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UNIT-5 AGENCIES OF FINANCIAL ADMINISTRATION

FINANCIAL COMMITTEES IN INDIAN PARLIAMENT

Parliamentary Committees are essential components of any legislature providing various supports in the
discharge of responsibilities of the latter. The support includes supervision, control and vigilance, and,
above all, sharing the heavy workload of the legislature. The Committee system ensures smooth
functioning of the legislature by building consensus on critical issues and examining issues in greater
details, which the legislature could not do for want of time and its large size.
The financial committees play an important role in the system of Parliamentary control over finances.
These committees ensure that the objective of Parliamentary control over finances are fulfilled. The
Parliament as a general body is too big to exercise any specific control over public expenditure. It is,
therefore, left to the committees to act as the ‘trustees’ of the Parliament in keeping a strict watch over
the public purse. In India, there are three financial committees:
1. Public Accounts Committee
2. The Estimates Committee
3. Committee of Public Undertakings.
Public Account Committee
This committee was set up first in 1921 under the provisions of the Government of India Act of 1919 and
has since been in existence. At present, it consists of 22 members (15 from the Lok Sabha and 7 from the
Rajya Sabha). The members are elected by the Parliament every year from amongst its members
according to the principle of proportional representation by means of the single transferable vote. Thus,
all parties get due representation in it. The term of office of the members is one year. A minister cannot
be elected as a member of the committee. The chairman of the committee is appointed from amongst its
members by the Speaker. Until 1966 - ‘67, the chairman of the committee belonged to the ruling party.
However, since 1967 a convention has developed whereby the chairman of the committee is selected
invariably from the Opposition.
The function of the committee is to examine the annual audit reports of the Comptroller and Auditor
General of India (CAG), which are laid before the Parliament by the President. The CAG submits three
audit reports to the President, namely, audit report on appropriation accounts, audit report on finance
accounts and audit report on public undertakings.
The committee examines public expenditure not only from legal and formal point of view to discover
technical irregularities but also from the point of view of economy, prudence, wisdom and propriety to
bring out the cases of waste, loss, corruption, extravagance, inefficiency and nugatory expenses.
In more detail, the functions of the committee are:
1. To examine the appropriation accounts and the finance accounts of the Union government and
any other accounts laid before the Lok Sabha. The appropriation accounts compare the actual
expenditure with the expenditure sanctioned by the Parliament through the Appropriation Act,
while the finance accounts shows the annual receipts and disbursements of the Union
Government.
2. In scrutinising the appropriation accounts and the audit report of CAG on it, the committee has to
satisfy itself that (a) The money that has been disbursed was legally available for the applied
service or purpose (b) The expenditure conforms to the authority that governs it (c) Every re-
appropriation has been made in accordance with the related rules
3. To examine the accounts of state corporations, trading concerns and manufacturing projects and
the audit report of CAG on them (except those public undertakings which are allotted to the
Committee on Public Undertakings)
4. To examine the accounts of autonomous and semi-autonomous bodies, the audit of which is
conducted by the CAG
 5. To consider the report of the CAG relating to the audit of any receipt or to examine the accounts
of stores and stocks
6. To examine the money spent on any service during a financial year in excess of the amount
granted by the Lok Sabha for that purpose.
In the fulfilment of the above functions, the committee is assisted by the CAG. In fact, the CAG acts as a
guide, friend and philosopher of the committee. On the role played by the committee, Ashok Chanda
(who he himself has been a CAG of India) observed: “Over a period of years, the committee has entirely
fulfilled the expectation that it should develop into a powerful force in the control of public expenditure.
It may be claimed that the traditions established and conventions developed by the Public Accounts
Committee conform to the highest traditions of a parliamentary democracy.”
However, the effectiveness of the role of the committee is limited by the following:
1. It is not concerned with the questions of policy in broader sense.
2. It conducts a post-mortem examination of accounts (showing the expenditure already incurred).
3. It cannot intervene in the matters of day-to-day administration.
4. Its recommendations are advisory and not binding on the ministries.
5. It is not vested with the power of disallowance of expenditures by the departments.
6. It is not an executive body and hence, cannot issue an order. Only the Parliament can take a final
decision on its findings.

