12. As mentioned in Chapter I, “Preparation of the budget” marks the first of the four budgetary stages. This is a purely executive function, and may be sub-divided as follows:—
(i) Preparation of estimates by the Heads of Departments based on estimates submitted by the Regional/District Officers.
(ii) Scrutiny of estimates by—
(a) the Administrative Department.
(b) the Finance Department.
(iii) Final consolidation of estimates and presentation to the Legislature.
PART I AND PART II ESTIMATES
13. The departmental estimates should take cognizance only of what are called ‘standing sanctions’, i.e. of revenue based on and of expenditure incurred by virtue of existing laws, rules and orders. These are called Part I Estimates. Proposals for the abandonment of an existing source of revenue, either in whole or in part, otherwise than in pursuance is authorised codes, manuals, or rules and for ‘new’ expenditure during the budget year are submitted to Government as and when they arise, so that they could undergo a pre-budget scrutiny. Estimates in respect of such proposals should be submitted to Government separately, indicating the authority for abandonment of revenue/incurring new expenditure. Such estimates are known as Part II Estimates. The details based on which the provision has been proposed should also be furnished in the case of new expenditure. Where the details have not been approved, the reasons therefor should also be given. In this chapter, attention will be confined to the preparation of Part I Estimates. Part II Estimates are dealt with in detail in the following chapter. [In recent years, this distinction is not being strictly observed, c.f. paragraph 16(1).]
GENERAL DIRECTIONS
14. Estimating should be close.—The budget of the State is based on the departmental estimates submitted by the Heads of Departments and certain other Estimating Officers, which, in turn, are based on the estimates prepared by the Regional/District Officers. The estimates should always receive the careful personal attention of the officers who submit them, who should ensure that they are neither inflated nor underptiched, but as accurate as practicable. This is possible only if the Estimating Officers keep themselves thoroughly acquainted with the flow of revenue and expenditure. While provision should be made for all items that can be foreseen, it is essential that it is restricted to the amount required for actual expenditure during the year. The general tendency to underestimate expenditure should be avoided, and a realistic picture of the finances of the department presented. Close estimating also implies that, except when unavoidable, as in the case of repairs and maintenance of buildings, lump sum demands should not be made.
15.Estimates should be on cash basis.—The estimates should take into account only what is expected to be actually received or paid (under proper sanction) during the year, including arrears of past years. In other words, the estimates should be a record of the year anticipated cash receipts and cash payments during the year, regardless of whether the receipts and payments relate to that year or previous years. For instance, machinery to be ordered in March, 1977, but not expected to be paid for till April, 1977, will be provided for in the estimates for the year 1977-78, and not 1976-77. Similarly, revenue due in March, 1977, but expected to be realised only in April, 1977, will be included in the Revenue Estimates for 1977-78, and not 1976-77. So also, arrears of revenue relating to a previous year, say 1972-73, if likely to be collected during the budget year 1977-78, will find a place in the Revenue Estimates for 1977-78. No attempt is made to assess the value of assets and liabilities at the beginning and end of the year, and to bring the difference into account. The advantage of having estimates prepared on a cash basis is that the accounts could be closed very much earlier than when they are prepared on a demand and liability basis.
CONSOLIDATED ESTIMATES IN
RESPECT OF PLAN SCHEMES
16 (1). The system of preparing the estimates in two parts, as indicated above, is found not convenient in the case of schemes included in the Five year Plan, as the overall annual provision for existing/continuing and new plan schemes will have to be kept within the annual plan outlay. As such, in respect of Plan Schemes, a single consolidated estimate, comprising both existing/continuing and new schemes, should be prepared, in accordance with the following directions:
(i) The outlay tentatively fixed for each scheme in the annual plan proposals should be taken as the basis for proposing provision in the budget. In respect of new schemes for expansion of existing schemes, separate statements containing sufficient details and explanatory notes in support of the provision proposed for each item, should be furnished. A consolidated statement showing the provision proposed for plan schemes, should also be furnishes, in the form given below:
Part A—Spill-over Schemes and continuing schemes
Part B—New schemes.
Note:—
A break-up of the provision as between expenditure on staff and contingencies (recurring and non-recurring) should be given in respect of the provision shown under column 8, with as much details as possible.
