April 22, 2018. Coupon on this security
will be paid half-yearly at 4.12% (half yearly payment being the half of the
annual coupon 8.24%) of the face value on October 22 and April 22 of
each year.
Floating Rate Bonds: These are securities which do not have a fixed
coupon rate and the coupon is re-set at pre-announced intervals based on
a specified methodology. The coupon is re-set at predetermined intervals
(say, every six months or one year) by adding a spread over a base rate.
In the case of most floating rate bonds issued by the Government of India,
the base rate is the weighted average cutoff yields of the last three 364
day Treasury Bill auction preceding the coupon re-set date. Floating Rate
Bonds were first issued in September 1995 in India. For example, a
Floating Rate Bond was issued on July 2, 2002 for a tenor of 15 years,
maturing on July 2, 2017. The base rate on the bond for the coupon
payments was fixed at 6.50% being the weighted average rate of implicit
yield on 364 day Treasury Bills during the preceding six auctions. Further,
in the bond auction, a cut-off spread (markup over the benchmark rate) of
34 basis points (0.34%) was decided. Hence the coupon for the first six
months was fixed at 6.84%. At the next reset date after six months,
assuming that the average cutoff yield in the preceding six auctions of
364 day Treasury Bill is 6.60%, coupon applicable for the next half year
would be 6.94%.
Zero Coupon Bonds: Zero coupon bonds are bonds with no coupon
payments. Like Treasury Bills, they are issued at a discount to face value.
Capital Indexed Bonds: These are bonds, the principal of which is linked
to an accepted index of inflation with a view to protecting the holder from
inflation. Over the past 5 years, these kinds of bonds have not been
issued. But now with inputs from leading economists and financial
experts, steps are being taken to revive the issuance of the Inflation
Indexed Bonds wherein payment of both the coupon and principal
payments on the bonds will be linked to an Inflation Index (Wholesale
Price Index).
Bonds with Call/ Put Options: Bonds can also be issued with features of
optionality wherein the issuer can have the option to buyback (call option)
or the investor can have the option to sell the bond (put option) to the
issuer during the currency of the bond. A bond (viz., 6.72%GS2012) with
call / put option was issued in India in the year 2002 which will mature in
2012. 6.72%GS2012 was issued on July 18, 2002 for a maturity of 10
years maturing on July 18, 2012. The optionality on the bond could be
exercised after completion of five years tenure from the date of issuance
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on any coupon date falling thereafter. The Government has the right to
buyback the bond (call option) at par value (equal to the face value) while
the investor has the right to sell the bond (put option) to the Government
at par value at the time of any of the half-yearly coupon dates starting
from July 18, 2007.
The dated securities issued by the state governments are known as State
Development Loans. The features of SDL’s are same as central
government issued dated securities. Investments in SDL’s are also
qualified for SLR and are also eligible as collaterals for borrowing through
market repo as well as borrowing by eligible entities from the RBI under
the Liquidity Adjustment Facility (LAF).
Auctions are conducted on the electronic platform called the Public Debt
Office – Negotiated Dealing System (PDO-NDS). Commercial banks,
scheduled urban cooperative banks, Primary Dealers, insurance
companies and provident funds, who maintain funds account (current
account) and securities accounts (SGL account) with RBI, are members of
this electronic platform. All members of PDO-NDS can place their bids in
the auction through this electronic platform. All non-NDS members
including non-scheduled urban co-operative banks can participate in the
primary auction through scheduled commercial banks or Primary Dealers.
For this purpose, the urban co-operative banks need to open a securities
account with a bank / Primary Dealer – such an account is called a Gilt
Account. A Gilt Account is a dematerialized account maintained by a
scheduled commercial bank or Primary Dealer for its constituent (e.g., a
non-scheduled urban co-operative bank).
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An example of a yield based auction of a new Government
Security is given below:
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price per Rs.100 of face value of the security (e.g., Rs.101.02,
Rs.100.95, Rs.99.80, etc., per Rs.100/-). Bids are arranged in
descending order and the successful bidders are those who
have bid at or above the cut-off price. Bids which are below
the cut-off price are rejected.
Amount
Price of Implicit Cumulative
Bid No. Of bid (Rs.
Bid Yield Amount
crore)
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numbers 7 and 8 are rejected as the price quoted is less than the cut-
off price.
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In every auction of dated securities, a maximum of 5 per cent of the
notified amount is reserved for non-competitive bids. In the case of
auction for Treasury Bills, the amount accepted for non-competitive bids is
over and above the notified amount and there is no limit placed. However,
non-competitive bidding in Treasury Bills is available only to State
Governments and other select entities and is not available to the co-
operative banks.
Gilt Account: As the eligibility to open and maintain an SGL account with
the RBI is restricted, an investor has the option of opening a Gilt Account
with a bank or a Primary Dealer which is eligible to open a Constituents'
Subsidiary General Ledger Account (CSGL) with the RBI. Under this
arrangement, the bank or the Primary Dealer would maintain the holdings
of its constituents in a CSGL account (which is also known as SGL II
account) with the RBI as a custodian on behalf of the Gilt Account holders.
The servicing of securities held in the Gilt Accounts is done electronically,
facilitating hassle free trading and maintenance of the securities. Receipt
of maturity proceeds and periodic interest is also faster as the proceeds
are credited to the current account of the custodian bank / PD with the RBI
and the custodian (CSGL account holder) immediately passes on the
credit to the Gilt Account Holders (GAH).
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securities issued by the state government are traded in these secondary
market.
The Reserve Bank of India has specified certain Do’s and Don’ts for
dealing in government securities. Here is a list:
Do’s
The Don’ts issued by the central bank are not applicable to the state
government and hence are not mentioned in this report. But on seeing the
list of Do’s one can easily appreciate the need for a system which can
easily manage the investment portfolio of state governments. Such a
system has been designed by Tata Consultancy Services.
Primary Market
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of which will be collected through clearing process after which securities
are issued to them.
Secondary Market
• When the market price of the bond is less than the face value, i.e., the
bond sells at a discount, YTM > current yield > coupon yield.
• When the market price of the bond is more than its face value, i.e., the
bond sells at a premium, coupon yield > current yield > YTM.
• When the market price of the bond is equal to its face value, i.e., the
bond sells at par, YTM = current yield = coupon yield.
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• Any capital gain (or capital loss) when the bond matures or it is sold;
and
i) Coupon Yield
Illustration:
Coupon: 8.24%
Face Value: Rs.100
Market Value: Rs.103.00
Coupon yield = 8.24/100 = 8.24%
Illustration:
The current yield for a 10 year 8.24% coupon bond selling for Rs.103.00
per Rs.100 par value is calculated below:
Annual coupon interest = 8.24% x Rs.100 = Rs.8.24
Current yield = (8.24/Rs.103)*100 = 8.00%
The current yield considers only the coupon interest and ignores other
sources of return that will affect an investor’s return.
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iii) Yield to Maturity
Yield to Maturity (YTM) is the expected rate of return on a bond if it is
held until its maturity. The price of a bond is simply the sum of the
present values of all its remaining cash flows. Present value is calculated
by discounting each cash flow at a rate; this rate is the YTM. Thus YTM is
the discount rate which equates the present value of the cash flows from
a bond to its current market price. In other words, it is the internal rate of
return on the bond. The calculation of YTM involves a trial-and-error
procedure. A calculator or software can be used to obtain a bond’s yield-
to-maturity easily.
There is day count conventions used in calculating bond yields. These day
count conventions refer to the method as to how the numbers of days are
counted for calculation of prices and yields of bonds. As the use of
different day count conventions can result in different prices/ yields, it is
appropriate that all the participants in the market follow a uniform day
count convention.
For example, the conventions followed in Indian market are given below.