Estimates Committee
The origin of this committee can be traced to the standing financial committee set up in 1921. The first
Estimates Committee in the post-independence era was constituted in 1950 on the recommendation of
John Mathai, the then finance minister. Originally, it had 25 members but in 1956 its membership was
raised to 30. All the thirty members are from Lok Sabha only. The Rajya Sabha has no representation in
this committee. These members are elected by the Lok Sabha every year from amongst its own members,
according to the principles of proportional representation by means of a single transferable vote. Thus, all
parties get due representation in it. The term of office is one year. A minister cannot be elected as a
member of the committee. The chairman of the committee is appointed by the Speaker from amongst its
members and he is invariably from the ruling party.
The function of the committee is to examine the estimates included in the budget and suggest
‘economies’ in public expenditure. Hence, it has been described as a ‘continuous economy committee’.
In more detail, the functions of the committee are:
1. To report what economies, improvements in organisation, efficiency and administrative reform
consistent with the policy underlying the estimates, can be affected.
2. To suggest alternative policies in order to bring about efficiency and economy in administration.
3. To examine whether the money is well laid out within the limits of the policy implied in the
estimates.
4. To suggest the form in which the estimates are to be presented to Parliament.
The Committee shall not exercise its functions in relation to such public undertakings as are allotted to
the Committee on Public Undertakings. The Committee may continue the examination of the estimates
from time to time, throughout the financial year and report to the House as its examination proceeds. It
shall not be incumbent on the Committee to examine the entire estimates of any one year. The demands
for grants may be finally voted despite the fact that the Committee has made no report.
However, the effectiveness of the role of the committee is limited by the following:
1. It examines the budget estimates only after they have been voted by the Parliament, and not
before that.
2. It cannot question the policy laid down by the Parliament.
3. Its recommendations are advisory and not binding on the ministries.
4. It examines every year only certain selected ministries and departments. Thus, by rotation, it
would cover all of them over a number of years.
 5. It lacks the expert assistance of the CAG which is available to the Public Accounts Committee.
6. Its work is in the nature of a post-mortem.

Committee on Public Undertakings

This committee was created in 1964 on the recommendation of the Krishna Menon Committee.
Originally, it had 15 members (10 from the Lok Sabha and 5 from the Rajya Sabha). However, in 1974,
its membership was raised to 22 (15 from the Lok Sabha and 7 from the Rajya Sabha). The members of
this committee are elected by the Parliament every year from amongst its own members according to the
principle of proportional representation by means of a single transferable vote. Thus, all parties get due
representation in it. The term of office of the members is one year. A minister cannot be elected as a
member of the committee. The chairman of the committee is appointed by the Speaker from amongst its
members who are drawn from the Lok Sabha only. Thus, the members of the committee who are from the
Rajya Sabha cannot be appointed as the chairman.
The functions of the committee are:
1. To examine the reports and accounts of public undertakings
2. To examine the reports of the Comptroller and Auditor General on public undertakings
3. To examine (in the context of autonomy and efficiency of public undertakings) whether the
affairs of the public undertakings are being managed in accordance with sound business
principles and prudent commercial practices
4. To exercise such other functions vested in the public accounts committee and the estimates
committee in relation to public undertakings which are allotted to it by the Speaker from time to
time
The committee is not to examine and investigate any of the following:
(i) Matters of major government policy as distinct from business or commercial functions of the
public undertakings
(ii) Matters of day-to-day administration
(iii) Matters for the consideration of which machinery is established by any special statute under
which a particular public undertaking is established
Further, the effectiveness of the role of the committee is limited by the following:
(a) It cannot take up the examination of more than ten to twelve public undertakings in a year.
(b) Its work is in the nature of a post-mortem.
(c) It does not look into technical matters as its members are not technical experts.
(d) Its recommendations are advisory and not binding on the ministries.