A note indicating the physical and financial targets of each scheme, in stage of implementation, specific central assistance, if any admissible:, and such other relevant particulars should also be furnished along with the Statement. Particulars in respect of Centrally Sponsored Schemes/Central Sector Schemes should be furnished in a separate statement, in the same form. Copies of the consolidated statement and the accompanying note should be sent to the Planning and Economic Affairs Department as well.
(ii) Another statement, showing the progress of expenditure on each scheme .
PART B. CENTRALLY SPONSORED/CENTRAL SECTOR SCHEMES INCLUDING COMMODITY SCHEMES, ETC.
Note.—(1) Figures of expenditure incurred on a scheme under different major heads of account should be shown separately.
(2)The gross expenditure should be shown in respect of Centrally Sponsored/Central Sector Schemes, the approved pattern of assistance being indicated in the remarks column.
(iii) Copies of the above statements should be sent to the Finance (Planning) Department also.
(2) At the time of transition from one Five Year Plan to another, it will be necessary to classify the plan expenditure into two categories, viz., (1) expenditure on maintenance of completed schemes, and (2) expenditure on schemes in progress, which continue to be of a developmental nature. In the former case, all expenditure on maintaining the schemes at the level of development already achieved should be treated as ‘committed’ (non-plan) expenditure. In the latter case, too, expenditure, at the existing level, on salaries, travel expenses, office expenses, rent, rates and taxes and other charges will be treated as ‘committed’ (non-plan) expenditure, except where the subsequent Five Year Plan specifically provides for the continuance of the scheme will form part of the subsequent Five Year Plan. In the case of capital projects not completed before the expiry of a Five Year Plan period, the entire expenditure including establishment charges, should be provided for in the next Plan.
(3) While so classifying the expenditure on plan schemes, a careful review should be made of every item categorised as ‘committed’, and any non-essential item pruned, to the extent practicable. For instance, it should be examined whether it is still necessary to retain the full complement of staff during the next plan period.
(4) Any additional expenditure of a developmental nature should be accommodated in the next Five Year Plan. For example, if a new building is required for an existing medical college, it should form part of the next plan.
(5) Estimates of ‘committed’ (non-plan) expenditure should be accompanied by a self-explanatory report, containing all relevant details of the scheme, to enable Government to verify the correctness of the classification of expenditure as ‘committed’ (non-plan) of developmental. For this purpose, a statement containing the following details should also be furnished in respect of each scheme:—
1 Name of scheme and Code No.
2 Whether the scheme would be completed by the end of the current plan or is to be continued during the next plan.
3 Whether and to what extent provision is to be made under non-plan’ for ‘committed’ expenditure.
4 Budget estimate of ‘committed’ expenditure in respect of the scheme, with details of staff to be retained and justification therefor, and other relevant particulars for working out the ‘committed’ expenditure.
5 Budget head (on the non-plan side0 under which provision is to be made for the ‘committed’ expenditure. The revised estimate for that year (last year of a plan period) should, however, be shown under ‘plan’.
FORM OF DEPARTMENTAL ESTIMATES—
PART I
17. The departmental estimates which should be in the same form as the budget estimates, may be prepared in the following pro forma*:—
*This relates to the budget year 1977-78.
18. Accounts [Column (1)].—The actuals of the previous year should be entered in this column, rounded to the nearest rupee. The figures should agree, as nearly as possible, with the figures recorded in the Accountant General’s final accounts. (Every Head of Department is bound to reconcile all differences between his figures and those of the Accountant General, and a certificate to effect that the figures have been so reconciled must be appended to each departmental estimate).
19. Budget Estimate [Column (2)].—The figures as given in the Budget Estimates of the current year should be entered here.
20. Revised Estimate [Column (3)].—(1) As mentioned in Chapter II, the Revised Estimate is an estimate of the probable revenue and expenditure of the current financial year under the various heads, framed during the course of the year, based on the actual transactions so far recorded and the anticipation for the rest of the year.
(2) The Revised Estimate of the current year is, prima facie, the best guide for framing the next year’s estimate, and, as such, it should be prepared as realistically as possible.
