The Finance Ministry is in the process of nominating three independent directors to Monetary Policy Committee (MPC) which will fix the benchmark interest rate of the RBI and set inflation targets.
"Members from Reserve Bank are known that is already mentioned in the Act itself. You have RBI Governor, Deputy Governor and Executive Director. Now from the government side three independent members are to be nominated," Economic Affairs Secretary Shaktikanta Das said on the sidelines of an event organised by ADB here.
The government nominees to the MPC will be selected by a search-cum-selection Committee under Cabinet Secretary with RBI Governor, Economic Affairs Secretary and three experts in the field of economics / banking / finance / monetary policy as its members.
The process to constitute MPC will be initiated after passage of Finance Bill, 2016 and its notification as an Act, he added. The Bill is likely to be passed in Parliament in a day or two.
The six-member panel will set interest rates to bring consumer or CPI inflation to pre-set targets.
Setting up of MPC is being done by amending the Reserve Bank of India Act, 1934, through the Finance Bill, 2016.
Each member shall have one vote and in case of tie, the Governor shall have a second or casting vote.
Presently, the Governor has overriding powers to accept or reject the recommendation of RBI's panel on monetary policy.
Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.
MPC will meet at least four times in a year and the government may, if it considers necessary, convey its views in writing to the MPC from time to time.
RBI will publish Monetary Policy Report every six months explaining the sources of inflation and the forecasts of inflation for the period between six to 18 months.
If RBI fails to meet the inflation target, it shall in the report give reasons for failure, remedial actions as well as estimated time within which the inflation target shall be achieved.
The guidelines said it was found that over the years
Ministries/Departments had started operating small and multiple schemes, which spread resources too thinly to realise any meaningful outcomes.
In the run up to the Union Budget 2016-17, various schemes were rationalised in consultation with the implementing Ministries/Departments. The number of Central Sector Schemes was brought down to around 300 and the number of Centrally Sponsored Schemes to around 30.
"However, this exercise is not an end in itself. In reiteration of the standing instructions in this regard and to ensure efficient management of public expenditure at all times," said the statement by the ministry.
As per the new guidelines, no new scheme or sub-scheme will be initiated without the prior 'in-principle' approval of the Department of Expenditure.
The implementing ministries have been delegated powers to appraise schemes and projects up to Rs 500 crore.
Besides, the implementing ministries have been delegated powers to appraise schemes and projects up to Rs 500 crore, it said.
No new Company, Autonomous Body, Institution/University or other Special Purpose Vehicle should be set up without the approval of the Cabinet/Committee of the Cabinet, irrespective of the outlay, or any delegation that may have been issued in the past, it said.
All such cases would be appraised by the Committee of Establishment Expenditure chaired by the Expenditure Secretary for which separate orders will be issued.
According to new guidelines, scheme/projects between Rs 100 crore and Rs 500 crore will be approved by the minister- in-charge of the ministry or department.
Earlier, the minister had powers to approve proposals up to Rs 150 crore.
In case of non-plan schemes entailing expenditure between Rs 500 crore and Rs 1,000 crore, the competent authority is the minister-in charge and minister of finance. Expenditure beyond Rs 1,000 crore will require clearance of the Cabinet or Cabinet Committee on Economic Affairs.
It also said that any increase in costs due to statutory levies, exchange rate variation, price escalation within the approved time cycle and/or increase in costs up to 20 per cent due to any other reason, are covered by the approval of the original cost estimates.
Any increase in this regard would be approved by the Secretary of the administrative department concerned with the concurrence of the Financial Adviser, it added.