Budget
The Constitution refers to the Budget as the “annual financial statement”. In other words, the term
“budget” has nowhere been used in the Constitution. It is the popular name for the “annual financial
statement” that has been dealt with in Article 112 of the Constitution. The budget is a statement of the
estimated receipts and expenditure of the Government of India in a financial year, which begins on 1st
April and ends on 31st March of the following year. In addition to the estimates of receipts and
expenditure, the budget contains certain other elements. Overall, the budget contains the following:
a. Estimates of revenue and capital receipts;
b. Ways and means to raise the revenue;
c. Estimates of expenditure;
d. Details of the actual receipts and expenditure of the closing financial year and the reasons for
any deficit or surplus in that year; and
e. Economic and financial policy of the coming year, that is, taxation proposals, prospects of
revenue, spending programme and introduction of new schemes/projects.
The Government of India has two budgets, namely, the Railway Budget and the General Budget. While
the former consists of the estimates of receipts and expenditures of only the Ministry of Railways, the
latter consists of the estimates of receipts and expenditure of all the ministries of the Government of India
(except the railways). The Railway Budget was separated from the General Budget in 1921 on the
recommendations of the Acworth Committee. The reason of this separation was to introduce flexibility in
railway finance.

Who makes the Budget in India?

 Prepared by the Budget Division in the Department of Economic Affairs of the Ministry of
Finance
 The Prime Minister, through Finance Minister, personally supervises and guides the budget
proposals
 Cabinet approves the Budget before it is presented in Lok Sabha; President’s approval is also
required for presenting the Budget
 Secretaries of Nodal ministries and their financial advisors prepare ‘Demand for Grant’ (DFG) of
their ministry
 Department of Expenditure in Finance Ministry does extensive consultation with nodal ministries
to finalize DFG or expenditure Budget
 Estimate committee, Standing committee of ministries/department scrutinizes the budget
Estimates, and DFGs
 PM and FM also obtain the inputs of stakeholders- Industry leaders, Business community,
Farmers, civil society, Economists, and other experts
 Niti Ayog also play vital role in providing inputs and expert advice for Fiscal Policy, program
evaluation -output/outcome framework
Different forms or types of Budget
1. Based on arena (site of budget making) of Budget:
• Union budget, State Budget, Budgets of Local bodies
2. On the basis of Income vs Expenditure
• Balanced: Income and expenditure are equal
• Surplus budget: Income is more than the expenditure; Independent India’s first budget was a
surplus budget of 51 lakhs.
• Deficit Budget: When expenditure is more than the income. After the 1st budget, union budget
always has been a deficit budget. The deficit (called fiscal deficit) is managed by taking loans or
printing money by RBI; usually loan is preferred as it is less inflationary
3. Asset generating nature of Income/Expenditure
• Revenue vs. Capital Budget.
• Revenue Budget: Income and expenditure which don’t have long term (more than current year)
impact; for example, tax income, and salary expenditure.
• Capital budget: Income and expenditure which have long term (more than current year) impact;
for example, income from loan and expenditure in road, port, other infrastructure.
Principles of Budget-making
The formation of the budget is guided by certain basic principles must be followed. The more important
of these principles are as follows:
1.The budget must be a balanced one: Generally speaking the estimated expenditure should not
exceed estimated income. When expenditure exceeds estimated income, it is called a deficit budget.
Though deficit budgeting is risky in that it can lead to inflation. However, up to a point it is
acceptable because it helps fight or downturn in economic activity.
2.Estimates should be on a cash basis: This is how it is in India, Britain and U.S.A. This kind of cash
budgeting has the advantage that the final preparation of accounts of a year can be done soon after its
close, though it may not reveal the true financial picture for the year. By deferring payments that are
due in that year, a surplus instead of a deficit will be shown in the present year’s budget, which is
incorrect. In contrast to the cash budget, there is the revenue budget which corrects this deficit, but it
 results in long delays in preparation and presentation of accounts and this makes the exercise of
financial control difficult.
3.Budget must distinguish between recurring expenditure and income on the one hand and capital
payments and receipts on the other. In other words, there must be a distinction between current or
revenue budget and capital budget. Each part must be balanced separately and the overall surplus or
deficit is ascertained by taking both into account.
4.Budget should be gross and not net: All the transactions of income and expenditure must be clearly
and fully shown and not merely as the resultant net position. Neglect of this rule can adversely affect
the established financial procedure and result in laxity of control, incomplete accounts, etc.
5.Budget estimates should be as exact as possible: Gross over-estimating leads to heavy taxation.
Gross under-estimating can throw the whole budget out of gear when it comes to implementation.
Close estimation is usually done by taking the average figures of previous three years under different
heads and making the necessary adjustments. Itemised estimates are an aid to close budgeting.
Generally, one is liberal in estimating expenditure and conservative in estimating income.
6.The formal classification used in the budget should correspond to the format of accounts, that is,
budget heads should be the same as that of accounts. This facilitates budget preparation, budgetary
control and maintenance of accounts.
7. The rule of lapse: It is the last budgetary principle. No part of the grant that is unspent in the
financial year can be carried forward to the next financial year. If this rule is not applied, departments
would live on accumulated and unspent balances and would, to that extent, be independent of
legislative control.