Bond market: The day count convention followed is 30/360 which means
that irrespective of the actual number of days in a month, the number of
days is taken as 30 per month and the number of days in a year is taken
as 360.
Illustration
Assuming that the price of a 91 day Treasury bill at issue is Rs.98.20, the
yield on the same would be
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Y = (100-98.20)*365*100/98.20*91 = 7.3521%
What is duration of a Bond?
Duration of a bond is a measure of the time taken to recover the initial
investment in present value terms. In simplest form, duration refers to the
payback period of a bond to break even, i.e., the time taken for a bond to
repay its own purchase price. Duration is expressed in number of years.
Market risk: Market risk arises out of adverse movement of prices of the
securities that are held by an investor due to change in interest rates. This
will result in booking losses on marking to market or realizing a loss if the
securities are sold at the adverse prices. Small investors, to some extent,
can mitigate market risk by holding the bonds till maturity so that they
can realize the yield at which the securities were actually bought. This is
also the reason for state governments not indulging in any kind of
secondary market transactions of the central government.
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5.7 Liquidity Management Assistance to the States
Though the receipts and the expenditure of the states are matched in the
annual State Budget, there could be temporary mismatches in the cash
receipts and expenditure during the course of the year. Central
Government and RBI have instituted mechanisms that enable States to
tide over such short term liquidly problems. These are as follows:
I. WMA Facility to State Governments
The Ways and Means Advances (W&MA) provided by RBI to the States are
governed by Section 17(5) of the RBI Act, 1934. This Section authorizes
the RBI to extend WMA to the State Governments which are repayable not
later than three months from the date of making the advances. These
advances are meant to be temporary to provide a cushion to the States to
carry on their essential activities despite mismatches on fiscal
transactions and to avoid disruptions to the normal and necessary
financial operations of the State. At present all the State Governments
except Jammu and Kashmir and Sikkim have signed such agreements with
RBI. The scheme is revised from time to time. Currently it is based on the
recommendations of the Bezbaruah Committee.
The RBI provides accommodation to the State Governments through two
facilities. These are: (i) Normal WMA facility and (ii) Special WMA facility
which is secured against Government of India securities held by the State
Governments with RBI. These facilities have been in existence since 1937
and 1953 respectively.
• Normal Ways and Means Advances
Normal WMA limits were earlier related to the minimum balance held by
each State. The present system of WMA is based upon the
recommendations of the Bezbaruah Committee under the Chairmanship of
Shri M.P. Bezbaruah. Bezbaruah Committee had recommended
substantial enhancement of limits of WMA. Based on the
recommendations of the Committee normal WMA was enhanced to Rs.
9875 crore from the earlier limit of Rs. 8935 crore from 1 March, 2006 for
26 States. The total normal WMA limit was further enhanced to Rs.9925
crore with effect from April 1, 2007 for 26 States and one UT (Pondicherry)
and continues to be the same from April 1, 2008 and April 1, 2009.
• Special Ways and Means Advances
The State Governments are sanctioned Special Ways and Means Advances
based on their holdings in Government of India (GOI) dated securities/
Treasury Bills since 1953 when a uniform limit of Rupees two crore was
allocated to each State. The limits were raised from time to time. Special
WMA Scheme continues to be linked to the investments made by State
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Governments in the Government of India securities, i.e., dated securities
and Treasury Bills as per recommendations of Bezbaruah Committee. A
lower and uniform margin of five per cent has been applied on the market
value of the securities for determining the operating limit of Special WMA.
The States are required to avail of Special WMA limits first before seeking
accommodation under the normal WMA limits.
• Overdrafts of State Governments
States' overdrafts (OD) with Reserve Bank of India represent their drawls
exceeding the authorized limits of WMA, both normal and special. The OD
regulation scheme was first introduced in 1972. Since then, the scheme
has regularly been revisited. The salient features of revised OD scheme
are as follows:
(a) The number of days that a State can be in overdraft at present is
14 consecutive working days.
(b) The norms of restricting overdraft to 100 per cent of the normal
WMA limit will continue. If the overdraft exceeds this limit for five
consecutive working days for the first time in a financial year, the
Reserve Bank will advise the State to bring down the overdraft level
within the 100 per cent of WMA limit. If, however, such irregularity
occurs on a second or subsequent occasion in the financial year, the
Reserve Bank will stop payments notwithstanding the above
provision, which permits the State an overdraft up to 14 days.
(c) No State Government will be allowed to be in overdraft for more
than 36 working days in a quarter. If this is not adhered to,
payments will be stopped. This regulation was made applicable from
April 1, 2003.
(d) The rate of interest on overdraft will be:
(i) Overdraft up to 100 per cent of normal WMA limit- two per cent
above the Repo rate, and
(ii) Overdraft exceeding 100 per cent of the normal WMA limit-five
per cent above the Repo Rate.
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(a) Advance release of States’ Entitlements of Plan and Non-
Plan Assistance
The Government of India, when requested by the States, considers the
advance release of monthly entitlements of the States consisting of
normal central assistance, share in central taxes, revenue deficit grants,
small saving loans.
(b) Ways and Means Scheme of Central Government
Ways and Means Advances are provided by the Government of India to
supplement the effort of the State Governments to meet temporary cash
imbalance. It is provided for temporary mismatch in revenue and
expenditure. Annual Budget provision for ways and means advance is
made in the Demand Head of Plan Finance-I, Division in the Department of
Expenditure. It carries a rate of interest as determined by Government of
India from time to time. At present the ways and means advances given
to the States by Government of India attract a rate of interest of 8.5%.
This advance is to be repaid within the year and cannot be spilled over to
next financial year. Amount of ways and means advance to be given to a
State and repayments is decided by the Ministry of Finance.
These are the concepts necessary to understand debt management and
cash management. To understand the financial concepts of any
Government, one must understand a concept called as budget.
5.8 What is a Budget?
References to budget can be found in Kautilya’s Arthashastra. It states
that the Chancellor should first estimate revenue from each place and
sphere of activity under different heads of accounts and then arrive at a
grand total. The actual revenue is to be estimated by adding receipts into
the treasury for current year and delayed payments received which were
due in earlier year/s. From this deduct the expenditure on king, standard
rations, other exemptions granted by King and authorized postponement
of payments into treasury. The outstanding revenues were estimated from
work under construction for which revenue will accrue on completion,
unpaid fines, unrecoverable dues, uncollectible sums, advances to be
repaid by officers etc.
The origins of the modern Budget can be traced to the Norman period,
where two departments dealt with finance- the Treasury and the
Exchequer. The Treasury received and paid out money on behalf of the
monarch. The Exchequer, had a ‘lower office’ which received money, and
an ‘upper office’, concerned with regulating the Kings accounts.
The term ‘budget’ has been derived from the old French word ‘bougette’,
which means a leather bag or wallet. The first use of the term ‘budget’
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may date back to 1733 financial statement by Walpole as Prime Minister
and Chancellor of the Exchequer. A cartoon of him opening a patent
medicine seller’s wares was published at the time, as a satirical comment
with the caption ‘The Budget Opened’. (‘Budge’ is an old word for a bag or
small case).
Initially, “budget” referred solely to the Chancellor’s annual speech on the
nation’s finances. Now, the term is used for an annual financial statement
of income and expenditure of a government.
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concurrent exercise. Revenue receipts are of two types – capital and
current receipts.
Capital receipts include repayment of loans given by the government,
receipts from divestment of public-sector equity and borrowings – both
domestic and external. Current receipts include mainly, tax revenues,
receipts by way of dividends from public-sector units and interest
payments on loans given out by the central government.
The amounts to be received by way of tax revenues is estimated on the
basis of existing rates of taxation and taking into consideration the likely
growth and inflation rate over the ensuing fiscal year.
