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This smart move by government could save Rs 10,000 crore taxpayer money in funding welfare schemes

With the Public Finance Management System (PFMS) making progress in tracking utilisation of funds up to the last mile and ensuring that funds are transferred only ‘just-in-time’ and not earlier for various schemes, the Centre has managed to cut down floating funds with the bank accounts of implementing agencies by 36% over the past year.

The idling of cash, meant for these schemes, was to the order of an average of Rs 1.4 lakh crore at any point of time in FY18; this has now come down to about Rs 90,000 crore. (Reuters)
The idling of cash, meant for these schemes, was to the order of an average of Rs 1.4 lakh crore at any point of time in FY18; this has now come down to about Rs 90,000 crore. (Reuters)

With the Public Finance Management System (PFMS) making progress in tracking utilisation of funds up to the last mile and ensuring that funds are transferred only ‘just-in-time’ and not earlier for various schemes, the Centre has managed to cut down floating funds with the bank accounts of implementing agencies by 36% over the past year.

The Controller General of Accounts (CGA), which is the nodal body overseeing implementation of the PFMS, has estimated that annual savings to the exchequer in terms of interest and other savings could be to the tune of Rs 10,000 crore if all the implementing agencies for central- sector schemes (CS) and centrally-sponsored schemes (CSS) come on board by next year and the floating funds with them are reduced to the minimum, a finance ministry official said.

The idling of cash, meant for these schemes, was to the order of an average of Rs 1.4 lakh crore at any point of time in FY18; this has now come down to about Rs 90,000 crore. The efficient fund management would help the Centre save on borrowing and opportunity costs. For example, floating of funds which used to be around Rs 50,000 crore in the case of the government’s flagship Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), has become almost zero, the sources said.

The implementing agencies for central government programmes include state governments, and assorted central and state agencies. Seeing the benefits of the platform, the ministry of defence, railways and communications (department of post) have evinced interest in the ‘just-in-time’ concept of transfer of funds to their implementing agencies, another official said. Later this week, the CGA would be making a presentation in this regard to the defence ministry.

The railways is considering initiating a letter of credit (LoC) concept wherein LoCs would be issued by railway agen-cies/wings to contractors, which would make withdrawals based on utilisation certificates instead of the current practice of giving advances for annual works contracts, sources said. Since the railways is a highly decentralised organisation with many accounting procedures being followed at different levels, the migration to the PFMS could happen only after its accounting systems are centralised, officials reckon.
Similarly, the department of fertilisers would soon use a software to transfer subsidies to fertiliser firms only after sales to farmers are captured through Aadhaar-linked point-of-sale machines, instead of the current practice of releasing funds at the time of offtake of fertiliser at the district level.

Even though PFMS — a CS scheme itself with allocated budget size of `839 crore till FY20 (only 30% spent so far) — has brought visible outcomes, it is struggling with acute manpower shortage at the officers level. As a result, CGA is deputing its officers working with various departments to work as nodal officers for states, affecting their core work, sources said. Officials reckon the PFMS scheme should be extended beyond FY20 in time to prepare strategies and hire dedicated manpower, to achieve its stated objective. Of 20 lakh agencies registered with the PFMS, about 1 lakh are transacting via the PFMS now. On an average, 20 lakh direct benefit transfer transactions takes place under PFMS (excluding LPG).

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First published on: 08-08-2018 at 05:34 IST
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