Preparation of Budget
In India the Union Budget is prepared by the Ministry of Finance in consultation with NITI Aayog &
other concerned ministries. The Budget division of the Department of Economic Affairs (DEA) in the
Finance Ministry is the nodal body for producing the Budget.
The 4 essential steps in the preparation of Union Budget are as follows:
1. The Initial Process: The initial processes involved in the Budget-making begins in August-
September, around 6 months prior to the presentation of the Budget. The Finance Ministry sends
Budget Circulars containing skeleton forms and necessary instructions/guidelines to concerned
ministries and departments. These circulars are then distributed amongst disbursing and field
officers who provide details about financial expenditures and receipts of their department during
the current and past fiscal year, and their financial requirements for the ensuing fiscal year.

2. Accumulation & Authorization of Data: The data and estimates provided by ground-level
officials are then scrutinized by top officials of their departments. Upon approval/revision the data
and estimates are sent to the concerned ministries where they are examined again. Finally, the data
and estimates are sent to the Finance Ministry which further scrutinizes these and correlates the
estimates with the current economic state and the available resources to determine their feasibility.

3. Composing The Budget: After analysing every aspect carefully, the Finance Ministry then
allocates revenues to various administrative ministries and devises new public welfare schemes.
At times, there are disputes between ministries over the allocation of resources. In such scenarios,
the Finance Ministry consults the Union Cabinet or the Prime Minister. Their decision is deemed
final in such scenarios. After completing the allocation of resources to future expenditures, the
Finance Ministry in association with Central Board of Direct Taxes and Central Board of Excise
and Customs prepares a report of the estimated revenues to be generated in the ensuing financial
year. In the final stage, both the reports are consolidated to generate the final Union Budget.
During this process, various departments of the Finance Ministry consult stakeholders in the
public domain (such as farmers and small business owners) to gain more insights and prepare an
efficient budget.
Enactment of Budget
In India Once the budget is prepared, it goes to the Parliament for enactment and legislation. The budget
has to pass through the following stages:
1. Presentation of Budget & Finance Bill in Both the Houses of Parliament: Under Article 77 (3)
of the Indian Constitution the Finance Minister presents the budget in the Lok Sabha.
Simultaneously, the copy of the budget is laid on the table of the Rajya Sabha. Printed copies of the
budget are distributed among the members of the parliament to go through the details of the
budgetary provisions. The Finance Bill (relates to proposals regarding the imposition of new taxes,
modification on the existing taxes or the abolition of the old taxes) is also presented to the
parliament immediately after the presentation of the budget.