On the capital receipts side, targeted amounts to be realized through
divestment of public sector equity and amounts to be realized by way of
repayments of loans is made. All the estimates are provided to the
revenue secretary.
STAGE 2: First estimates of deficit
After the estimates of revenue and expenditure are made, they are
matched together. This provides the first estimate of expected shortfall in
revenue to meet projected expenditure. The government then, in
consultation with the chief economic advisor, decides on the optimum
level of borrowings to meet this deficit. The figure of external borrowings
is known as much of the external borrowing by the government consists of
bilateral and multilateral assistance which is known by the time budget
exercises are undertaken. The level of domestic borrowing depends partly
on the desired level of fiscal deficit that the government targets for itself.
A part of the revenue gap is left unfilled to be met through the issue of ad
hoc treasury bills.
STAGE 3: Narrowing of the deficit
After the targets for the fiscal deficits and the overall budget deficit is
decided, any remaining shortfall is filled through a revision in tax rates if
feasible , keeping in mind the fiscal incentive structure the government
wishes to put in place to stimulate the growth in different sectors.
Following the initial plans, if any changes need to be made adjustments
are made to the expenditure; usually the plan expenditure has to be
modified. The non plan expenditure comprises of interest payments,
subsidies and administrative expenditure. Due to the political sensitivities
involved in reducing subsidies, non-plan expenditure of the government is
inflexible about changing it and it is the plan expenditures which get the
axe after pre-emption have already been made for non-plan expenditure.
STAGE 4: The Budget
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The presentation of the Budget for the ensuing fiscal year (beginning April
1) is usually done on the last working day of February. The Indian
constitution has made the Parliament supreme in financial matters. The
Union government, under Article 112 of the constitution, is required to lay
an annual financial statement of estimated receipts and expenditure
before both Houses of Parliament. It can levy taxes or disburse funds only
on approval in both houses of Parliament. However, the proposal for
taxation or expenditure has to be initiated within the Council of Ministers–
specifically by the Minister of Finance. The Finance Minister presents
before the Parliament, a financial statement detailing the estimated
receipts and expenditures of the central government for the forthcoming
fiscal year and a review of the current fiscal year.
Under Article 114 of the Constitution, the government can withdraw
money from the Consolidated Fund of India only on approval from
Parliament and so it has to get the Appropriation Bills approved by
Parliament. This authorizes the executive to spend money. Article 265 of
the Constitution prohibits the government from collecting any taxes
without the authority of law. Therefore, the government comes up with
the Finance Bill. The Bill may levy new taxes, modify the existing tax
structure or continue the existing tax structure beyond the period
approved by Parliament earlier. The bills are forwarded to the Rajya Sabha
for comment. The Lok Sabha, however, is not obligated to accept the
comments and the Rajya Sabha cannot delay passage of these bills. The
bills become law when signed by the President. The Lok Sabha cannot
increase the request for funds submitted by the executive, nor can it
authorize new expenditures.
The proposals in the budget come into force on April 1. Between the
presentation and effective date there is a gap of 1 month during which the
Lok Sabha can review and modify the government’s budget proposals.
This does not happen most of the time and the Parliamentary scrutiny of
proposals and the passage of the budget gets completed in May, well
after the commencement of the new fiscal year. Since the proposed
budget has to be effective from April 1, the government usually seeks an
interim approval to meet emergent expenditures that have to be incurred
pending the approval of the budget.
This is called the vote-on-account and the sanctions given by the passage
of the vote-on-account get automatically overridden once the Budget is
approved by Parliament.
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Each state government has its own budget, prepared by the state’s
minister of finance in consultation with appropriate officials of the central
government. Primary control over state finances rests with the state
legislature. However, State finances are which latter reviews the state
government accounts annually and reports the findings to the state
governor for submission to the state’s legislature.
Because of its greater revenue sources, the central government shares its
revenue received from personal income taxes and certain excise taxes
with the states. It also collects other minor taxes, the total proceeds of
which are transferred to the states. The division of the shared taxes is
determined by financial commissions established by the president, usually
at five-year intervals.
The central government also provides the states with grants to meet their
commitments.
Budget documents
1. Key to Budget
This document provides an understanding of the budget documents
2. Budget Highlights
This statement gives the key features of the budget
3. Annual Financial Statement
Annual Financial statement is the main document. This statement shows
the receipts and payments of the government under the three parts in
which government accounts are kept.
4. Budget at a Glance
Budget at a Glance provides an overview of government finances. It’s
more like a balance-sheet of the Union or state. It gives a broad break up
of tax revenues, other receipts, and expenditure-plan and no-plan
allocation of outlays by ministries. Progresses towards implementation of
Budget proposals announced in previous years are listed in the
Implementation Budget.
5. Expenditure Budget
Expenditure Budget Volume I and II explain the provisions made. While
Volume I explains the provisions ministry-wise, Volume II analyses
expenditure trend over the years with regard to Plan and non-Plan
expenditure.
6. Receipts Budget
Receipts Budget gives details of revenue receipts and capital receipts and
explains the estimates so as to make them intelligible to an ordinary
citizen. It also include trend of receipts over the years and details of
external assistance
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These documents are common to both the central as well as state
governments.
Conclusion: The budget documents are fascinating. These documents
are not just numbers. Scrutinizing them, one can understand the intention
of the government, its priorities, its policies, and its allocation of financial
resources, among different regions, sectors, industries which create a sea
change in the lives of the people affected by it. Budget numbers express
an enormous volume of information. One trained in budget analysis can
discover the government’s expressed as well as hidden priorities. They
may be interested in rural development by-creating employment
opportunities, or providing elementary education to children, drinking
water facilities to the villages, or health services in remote areas or
whether their focus is on urban development with creation of industries ,
satellite towns , improvement in facilities or it wants to provide optimum
resources to both.
As per article 202 of the constitution of India, the governor of a state shall
cause to be laid before the house or houses of the legislature of the state,
a statement of the estimated receipts and expenditure of the state for a
financial year. This estimated statement of receipt and expenditure for a
financial year named in the constitution as the “Annual Financial
Statement” is commonly known as “Budget”.
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charges/services as are voted by the legislatures or charged
appropriations as included in the annual financial statement.
The advance made from the fund to meet the urgent and emergent
expenditure is required to be recouped by necessary supplementary
provision within the financial year. In exceptional cases where
advance is given at the last part of the financial year, when there is
no chance to recoup the same by necessary provision through
supplementary, the same can be recouped in the next financial
year.
The suspense and remittances are only adjusting heads and all
entries in these accounts are eventually cleared by corresponding
Credit/Debit to the final head of accounts.
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Composition of the Consolidation Fund
Revenue Expenditure
Capital Expenditure
Here it becomes important to note down that the term non plan
expenditure is just a nomenclature and the expenditure is actually a
planned one.
Revenue Receipt:
• Sales Tax
• Motor Vehicle Tax
• Electricity Duties
• Stamp and Registration fees
• Land revenue
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• State excise duty
• Professional Tax
• Entry Tax
• Entertainment Tax
• Luxury Tax
(b) State’s own non tax revenue
Now instead of share from this few central taxes, State’s share has been
recommended at x% on all central taxes excluding surcharge on income
tax under the award of Eleventh Finance Commission.
• Non Plan revenue deficit grant, Centre’s share under Calamity Relief
Fund, up-gradation and special problem grant as recommended by
the Finance Commission
• Grant portion of the central assistance for state plan (70% loan +
30% grant)
• Grant under Centrally Sponsored Plan Schemes (State share varying
from 50% to 10% and central’s share from 50% to 90%)
• Grant under Central Plan Schemes
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State’s own tax and own Non Tax are called State’s own revenue whereas
State’s total revenue consists of State’s own revenue, share in Central
taxes and grants from the Centre.
Capital Receipts
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of the legislature but is placed before the legislature along-
with the voted amount.
