No more parking funds in public accounts

Various departments have deposited about ₹5,000 crore in their accounts maintained in the Treasury

Finance Minister T.M. Thomas Isaac had hinted at applying brakes on spending in the wake of the strain on the finances.

As part of the government bid to ease the strain on the State’s finances, all departments and autonomous bodies have been directed to desist from parking their funds in public accounts and be more frugal.

On finding that substantial sums have been deposited in public accounts of autonomous institutions and various departments, the Centre has curtailed the borrowing limit of the State. The curtailment, along with the delay in providing the Central transfers, has upset the financial transactions and the government has been forced to regulate cash outgo from the Treasury.

A recent Finance Department review is understood to have found that various departments had deposited about ₹5,000 crore in their accounts maintained in the Treasury. The funds of institutions such as the Kerala State Financial Enterprises and the security deposits of government contractors are also deposited in the public accounts in the State treasury. All these were taken into consideration while restricting the State’s borrowing limit, sources said.

Earlier, Finance Minister T.M. Thomas Isaac had hinted at applying brakes on spending in the wake of the strain on the finances. Local self-government institutions are known for depositing substantial sums for executing Plan projects such as drinking water, housing and electrification in the accounts of government agencies such as the Kerala Water Authority, the Kerala State Housing Board, the Kerala State Electricity Board.

If the project gets delayed, the funds would remain idle in the accounts of the agencies. Of late, steps were taken to streamline the process and such a situation has been averted too. But the latest directive would be applicable to them too, sources said.

'Financial stability will be hit'

According to former State Finance Commission chairman B.A. Prakash, maintaining substantial sums in public accounts would affect the financial stability of the State and the government directive to address it should be appreciated. Local bodies and other agencies should be warned against bypassing the government directive. The system of permitting local governments to carry over the unspent funds to next financial year too is a unhealthy practice and should be scrapped, say Mr. Prakash.

Prescribing a regimen for the financial crisis, Mr. Prakash said that quinquennial pay and pension revision of government employees and service pensioners also incurs a severe strain on the exchequer. The Tenth Pay Revision Commission had recommended that the pay be revised only once in 10 years and fixed at higher scales. The recommendation was rejected but the pay scales were accepted. This should be reviewed, says Mr. Prakash.