2. General Discussion of Budget: The proposals on revenue and expenditure are discussed in the
Parliament in 2 stages – Stage I (Broad outlines of the budget, principle & policies underlying it are
discussed) & Stage II (Discussion is based on reports of concerned Departments, Ministries &
Standing Committees). Members of the Parliament actively take part in the discussion.

3. Demands for Grant & Voting on the Same: They are presented ministry-wise and demand
becomes a grant after it has been voted. The voting of demands for grants is the exclusive privilege
of the Lok Sabha and not of Rajya Sabha. Each demand is voted separately by the Lok Sabha.
During this stage, the members of Parliament can discuss the details of the budget. They can also
move to reduce any demand for grants.

4. Passing of Appropriation Bill: After the Demands for Grants are voted for & passed by the
members of Lok Sabha, the Appropriation Bill which is intended to give authority to the Union
Government to withdraw funds from the Consolidated Fund of India for meeting the expenditure
during the financial year is introduced, considered and passed. Once it is passed in the Lok Sabha it
is sent to the Rajya Sabha which has the power to recommend any amendments however, it is
prerogative of the Lok Sabha to either accept or reject the recommendations made by Rajya Sabha.
After the bill receives accent from the President it becomes an Appropriation Act. The process
however takes time & the Union Government requires money to carry on its normal activities. To
meet the immediate expenses the Constitution has authorised the Lok Sabha to make any grant in
advance for a part of the financial year. This provision is known as the ‘Vote on Account’ (Article
116).

5. Passing of Finance Bill: After the passing of the Appropriation Bill, the Finance Bill (Money Bill
under Article 110) which stipulates legal amendments required for levying new taxes, modification
of the existing tax structure or continuance of the existing tax structure is introduced, discussed &
passed only in the Lok Sabha. The Rajya Sabha however can recommend amendments in the Bill.
The bill has to be passed by the Parliament within 75 days of its introduction. The passage of
Finance Bill by Parliament marks the completion of budgetary process.
FUNCTIONS OF MAJOR INSTITUTIONS IN BUDGETARY PROCESS
The budgetary process in India is indeed a difficult exercise. It involves a variety of institutions at various
levels. What follows is a brief description of the major actors or agencies involved in the budgetary
process at the union level.
1. Parliament: Parliament in India is the supreme legislative body involved in the budgetary
process. Parliamentary approval for the passage of budget is a must. In consonance with the
norms of parliamentary democracy, the Parliament is entrusted with the primary responsibility of
acting as the custodian of public money in the country. Under Article 112 of the Constitution, the
President shall cause to be laid before both the Houses of Parliament the ‘annual financial
statement’. This Annual Financial Statement is the main budget document. It may be noted that
word ‘budget’ does not figure in the Indian Constitution. Further, of the two Houses of
Parliament, it is the lower House or the Lok Sabha that holds absolute control over the financial
matters, including the union budget.
 2. Political Executive in India, the Executive has an equally an important role to play in the
budgetary process. The union Finance Minister pilots the budget in the parliament. The Ministry
of Finance is the core unit of the Executive, entrusted with the task of managing the operational
dynamics of the budget. The Ministry of Finance (MOF) is the nodal agency of the budgetary
process. Right from estimating the final figures of the revenues and expenditure of the
government for presentation before the Parliament, the Ministry is vested with the task of
ultimately ensuring that the finances of the country are managed with proper care.

3. Audit Department: Another important institution which is involved in the budgetary process is
the office of the Comptroller and Auditor General (CAG). Visualised under the provisions of
Article 148 of the Constitution, the office of CAG conducts an audit on behalf of the Parliament
to investigate and report on the fidelity, legality and efficiency of all the financial transactions
carried out by government departments. Over the past few years, the CAG has emerged as one of
the most stringent checks on the financial impropriety of the government, though critics have
argued against such a role of audit in our country.