For instance the expenditure of Speaker, Deputy Speaker,
Governor, and office establishment, judges of high court,
administrative tribunal, Gujarat Public Service Commission,
regulatory commission and decrial dues arising out of court
judgment are treated as charged expenditure.
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3. Primary Deficit: The primary deficit represents the Fiscal Deficit less
the Interest Payment. It represents the net borrowing to meet the
expenditure excluding the interest payment.
4. Budgetary Deficit: Budgetary Deficit represents the net borrowing
from RBI at the end of the year. The Budgetary Deficit indicates that
the total expenditure has exceeded by that amount from all
Revenue Receipt, all Recovery of Loans and Advances, all Loans and
the net balance in the Public Account etc. It is a borrowing from RBI
in advance which is recouped in the next year.
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objectives underlying the expenditure proposed for various schemes and
programmes in the Demand for Grants, suitable explanatory notes are
included in this volume in which, wherever necessary, brief reasons for
variations between the Budget estimates and revised estimates from the
current year and requirements for the Budget year are also given.
Detailed Demands for Grants: The Demands for Grants are followed by
the Detailed Demands for Grants laid on the table of the Legislative
Assembly some time after the presentation of the Budget, but before the
discussion on Demands for Grants show further details of the provisions
included in the Demands for Grants as also of actual expenditure during
the previous year. A break up of the estimates relating to each
programme/organization, wherever the amount involved is not less than
Rs. 10 lakhs, is given under a number of object heads which indicate the
categories and nature of expenditure incurred on that programme, like
salaries, wages, travel expenses, material and equipment, grants-in-aid
etc. At the end of these Detailed Demands are shown the details of
recoveries taken in reduction of expenditure in the accounts.
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presented to Legislative Assembly separately by the
Ministries/Departments. Performance Budgets are prepared and circulated
to Members of Legislative Assembly by all Ministries/Departments dealing
with developmental activities. The Performance Budget presents the
budget of the Ministry/Department in terms of functions, programmes and
activities. It also includes a statement on the programmes and
performance of the various public sector undertakings under the
Ministry/Department indicating, among other things, the capacity installed
and utilized, physical targets and achievements, results of operation,
return on capital etc. Performance Budget serves the management as a
tool of administrative and financial control in the implementation of
development programmes.
a) All receipts in India on behalf of each state Govt & on behalf of each
Union Territory shall be paid into its treasury or the bank, and initial
accounts of such receipts shall be maintained at the treasury.
b) Receipts realized in the public works, Forest and any other departments
which may be authorized in this behalf shall be paid into a treasury or
bank in the lump and accounted for at the treasure merely as receipts on
behalf of such departments. The detailed accounts of such receipts shall
be kept by the departmental officers concerned.
• Officers of the Civil Departments who pay their receipts into the
Consolidated Fund or the Public Account or withdraw money for
expenditure there-from or from the Contingency Fund in the lump
will submit detailed accounts of their transactions to their respective
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Accountant General. Some specified Departmental officers may be
required to render to the Accountant General compiled accounts of
their transactions classified under prescribed heads of accounts.
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showing the progressive totals month by month under each major head in
the “Public Debt”, “Loan and Advances”, sectors of the Consolidated Fund
and those in the Public Account. This abstract will also show the
progressive totals under such minor, sub and detail heads as may be
found necessary. Separate Detail Book and Consolidated Abstracts will be
maintained for Central and State transactions.
The cash balance of the State Govt in the books of the Accountants
General at the close of each month will then be reconciled with the
balances shown in the Cash Accounts rendered by Treasury Officers and
with the statements of closing balance received from the Central Accounts
Section of the Reserve Bank. Reconciliation of figures under the head
“8675-- Deposits with Reserve Bank” in respect of transaction of the
Central Govt/ Union Territory Govt and Administrations arising in their
books will be effected by the Accounts General.
i) Each Accountant General will work out the progressive figures during
the year of the Central and State accounts with which he is concerned. On
closing the accounts for March (Supplementary), a progressive account of
the transactions and accounts relating to annual receipts and
disbursement of State Govt/ Union Territory Govt. A progressive account
of the Union Territory Administrations and relevant transactions of Union
Territory Govt for which budget provision is made in the composite Grants
of the central Govt and transactions under the Public Account will be sent
by the Accounts General to the controller General of Accounts, vide Rule
(j) above.
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Annual Accounts ( including Appropriation Accounts) in respect of State
Govt, and Union Territory Govt with Legislature are prepared by the
concerned Accountant General and submitted to the Comptroller and
Auditor General of India for approval and transmission to the Governor of
the State, Administrator of the Union Territory Govt concerned, along with
his report thereon in terms of Article 151 (2) of the Constitution/Section 49
of Union Territories Act, 1963 and section 11 of the Comptroller and
Auditor General's (Duties, Power and Conditions of Service) Act, 1971 for
being laid before the Legislature.
Each office or branch of the Reserve Bank, or the State Bank of India
acting as agent of the Reserve Bank, shall keep separate account of cash
transactions undertaken by it on behalf of the State Govt within whose
area it is situated. All transactions which cannot be debited or credited
directly to the account of the Central Govt with the Bank and transactions
of other State Govt shall also be taken to the account of the Govt of the
State in which they occur. Statement of these transactions together with
all supporting vouchers, challans, paid cheques etc. shall be forwarded by
each office and branch of the bank daily to he local Treasury officer or to
the Accountant General as the case may be. The transactions shall also be
reported to Central Account Section, Reserve Bank Of India,
Nagpur.
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(Note: With effect from 1st February, 1978 transactions on account of
discharge value of, and periodical interest on securities of State Govt, as
well as receipts on account of subscriptions against market loans floated
by State Govt are taken by the officers of the Reserve Bank of India
directly against the cash balance of the State Govt concerned with the
Central accounts section of the Reserve Bank of India, Nagpur.)
Complete accounts of the Central Govt and each of the State Govt with
the Bank shall be maintained by the Central Accounts Section o the
Reserve Bank at Nagpur which shall also act as a general clearing house
for the adjustment of (i) all transactions between different State Govt and
(ii) such transactions between the Central and State Govt as may be
specified by the Central Govt. All adjustments to be made between the
accounts of different State Govt as well as all payments which one of
these Govt has to make to another shall be advised by the Accountant
General authorized in this behalf to the Central Account Section of the
Reserve Bank which will pass the necessary entries in the accounts of the
Govt concerned, maintained in its books. Similarly, such adjustments in
the case of specified transactions between the Central Govt and the State
Govt will be advised to the Central Accounts Section of the Reserve Bank
by the Accountant General authorize in this behalf for making monetary
settlement in the accounts of the Govt concerned maintained in the books
o the Bank. Details of transfers affected in its books against the balance of
the State Govt or of the Central Govt a the case may be, on account of
adjustment advised by Accounts Officers authorized for the purpose, shall
be communicated by the Central Accounts Section of the Bank to the
originating as well as to the effected Accounts Officers or Account Officer
of the concerned ministry/Department of the Central Govt at the close of
each day.
Cash balance held in the treasuries of the Central Govt from part of the
Consolidated Fund, Contingency Fund and the Public Account of India.
Such treasuries exist in those Union Territories whose accounts have not
been separated from audit and continue to the compiled by the
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Comptroller and Auditor General of India. Transactions on behalf of State
Govt arising in these treasuries shall be classified in the treasury accounts
under the head “8658 – Suspense Accounts – Suspense Accounts (Civil) –
Accounts with Accountant General and settled in cash by exchange of
cheques/demand drafts as the case may be. (NOTE: At present the
settlement of the transactions by the exchange of cheques/demand drafts
is resorted to in cases where the transactions taking place in Union
Territory accredited to an Accountant General are adjustable against the
cash balances of a State, whose accounts are maintained by another
Accountant General. These transactions initially taken in the Central
Section of accounts under the head '8685 Suspense Accounts- Cash
Settlement Suspense Account'.)
