New system to cut spends rush in Q4

The modified cash management system in the central government, aimed at greater evenness in budgeted expenditure within a financial year, has introduced an exchequer control based expenditure system for 15 demand for grants.

The system came into effect on April 1 this year. The control will apply cumulatively at the demand for grants level only.

The key objective of the new cash management system is to reduce the "rush of expenditure" seen during the last quarter of every fiscal.

It will also reduce the tendency of "parking of funds", help monitor expenditure patterns and allow better planning of the indicative market borrowing calendar of the central government.

The new system has stemmed from review of a pilot scheme of cash management introduced for nine demand for grants in fiscal 2003-04.

Accordingly, financial advisors in central government ministries have been made responsible for implementation of the modified system. For each demand for grant, separate monthly plans will be worked out for Plan and non-Plan expenditure and included in the detailed demand for grant.

The monthly expenditure plan will form the basis of quarterly expenditure allocations. Ministries and departments cannot issue cheques beyond this limit, without prior approval of the finance ministry's cash management cell. Any savings under the quarterly expenditure allocations cannot be automatically carried forward to the next quarter.

However, revalidation may be allowed on specific request. Any spillover, as long as it is in line with the monthly and quarterly plans, would not require prior validation.

The finance ministry would consider requests for revalidation within 15 days of receiving them, failing which they would be deemed to have been granted. The monthly and quarterly allocations pertaining to the fourth quarter would be subsumed in the revised estimates for the financial year.

Crucially, the omnibus guideline restricting expenditure in the last quarter of the fiscal to 33 per cent of the budgeted amount shall not apply to demand for grants where the modified cash management system is being implemented.

The allocations will be in gross terms.