4. Parliamentary Committees: Finally, the Parliamentary Committees on Estimates, Public

Accounts and Public Undertaking as well as 24 departmental Standing Committees play an
important role in the budgetary processes of the country. Important roles are assigned to these
committees to exercise control over the finances of the government or its public undertakings.
These committees are empowered to perform these tasks by parliament due to paucity of time or
lack of expertise with the latter. It may be mentioned here that the role of these Committees is
distinct in relation to the budgetary process. The Estimates Committee, for instance, suggests
economies in estimates of expenditures of various government departments in order to make them
more realistic and economical. The Public Accounts Committee carries out a post-mortem of the
accounts in the light of the audit report of the CAG. In the process, these committees bring out
financial irregularities, if any, and suggest remedial measures for the same. In brief these
institutions/organisations noted above are playing a significant role in the budgetary process in
India. Each year, the budget follows a cycle that includes:

1. Preparation of the budget (which entails deciding where tax money will be expended);
2. Budget approval;
3. Budget implementation; and finally
4. Auditing (which is intended to make sure that tax money allocated to various government
departments is spent properly).

Comptroller and Auditor General of India

Article 148 of the Constitution of India establishes the authority of this office. The Comptroller and
Auditor General are appointed by the President of India and can be removed from office only in the
manner and on the grounds that a Judge of the Supreme Court is removed. The person appointed to this
office should take an oath of office before the President or any other person appointed by the office of the
President. The salary, service conditions, leaves of absence; pension and age of retirement are determined
by the Parliament of India and specified in the Second Schedule such that the service conditions and
salary will not be modified to the disadvantage of the incumbent during their tenure. The CAG is not
eligible for any further office after the end of their tenure either in the Government of India or any State
Government. The powers and functions of the CAG are subject to the provisions of the Indian
Constitution and any Acts of Parliament, along with the service conditions for the Indian Audits and
Accounts Department. The rules governing these would be prescribed by the President in consultation
with the incumbent. The expenses on the administration of this office including all allowances, salaries
and pensions would be charged to the Consolidated Fund of India. The incumbent is appointed for a
period of 6 years or until attaining the age of 65 years whichever is earlier.

Independence of CAG
  There are several provisions in the Constitution for safeguarding the independence of CAG.
 CAG is appointed by the President by warrant under his hand and seal and provided with tenure
of 6 years or 65 years of age, whichever is earlier.
 CAG can be removed by the President only in accordance with the procedure mentioned in the
Constitution that is the manner same as removal of a Supreme Court Judge.
 He is ineligible to hold any office, either under the Government of India or of any state, once he
retires/ resigns as a CAG.
 His salary and other service conditions cannot be varied to his disadvantage after appointment.
 His administrative powers and the conditions of service of persons serving in the Indian Audit
and Accounts Department are prescribed by the President only after consulting him.
 The administrative expenses of the office of CAG, including all salaries, allowances and
pensions are charged upon the Consolidated Fund of India that is not subject to vote.
Powers and of the CAG of India
The powers of the CAG, regarding audits, are provided for in the Comptroller and Auditor General of
India (Duties, Powers and Conditions of Service) Act, 1971. According to this act, the CAG can audit:
 All receipts and expenditure from the Consolidated Fund of India and of the states and union
territories.
 All transactions relating to the Contingency Funds and Public Accounts.
 All trading, manufacturing, profit and loss accounts and balance sheets and other subsidiary
accounts kept in any department.
 All stores and stock of all government offices or departments.
 Accounts of all government companies set up under the Indian Companies Act, 1956.
 Accounts of all central government corporations who are Acts provide for audit by the CAG.
 Accounts of all authorities and bodies substantially funded from the Consolidated Fund.
Accounts of any authority, even though not substantially funded by the government, at either the
request of the Governor/President or at the CAG’s own initiative.
Role of CAG in India
The role of this office is to uphold the provisions of the Indian Constitution and laws enacted by the
Parliament in the field of financial administration. The accountability of the executive (i.e., the council of
ministers) to the Parliament in the sphere of financial administration is secured through CAG reports. The
office is responsible to and is an agent of the Parliament and conducts audits of expenditure on its behalf.
The CAG has ‘to ascertain whether money shown in the accounts as having been disbursed was legally
available for and applicable to the service or the purpose to which they have been applied or charged and
whether the expenditure conforms to the authority that governs it’.
The office can perform a propriety audit, that is, it can look into the ‘wisdom, faithfulness and economy’
of government expenditure and comment on the wastefulness of such expenditure. However, unlike the
legal and regulatory audit, which is obligatory on the part of the CAG, the propriety audit is
discretionary.
The secret service expenditure is a limitation on the auditing role of the CAG. In this regard, the CAG
cannot call for particulars of expenditure incurred by the executive agencies but has to accept a certificate
from the competent administrative authority that the expenditure has been so incurred under his authority.
The Constitution of India visualizes this office to be Comptroller as well as Auditor General. However, in
practice, the incumbent officer is fulfilling the role of an Auditor-General only and not that of a
Comptroller. In other words, ‘the office has no control over the issue of money from the consolidated
fund and many departments are authorized to draw money by issuing cheques without specific authority
from the CAG, who is concerned only at the audit stage when the expenditure has already taken place.