Cash balances held in Central treasury form part o the Consolidated Fund,
the Contingency Fund and the Public Account of the State to which the
treasury belongs. The treasury Rules of each State Govt issued under
article 283 of the Constitution, however, provide that moneys may be
received and payments made on behalf of other State Govt, by a State
Treasury.
NOTE (ii): As the general banking business of the State Govt of Jammu &
Kashmir is at present, not conducted by the Reserve Bank of India, the
settlement of transactions between the State Govt and other State the
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Centre / is affected in cash or by demand drafts in accordance with the
instructions contained in separate order.
(b) In the case of such transactions of the Central Govt, including Railways
/ Postal / defence Departments at State treasuries (both banking and non-
banking), these shall be accounted for by the treasuries in the State
Section of Treasury Account under the head 'PAO Suspense – Transactions
adjustable by PAO ministry / Department of ….......' below the Major head
'8658 – Suspense Accounts' for necessary cash settlement by the State
Accountant General with the Pay and Accounts Office.
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5.11.2 Directorate of Pension and Provident Fund: The
Directorate of Pension and Provident Fund deals with the scrutiny and
authorization of pension cases of government employees/officers. Pension
case papers are handled by about ten branches and each case has to
move to various branches. It is a state-level office and has no subordinate
offices at the district or taluka level. And considering the nature of
functions of this office, it deals with government employees/officers and
pensioners as well as government offices, which means it does not have
direct interaction with citizens.
Treasuries & Sub Treasuries Information: Treasuries are the nodal offices
for all financial transactions of the Government in the district. They
manage both payment and receipts of the Government.
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Accounts to the State Government. Annual Finance and Appropriation
Accounts are prepared and presented to the Governor of the respective
state for lying on the table of State Legislative Assembly (Vidhan Sabha).
This office also issues Drawing and Disbursing Authorities to the
respective Drawing and Disbursing Officers and conducts periodical
inspection of treasuries.
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7. Then the consolidated file is forwarded in the regular hierarchy of the
respective department.
8. The planning branch of the department will write a letter along-with
various reports (sub-sector wise) to the GAD (Planning) as a part of formal
procedure.
9. Thus the GAD (Planning) will receive such reports from various
departments.
10. Now GAD will prepare a separate file for each sub sector and if a sub
sector is shared between more than one department than consolidated
outlays will be prepared.
11. Again the file will be forwarded in the regular hierarchy and necessary
approval will be sought.
12. GAD will issue sector/sub sector wise outlays to all departments and
invites for discussion.
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A briefing as to what the document stated: On the basis of
recommendations of a committee, it was decided by the Government to
earmark 17.57% of the outlay of the state’s annual development plan
every year for Tribal sub plan. As this decision was taken in the middle of
the year, additional budgetary allocations had to be made subject to full
utilization of already allocated outlay and under preparedness to absorb
more funds during the current year. It will be the responsibility of the
Tribal Development Department to finalize the sectoral, sub-sectoral
outlays and schematic outlines and outlays. After deciding the inter-
sectoral, sub-sectoral and schematic outlays under tribal sub plan, the
tribal development department shall communicate the breakup of outlays
to be provided for tribal sub-plan to all concerned administrative
department.
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• Data Exchange with AG & Treasury
• Trend Analysis and Decision Making
Functions of an e-Budget:
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The e-Budget module will interact with the following external entities:
• Loan Receipt
• Loan Repayment/ Interest Payment
• Debt Consolidation
• Template Generation (Time Promissory Notes, Memo etc)
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The process involved while receiving GoI loan: The central
government will issue a sanction order to the respective state
government and RBI Central Accounts Section (Nagpur). As the
state account finances are maintained at RBI CAS, it will credit
the state Government account as per the amount mentioned in
the sanctioned letter. As and when the repayments arise the
treasury will make the necessary arrangements and the state AG
will issue an advice to the RBI CAS as well as to the state
government (Finance Department). All these debits and credits
are reflected in the Daily Position Statement which is an
interaction tool between RBI CAS and AG office.
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moratorium period, wherein no repayments towards the principal
are to be made. The repayment schedules will be individual loan
specific, and will normally consist of 10 installments a year
consisting of interest and principal.
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are deposited in a bank along-with a challan. This challan will be
acknowledged by the bank on a specified date in the future and
is kept as a record of the amount deposited.
As per the repayment schedule, whenever an amount is due, FD
will undertake internal processing regarding the amount to be
paid and thereafter will issue a formal order mentioning the
project wise amount to be repaid. The DMO of FD will forward the
details to the Cash section. In the cash section the DDO will
prepare a bill in proper format and submit it to the Treasury
office for issuing cheque. Once the cheque is prepared in the
Treasury, the cash section of FD will collect the cheque and
submit it to the DMO cell of FD. A responsible official of DMO will
submit the cheque to the institute and get the necessary
acknowledgement. Between the amount released and repayment
made reconciliation will be made in every 6 months. Also
reconciliation is done with the Accountant General’s office for the
head wise amounts booked in the budget.
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Characteristics of Institutional Loan: The institutional loan is for
duration of 7 years, with annual interest rate of 6.5%. There is a
moratorium period of 2 years. The payment schedule is different
for principal component and interest component. While the
principal is to be repaid in 5 equal instalments after the
moratorium period is over, the interest has to be paid every
quarter on the amount of loan outstanding as on that date.
(i) National Small Savings Fund ( NSSF) Loan: People from all over
India invest in Kisan Vikas Patra, Post Office Monthly Income
Account, 15 Years Public Provident Fund Account, Post Office
Time Deposit Account, 5-Years Post Office Recurring Deposit
Account, Post Office Savings Account, National Savings
Certificate(VIII Issue), Deposit Scheme For Retiring Govt.
Employees-1989, Deposit Scheme For Retiring Employees of
Public Sector Companies 1991, all these form part of NSSF. The
rate of interest on an average on these schemes works out to be
around 8%. These schemes are essentially under the umbrella of
the Central Government. Now Central Government provides
these loans to the state governments in accordance with the
amount invested by that state’s inhabitants. For e.g. if a total of
Rs. 1000 crores have been invested by the people of Gujarat in
the NSSF schemes then the Government of Gujarat will receive
these 1000 crores at an interest rate of 9.5% from the Central
Government.
The process of receiving, management and repayment of NSSF
loan is again different then other processes mentioned in relation
with other loans. Initially the Finance Department of the State
Government as well as RBI CAS (Nagpur) will receive a sanction
(notification) of net amount released during the year. RBI CAS
will credit the amount in the account of the State Government
and the same will be reflected in the Daily Position Sheet which is
sent to the AG as well as to the FD of the State. On the due date
of repayment the amount will be debited from the state
government’s account by RBI CAS and is again reflected in the
Daily Position Sheet.
The system being proposed by TCS will have to track each and
every loan by verifying the payables against the payments made
by RBI CAS (as will be reflected in daily position sheet). The
system will have to reconcile with AG for the payment accounted.
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The system will have to generate repayment schedule as per the
terms and conditions of the loan.
The MIS generated by NSSF system will include:
○ Details of loan received, repaid and outstanding (Year
wise, month wise)
○ Payable details (Principal + Interest) month wise/year
wise
○ Tracking of the loans received against budgetary
estimates
○ Trend analysis of loans received, repaid & outstanding
(Graphical reports)
○ Details of loan at particular interest rate or between
particular band of interest rates (interest rate profile of
market loans)
(i) Market Loans: State Governments often take loans from open
markets to finance their capital expenditure requirements. Now
the states by themselves do not have any powers to raise such
money directly. They have to provide a notification to the RBI for
raising this money on behalf of the state government. RBI does
so by conducting the auction process described in this report
itself. The process of obtaining market loan starts with the state
government issuing notification regarding floating of Government
stock along with various details of tenure, starting date, amount,
repayment schedule to the RBI. Thereafter notices will be issued
to the market participants (interested bidders) who in turn will
submit their bids to the RBI. The RBI after concluding with the
auction will send all the details such as amount of bids received,
amount of bids accepted, interest rate decided etc to the state
governments. Thereafter on a regular basis the state’s debt
management office will track the loans as per the terms and
conditions of the loans. These terms and conditions first appear
on the RBI CAS statement.
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outstanding details (year wise, weighted average interest rate of
that particular year etc), market loans outstanding details (month
wise), market loans repaid (along with date of receipt, date of
repayment, amount of interest paid, amount of principal paid,
loans repaid for which interest rate etc). Also the system will be
able to reconcile the amount paid with the amount payable and
interface with external entities like AG.
The banks through their link offices will send the daily records of
transactions to RBI Public Accounts Department (PAD). (Gujarat’s RBI PAD
is situated at Ashram Road, Ahmedabad). RBI PAD in turn will send these
daily statements to RBI CAS Nagour. RBI CAS will work out the overall
balance position of the state and generate a Daily Position Statement
(DPS). DPS will consist of transactions reported by RBI PAD,
intergovernmental transactions recorded directly at RBI CAS and all other
transactions affecting the cash position of the state. This DPS is forwarded
to the state government and AG office on a daily basis.
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• All the debits and credits of agency banks (these include all
the receipts of Government and all payments of
Government executed by agency banks), the Treasury
offices also generate daily totals of debits and credits and
these are reconcile with the bank records.
• All the intergovernmental advices such as Loan/Grant
received from the central government, liaison office
transactions, interstate settlements
• Investments in T-Bills, rediscounting of T-Bills, maturity
proceeds of the investments etc
• Ways and Means advances and their repayments
• Overdraft advances and their repayments etc
Now based on the daily position of the state, the state will be either in
deficit or surplus. If the state is in surplus then the excess funds of the
state will be invested by the RBI. If the state is in deficit then primarily the
T-Bills will be discounted, if however there are no T-Bills then RBI will give
Ways and Means Advances (WMA). Once the approved limit of WMA is
over, then special WMA (at a higher rate of interest) is given, if even
special WMA gets exhausted then the state has to take the overdraft
facility (at an even higher rate of interest). These various advances are to
be repaid as soon as the state comes in a surplus position.
Guarantee Issue
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Corporation/Statutory bodies, Municipal Corporations, Municipalities,
Nagar Panchayats, Cooperative Banks/Societies, Joint Stock companies
etc. The guarantee can be for loan, bond or tripartite agreement. In case
of default by the borrowing organization, State Government has to honour
the amount defaulted within the limit of amount guaranteed. The amount
paid by State Government to the lender has to be recovered from the
parent department of the defaulted organization.
Such Guarantees are an example of non fund based financing and the
state governments providing them earn income on them. The fees
charged by the state governments will be in the range of 0.25% to 2% of
the amount Guaranteed. However for guarantees provided to social
organisations, no such fees will be charged. The respective department
which has taken this facility will deposit the guarantee fee every year in
the month of April. This fee will be calculated on the outstanding amount
of guarantee. For instance if the state government has given a guarantee
of repayment of Rs. 100 crore loan by XYZ Department, but later on
because of subsequent payments made by XYZ Department the loan
amount has fallen to Rs 70 crores, then the fee calculated will be on Rs 70
crores and not on Rs 100 crores.
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guarantee, tenure of the guarantee, name of the beneficiary organization,
name of the lender etc. Such a resolution is given to both, the borrower as
well as the lender. Based on such a letter an agreement is signed between
the lender and the borrower and the funds are released by the lender.
Subsequently the concerned department keeps on informing the finance
department about the progress of the project, manner of fund utilization
etc.
Energy
Finance
State
Treasury
andDepartment
Bank
GuaranteePetrochemicals
of
Issue
GIPCL
(GoG)
Department
(GoG)
India
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In the diagram the organization requiring guarantee is GIPCL, the parent
department of GIPCL is Energy and Petrochemicals Department, the
arrows point out the process flows of guarantee issue. As seen from the
diagram GIPCL will generate a request to its parent department which in
turn will forward it to the Finance Department. The finance department in
turn will issue a sanction order after proper scrutiny and forward the same
to the Energy and Petrochemicals Department (EPD). The guarantee fee is
paid by the EPD to the Treasury which will reconcile the amount with the
FD. The resolution generated by EPD will be transferred to GIPCL as well
as to SBI.
Guarantee Vacation
The borrowing organization will start repaying the loan to the lender as
per the terms and conditions of the loan. Simultaneously the organization
will also inform its parent department about the repayments made, based
on which the department will issue necessary orders to the FD for
vacating the guarantee. FD in turn will issue order for vacating the
guarantee as per the order of the department and will send notifications
to the department and the organization. In case of a default the creditor
will inform the parent department of the default case. This parent
department will in turn inform to the FD which as a guarantor will make
the payment to the lender. FD will recover the amount from the
concerned parent department in due course of time.
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Energy
Finance
and
GIPC
SB
Department
Guarantee Petrochemicals
Vacation
Department
(GoG)
LI
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GIPCL will start paying SBI as per the terms and conditions of the loan and
inform EPD. EPD in turn will issue an order to the FD to vacate the
guarantee as per the amount repaid. FD will vacate the guarantee as per
the order and issue notifications to GIPCL and EPD. In case of a default by
GIPCL, SBI will send a notice to EPD which in turn will inform FD.
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6.6 Online Bill Processing by DDO Office Module:
The staff of the DDO office will prepare various online bills and send them
to the DDO for verification. The DDO will check and verify the online bills
and send the same for processing to the Treasury (after applying digital
signature). The inward clerk at the treasury will generate tokens against
online bills received and send them to the auditor for approval. The
auditor at the Treasury will check the bills and either approve or reject
them. If the auditor approves the bills, he sends them to the check writer
to generate the respective cheques online. In case any of the bills are
rejected then those will be sent to the outward counter with reasons of
rejection to be sent back to the DDO office. For the approved bills, the
cheques will be generated online and sent to the custodian of the
treasury, the custodian in turn will forward it to the outward counter. From
the outward counter the generated cheques will be sent to the DDO office
(This entire process is online). Simultaneously in the treasury, vouchers
will be prepared and detail posting of the cheques issued will be done
which will get reflected in the books of accounts (Again the entire process
of voucher generation, posting etc will be done online).
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• Advance Bill (GTR-85)
• Court Fee Refund (CFR)
• Detailed Bill For Contingent Charges (GTR-44)
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There will be different outer counters for different cheques with each
counter having a minimum and maximum limit of amount of cheques to
be disbursed.
The first step in the process will be user registration. As soon as the home
page of the treasury module will be opened there will be an option for new
users to register themselves. For the sake of understanding let’s take an
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example of Mr. Patel who is an accountant in a firm and has to make a
payment of value added tax on behalf of his firm. Mr. Patel will have to
register himself on the treasury portal by filling in the requisite details.
These details include:
Mr. Patel will also have to mention the treasury and the sub treasury
where the challan is to be deposited by clicking on the link given. Mr. Patel
will have the option to register for different purposes challans. Once Mr.
Patel is registered a screen showing various kinds of information
pertaining to him will be displayed.
Once the registration process is complete, the system will integrate the
new registration in the legacy system. This is necessary for future
references.
Once the registration process is over, Mr. Patel can login to the system
whenever the tax payment has to be made. This can be done by using the
login ID and password.