The duties and functions of the CAG as laid down by the Constitution are:
  Auditing the accounts related to all expenditure drawn from the Consolidated Fund of India,
consolidated fund of every state and consolidated fund of every union territory having a Legislative
Assembly.
 Audit of all expenditure from the Contingency Fund of India and the Public Account of India as
well as the contingency funds and the public accounts of states.
 Audit of all trading, manufacturing, profit and loss accounts, balance sheets and other subsidiary
accounts of any department of the Central Government and state governments.
 Auditing the receipts and expenditure of the Government of India and each state to ensure that the
rules and procedures in that regard are designed to secure an effective check on the assessment,
collection and proper allocation of revenue.
 Auditing the receipts and expenditure of the following: All bodies and authorities substantially
financed from the Central or state revenues; Government companies; and other corporations and
bodies when so required by related laws.
 Auditing all transactions of the Central and state governments related to debt, sinking funds,
deposits, advances, suspense accounts and remittance business. He also audits receipts, stock
accounts and others, with approval of the President, or when required by the President.
 Auditing the accounts of any other authority when requested by the President or Governor. For
example, the audit of local bodies.
 Advising the President with regard to prescription of the form in which the accounts of the Centre
and the states shall be kept (Article 150).
 Submitting audit reports relating to the accounts of the Central Government to the President, who
shall, in turn, place them before both the Houses of Parliament (Article 151).
 Submitting audit reports relating to the accounts of a state government to the Governor, who shall,
in turn, place them before the state legislature (Article 151).
 Ascertaining and certifying the net proceeds of any tax or duty (Article 279). The certificate is final.
The ‘net proceeds’ means the proceeds of a tax or a duty minus the cost of collection.
 Acting as a guide of the Public Accounts Committee of the Parliament. He compiles and maintains
the accounts of state governments. In 1976, he was relieved of the responsibilities regarding the
compilation and maintenance of accounts of the Government of India due to the separation of
accounts from audit, through departmentalization of accounts.
The CAG submits three audit reports to the President:
 Audit Report on Appropriation Accounts
 Audit Report on Finance Accounts
 Audit Report on Public Undertakings
The President lays these reports before both the Houses of Parliament. After this, the Public Accounts
Committee examines them and reports its findings to the Parliament.