When Mr. Patel will login to the system, he will have to click on the
relevant challan for making e-payment (the names of only those challans
for which Mr. Patel has registered will be displayed). In our case the
relevant challan is for VAT. Once Mr. Patel clicks on VAT challan, he will
have to fill in the challan and confirm it. Once confirmed the challan will
have to be submitted for making e-payment. As soon as Mr. Patel submits
the filled challan, he will be guided on to the respective Banks’ portal.
(This is an example of external interface with banks. This bank will be
from among a group of authorized banks, and Mr. Patel will have to select
one from this group.(the bank will be the one where Mr. Patel has an
account) The finance department (GoG) will have a tie-up with these
banks). Once on the bank portal, Mr. Patel will use his net banking
credentials and login.
All the information which Mr. Patel has filled in the challan will be shown
on the bank’s portal and Mr. Patel has to select the account from which he
wants to make the payment. Once the account has been selected, a
screen will be displayed where Mr. Patel will be able to look at all the
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details of the challan and the account selected. Mr. Patel will confirm
these details and once confirmed a unique Challan Identification Number
(CIN) will be generated on the banks end to uniquely identify different
challan payments. This CIN will be displayed on the screen of Mr. Patel
after a few moments, and Mr. Patel will have to confirm the payment by
clicking on the confirm button and the amount will be debited from his
account.
All the accounting work for all such transactions will be done by Treasury
Office Gandhinagar. As such sending an email to the user is not
mandatory in such cases, some banks may do so as an additional service
to their customers.
After the relevant amount has been debited, the banks will generate a
unique cyber receipt with a unique reference number as a proof of the
transaction. This cyber receipt will be displayed on the screen of Mr. Patel
and he can either take a print out of the same or save a copy for future
reference. All this features will be system enabled. Once the transaction is
completed Mr. Patel will be directed back to the treasury portal where CIN
and bank reference number will be displayed. The system will also enable
Mr. Patel to see the details of the payments made if he so wishes. With
this the interaction with Mr. Patel gets over.
Next will be the reconciliation between the banks and the treasury. Before
the end of the working day, banks will send the reconciliation report for all
the online transactions carried out during the day with a naming
convention
Reconciliation_Report_<BankName>_<ddmmyyyy>
The banks will also upload e-scroll soft copy on the cyber treasury portal,
and it is on the basis of this e-scroll that the final accounting records will
be updated.
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External Interface with RBI, AG, Banks:
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sending a daily report to the RBI of the state governments’ position. These
reports will be sent to the state treasury (as RBI scroll) and again a
reconciliation of the details captured at treasury and at RBI will be done
(On the system itself). If any discrepancy arises then it will be clarified by
necessary inputs from the banks, RBI and treasury.
From To
Finance *
Department * * *
Controlling
* *
Officer (CO)
The system will have the facility to generate reports for grant distribution
for all the above mentioned cases. Apart from this the system will be able
to generate reports for all the grants received by various CO’s as well as
various DDO’s as on a particular date. (These will come under transaction
screens)
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Apart from this, the system will generate reports (under the heading
report screens)
The system will be having detailed interfaces with RBI, Banks and AG.
Interface with RBI: The main feature of this interface will be to capture
RBD figures as received from RBI and compare it with RBD figures
received from Banks (via various treasuries and sub-treasuries) on a daily
basis. The system will provide features of entering receipt/payment details
bank wise and branch wise and help in calculating RBD. This would also be
captured in respective Treasury Office/Sub Treasury Office. Also the
figures received from RBI will be uploaded centrally in DAT through this
system itself and the reconciliation process takes place at DAT on the
system itself. The discrepancy reports will be generated (whether any
discrepancy is found or not) through the system. In case any settlement
process with the banks is needed, then it will be done by RBI and the
details will be uploaded on the system (on DAT platform).
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Interface with Banks: The bank interface of IFMS is primarily concerned
with uploading of e-scrolls received from various banks into the IFMS.
Upon such an upload, the data from these scrolls would be imported into
IFMS and thus will eliminate data entry of individual challans at the
treasury.
All the kinds of reports such as pension inward report, pension payment
order, commuted value of pension order, and branch wise status of
pension cases will be generated by the system itself. Thus the system as
developed by TCS will be able to incorporate the existing process of the
government and replace the existing manual system by an online system.
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distributed as per major heads to the in-charge personnel within the
system itself. Thereafter detail posting on the basis of these vouchers will
be done and all kinds of reports such as payment subsidiary register, RBD
report, major head-wise payment jotting etc will be generated in the
system itself. These reports will be open to access for future references as
well as will be printer friendly. Similarly for receipt accounting the major
and first input will be the bank scrolls and challans. On the basis of this
input detail posting of challans will be done and the books updated. The
posting will be done as per treasury and sub-treasury. Here again various
kinds of reports such as receipt subsidiary register, date wise receipt
summary, cash account etc will be generated. Again all this reports will
also be open to future access and printer friendly.
First the vendor (these are government approved vendors) will give a
hand written challan at the counter. With the submission of this challan at
the counter, the system will come into the picture. Initially there will be
stock verification of the desired stamps. Once it is confirmed that there is
adequate stock with the treasury, an online challan preparation will be
done. Subsequently an enfacement number will be generated for the
challan. Such a number will be unique. This number will be written on the
challan and given back to the vendor. The vendor will take the challan and
pay money along-with the challan in the bank. The bank will be sending
such acknowledged challans back to the treasury. The bank will also be
sending a detailed scroll of various challans received (the scroll will have
the numbers of various challans) to the stamp officer at the treasury. At
the treasury challan verification will be done on the system itself. Once it
is confirmed that everything is in order, the challan will be approved for
stamp sale. Now the stamps will be transferred from double lock register
to single lock register. Simultaneously it will be verified that the minimum
required stock is there. Subsequently stamps will be issued to the vendor
who in turn will sell to the common man. If the minimum requirement is
not met then fresh order* for stamps be given to the stamp issuing
authority. Either way the inventory will be updated. All this features will be
system enabled. The challans will be sent to book branch, discount reports
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will be prepared (discounts are given to vendors as a remuneration), the
consolidated discount bill will be sent to the book branch.
* For issuing fresh orders to the stamp issuing authority, indent will be
prepared and sent to the appropriate authority via the system itself.
Indent preparation is a necessary step for issuing fresh orders of stamps.
The system provides with various models to prepare, edit, consolidate
indent.
1. Through Bank: The depositor will fill in a challan and deposit the
amount in the bank. The bank will be sending a scroll and deposited
challans to the treasury office. Here the processing will be done by
the relevant staff member. The PD account will be credited with the
relevant amount.
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2. Through FD: The FD can credit the relevant PD account directly in
case grant-in-aid is to be provided to the account holding institution.
The payment process will start with the issuance of cheque book to the
depositor. Whenever any payment is to be made from this account, the
depositor will issue a cheque which on being deposited in the bank will
ensure payment from the bank. The bank in turn will send the cheque to
the treasury along-with the scrolls. These cheques and scroll is sent to the
deposit branch by the treasury for detailed cheque posting. This payment
made from the PDPLA account will have to be refunded by the treasury.
The account holder will submit bills for refund and the treasury will
dispatch a cheque against the same. The person in charge of all this
processes will generally be the DDO of the relevant department.
Through the system being developed by TCS all the processes from
cheque book issue, PDPLA account creation, posting of receipt challans,
posting of payment vouchers will be done on the system itself.
The system will also be able to generate various kinds of reports such as
incorporation of bank intimation for new account, head wise account
summary, date wise accounts summary, ledger cum passbook. The
system will also be able to generate reports related to inoperative
accounts (accounts which have had no activity since a particular date), no
transactions accounts. Also reports showing date wise minimum balance
and month wise minimum balance will be generated (this holds
importance as the interest calculation is done on the minimum balance of
the month).
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For the recoveries, at the time of preparation of pay bill, DDO’s need to
prepare schedule statements for the GPF, loan recoveries etc. These loan
recoveries need to be updated under the particular account head. The
schedules along with the pay bill are submitted to the Treasury office.
Through the system designed by TCS the above mentioned process will be
totally system enabled.
For the purpose of accessing the CRA system, Nodal offices and
Subscribers need to get registered afresh in the CRA system. Upon
registration, the entities will be allotted unique Registration Numbers,
User ids and passwords, which can be used by the nodal offices and
subscribers for accessing the NPSCAN/CRA system. The Subscribers, upon
registration, will be allotted a PRAN by CRA which shall be used by nodal
offices while uploading subscriber contribution information to the CRA
system.
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6.15.1 The NPS architecture is summarized as shown below:
a) A Tier I non withdraw able and tax deferred pensions account (for
all individuals), and
The number of such sub accounts may be altered as the system evolves
and depending on the needs and performance of the NPS.
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2. A member will accrete savings towards his retirement into his PRA
through his working life. This PRA will stay with the member regardless of
where he stays or Works – including spells of unemployment, self
employment, changes in jobs or location. He will be able to use a
nationwide network of competing pension service providers (POPs) to
access this system for opening a PRA, accreting new Contributions,
receiving account or system information and for obtaining retirement
benefits.
• Points of presence(pop)
• Central record keeping agency
• Pension fund manager
• Trustee bank(Bank of India)
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• Annuity service provider
• NPS Trust
• Provident Fund Regulatory & Development Authority
• Subscriber
6.15.3 Roles & Responsibility of Stake Holders
• Point of presence:
Point of presence is the first point of interaction of the NPS
subscriber with NPS architecture. This POP acts as a collection point
and extends a number of services to the customers.
LIST OF POPs
1. Allahabad Bank
2. Axis Bank Ltd.
3. Bajaj Allianz General Insurance Co Ltd.
4. Central Bank of India (CBI)
5. Citibank N.A.
6. Computer Age Management Services Private Ltd.
7. ICICI Bank Ltd.
8. IDBI Bank Ltd.
9. IL&FS Securities Services Ltd.
10.Kotak Mahindra Bank Ltd.
11.Life Insurance Corporation of India (LIC)
12.Oriental Bank of Commerce (OBC)
13.Reliance Capital Ltd.
14.State Bank of Bikaner & Jaipur (SBBJ)
15.State Bank of Hyderabad
16.State Bank of India (SBI)
17.State Bank of Indore
18.State Bank of Mysore
19.State Bank of Patiala
20.State Bank of Travancore
21.The South Indian Bank Ltd.
22.Union Bank of India (UBI)
23.UTI Asset Management Company Ltd.
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PAOs shall remit the pension contributions, including Government’s
matching contribution, in respect of Government employees
covered under the NPS to the CRA w.e.f. the salary of June, 2008..
For this purpose, the individual subscribers (new entrants to
government service excepting Armed Forces on or after 1st January,
2004) the state government employees (for states adopting NPS),
DDOs, PAOs and (and equivalent designations in other accounting
formations) need to get registered afresh in the CRA system.
• ASP:
Annuity Service Providers (ASPs) are be appointed by PFRDA to
maintain the annuity contribution of subscribers through their
various schemes. Subscribers will have the option to invest their
amount into one or more annuity schemes upon
retirement/resignation. ASPs would be responsible for delivering a
regular monthly pension (annuity) to the subscriber for the rest of
his/her life.
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• NPS TRUST:
A trust appointed under INDIA TRUST act, 1882 is responsible for
taking care of the funds under the NPS in the best interest of
subscribers.
• Subscriber:
Subscribers will have complete control on how their contributions
and savings in PRAN are managed. They will be able to select a
professional Pension Fund (PF) from a pool of competing Pension
Funds. Each PF in this system will offer a limited number of simple,
standard investment schemes with different risk and return profiles.
They will also be able to seamlessly switch savings between
investment schemes subject to such conditions as prescribed by
PFRDA from time to time.
• POP/POP-SP Details:
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The Government of India has decided to roll out the NPS for all
citizens of India from 1st May, 2009. Hence, various facilities (like
opening Permanent Retirement Account, contributing to NPS etc) will
be required to be provided to all the citizens (known as ‘Subscribers’
in the NPS architecture) at various locations across India. These
processes shall be carried out through the entities known as Points of
Presence (POPs) appointed by the PFRDA. POPs’ shall provide the
services under NPS through their network of branches called POP
Service Providers (POP-SP).
CRA to
Consolidation
FVU
FPU
Digitizatio
Validation
Upload
Subscriber of
Contribution File (SCF) Upload by PAO
DDO
n of wise
ofNPSCAN
Records
Subscriber
Records
Contribution
Records
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File Preparation Utility (FPU). It is a JAVA based utility which can be easily
installable on a desktop machine.
Note 2: File Validation Utility (FVU) is a Java based utility developed by the
CRA to ensure that SCF prepared by DTA/DTO is in conformity with the
file formats of CRA.
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largely depends upon the figures of actual receipts and expenditure
for the previous 3 years. The basis of expenditure is taken as
indicative with some scope for the incremental effects. A DDO has to
prepare the budget estimate of his/her office in the basis of such
record. In the revised estimate, the DDO has to consider the actual
expenditure for 4/8/9 months as a base. Each DDO in the state will
have a code number without which the treasury office will not
entertain their claims.
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lump-sum of the remaining pension wealth, which she would be free
to utilize in any manner. Individuals would have the flexibility to
leave the pension system prior to age 60. However, in this case, the
mandatory annuitisation would be 80% of the pension wealth.
The participating entities (PFMs, CRA etc.) would give out easily
understood information about past performance & regular NAVs, so
that the individual would able to make informed choices about
which scheme to choose.
Insights from Gujarat Government into the NPS (Being one of the
state governments which might take TCS developed software for New
Pension Scheme):
New Defined Contribution Pension Scheme being introduced with
effect from 1.4.2005 Government of Gujarat, Finance Department,
G.R.No.NPN2003GOI10P Sachivalaya, Gandhinagar
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(1)All employees of Government and Panchayat who may be appointed on
or after 1st April, 2005;
(3)Employees already appointed prior to 1st April, 2005 under the practice
adopted by the State Government for appointment on Monthly Lumpsum
Salary and the employees who may be appointed now onwards on
Monthly Lumpsum Salary through the regular recruitment procedure
applicable as per Government orders in force and who may be converted
in the regular payscale on or after 1st April, 2005.
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• Premature withdrawals not allowed
Thus there are certain downsides also to NPS but the overall benefits do
outweigh the costs.
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b) Till now I had been learning about the work place, the culture at
different organizations, useful management tools, personal relations
skills, quantitative skills, etc. But this training gave me the opportunity
to use that learning in the real situation.
c) The project helped me in enhancing my communication skills.
d) It was a nice experience to build interpersonal relationships with
different people.
e) Hours of work increased my stamina to work long hours and also
realized importance to finish the work on time.
f) The formulation of project report increased my patience and ability
to work hard.
7.2 Learning:
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8. RECCOMMENDATIONS
The first and foremost recommendation for TCS is to change its vision
statement. In my humble opinion it is short sighted. TCS needs to have
a vision that will show its leadership qualities and long term thinking.
TCS should shift focus from Low cost advantage to high quality services
commanding a premium being the pioneer in the industry.
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9. BIBLIOGRAPHY
Books:
PRASANNA CHANDRA, 2008, Financial Management (7th Edition),
Documents of TCS:
Websites Concerned:
http://www.wikipedia.com/
http://www.google.co.in/
http://www.npscra.nsdl.co.in/
http://rbi.org.in/
http://www.tcs.com/
http://www.scribd.com/
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