Planning Commission
The erstwhile Planning Commission was established in March 1950 by an executive resolution of the
Government of India on the recommendation of the Advisory Planning Board constituted in 1946, under
the Chairmanship of K.C. Neogi. Constitution does not provide the provision of Planning Commission. It
was constituted in the form of an advisory and specialized institution by the Government. Thus, the
Planning Commission was neither a constitutional body nor a statutory body. In other words, it was a
non-constitutional or extra-constitutional body (i.e. not created by the Constitution) and a non-statutory
body (not created by an act of Parliament).
Planning Commission by this resolution of the government was, thus, expected to perform a key-role in
the economic development of the country and it worked as the supreme organ of planning for social and
economic development. The Commission was only a staff agency- an advisory body and had no
executive responsibility. Consequently the Government had been changing its nature and organization
from time to time.
The Prime Minister was the chairman of the commission. India’s first Prime Minister, Pandit Jawahar Lal
Nehru became the “ex-officio” first Chairman of the Planning Commission. He presided over the first
meeting of the commission. The commission had a full time Deputy Chairman. He was the “de – facto”
executive head of the commission. The commission had four to seven full time expert members and some
Central ministers as part time members. To ensure to perform its desired role, the Planning Commission
maintained a close liaison with the cabinet.
Composition of Planning Commission
The Prime Minister was the Chairman of the Planning Commission, which used to work under the overall
guidance of the National Development Council. The Deputy Chairman and the full-time members of the
Commission, as a composite body, provided advice and guidance to the subject Divisions for the
formulation of Five Year Plans, Annual Plans, State Plans, Monitoring Plan Programmes, Projects and
Schemes.
Members of the Planning Commission:
1. Chairman – Prime Minister; presided over the meetings of the Commission
2. Deputy Chairman – de facto executive head (full-time functional head);
a. Was responsible for the formulation and submission of the draft Five-Year Plan to the
Central cabinet.
b. Was appointed by the Central cabinet for a fixed tenure and enjoyed the rank of a cabinet
minister.
c. Could attend cabinet meetings without the right to vote.
3. Part-time members – Some central ministers
4. Ex-officio members – Finance Minister and Planning Minister
Functions of Planning Commission:
1. To make an assessment of the material, capital and human resources of the country, including
technical personnel and to investigate the possibilities of augmenting such of those resources as
are found to be deficient in relation to the nation’s requirements.
2. To formulate a plan for the most effective and balanced utilisation of the country’s resources.
3. To determine priorities as between projects and programmes accepted in the plan.
4. To indicate the factors that retard economic development and to determine conditions which
should be established for the success of the plan.
5. To determine the nature of the machinery to secure the successful implementation of the plan.
6. To appraise from time to time the progress of the plan and to recommend the necessary
adjustments of policy and measures; and,
7. To make recommendations either for facilitating the discharge of its duties or tor a consideration
of the prevailing economic conditions, current policies, measures and development programmes;
or for an examination of problems referred to it for advice by the Central or State Government.
Critical Evaluation
Criticizing the role of the planning commission, Appleby observes that this extra constitutional body
created by the centre acts as a “SUPER-CABINET” for the whole of India directing and regulating the
entire socio-economic activity on National basis. As a matter of fact, the planning Commission which
does not contain any representation from the states, has turned out to be a ‘Leviathan’ in the realm of
financial relationship between the union and the states. The commission not only formulates the plan for
the entire country, but also has the final say in respect of the state planning. Thus the commission can
regulate the state plans according to its wishes. The constitution empowers the parliament to make
discretionary grants for the needy states. Such grants are also made on the basis of recommendations of
the planning commission. Professor Gadgil says that planning commission was created with some
specific objective such as assessment of natural resources, formulation of national plans, determination of
priorities, periodical review of plan implementation etc., but excepting the pack of plan formation. The
commission’s role in the spheres falls much short of expectations. This is because the commission which
is essentially and advisory organization in the fields of economic development has associated itself in
decision making in political spheres. he planning commission when is expected to be politically neutral
has not been so and has undesirably associated itself with political issues criticizing the role of the
planning commission, Ashoke Chandra observes ‘When politics and planning becomes mixed up, it is
planning that often suffers in consequence.’