(3) The Revised Estimate should be prepared, bearing in mind—
(i) the actual expenditure during the first five months of the current year,
(ii) the expenditure likely to be incurred during the remaining months of the year,
(iii) the additional funds already obtained or proposed to be obtained through Supplementary Grants,
(iv) reappropriation/surrender of funds already made of proposed to be made,
(v) new schemes sanctioned in the course of the year,
(vi) new heads of account opened during the year, and
(vii) other relevant factors having a bearing on the expenditure during the year.
In short, the Revised Estimate should represent the anticipated expenditure during the year, taking into account all relevant post-budget developments, and should closely correspond to the actuals. As the closing balance of the year is worked out with reference to the Revised Estimate, any large variation between the Revised Estimate and actuals would upset the ways and means forecasts. It would, therefore, be very difficult for Government to entertain requests for additional funds, made later in the year, if these are not already covered by the Revised Estimate submitted earlier.
(4) At the time of the estimates, the actuals of the first five months of the current year will normally be available, and the revised estimate may, therefore, be calculated as follows:—
(i) by adding to the actuals of the first five months of the current year to those of the last seven months of the previous year; or
(ii) by taking a proportionate figure, so that the revised estimate will be 22/5 times the actuals of the first five months; or
(iii) by assuming that the Revised Estimate for the current year will bear the same ration to the actuals of the first five months as the actuals of the previous year bore to those of the first five months of that year. The Heads of Departments and other Estimating Officers should use their discretion and adopt the method considered most suitable in each case. If the amount under any head of account is fixed, there is, of course, no need to use any of these methods. If it is not subject to any regular influence, but fluctuates quite irregularly, method (iii) is not applicable. When method (i) or (iii) is used, it is generally better to take the average of the last three years. Due allowance should be made for any exceptional phenomenon which affected the actuals of the previous years and also for any special or unusual feature of the current year. The amount of each estimate should be rounded to the nearest hundred.
(5) The Revised Estimate is just a financial assessment prepared for the information of the Executive in the course of the year, showing how much the department excepts to receive or spend during the year according to latest indications, so as to enable Government to work out the approximate closing cash balance of the current year (which is also the opening balance of the budget year). It does not, in any way, nullify the budget passed by the Legislature, which continues to hold good; nor does it authorise the incurring of additional expenditure. For instance, if the budget grant for jails during a year is Rs. 100 lakhs, and the amount of the Received Estimate is Rs. 105 lakhs, it does not mean that the Inspector General of Prisons is authorised to incur expenditure over and above the budget grant, to the tune of Rs. 5 lakhs. Similarly if the amount of the Revised Estimates is less than the budget grant, it does not imply that budget grant of the department has been correspondingly reduced. All that this figure indicates is that the department, on the basis of the latest information available, anticipates the expenditure during the year to be greater/less than the amount authorised in the budget. If the expenditure anticipated is greater, the department should take necessary steps in time to obtain a supplementary grant. If the reverse be the case, the department should surrender the saving in time, vide paras 88, 89 and 91.
21.Budget estimate [Column (5)].—The Revised Estimate for the current year should form the basis for preparing the Budget Estimate for the coming year, with due allowance for any special factor. Thus, if the current year’s estimate had provided for any non-repetitive item of expenditure, corresponding reduction should be made in the Budget Estimate for the coming year. The variations between the Revised Estimate for the current year and the Budget Estimate for the ensuing year should be clearly explained in the “Remarks” column [Column (6)]. It should not be assumed that Provision for the budget year should always be made on the basis of the revised estimate as a matter of course. A charge once provided for and accepted by Government may no longer be necessary. Likewise, increased provision made even during successive years under a particular head of account might have been for the furtherance of a function which had suffered during an earlier period of financial stringency. Therefore, even in such cases, the necessity for making provision at the same level for the budget year should be closely looked into. In short, this is the time of the financial year when a thorough and comprehensive review of the working of each office and department could be fruitfully undertaken, with a view to identifying avoidable expenditure for the purpose of framing the next year’s budget.
PROVISION FOR LOSSES
22. Provision for losses should not, ordinarily, be made in the budget. However, if, in any case, some loss is expected and provision has to be made, it should be with the special sanction of the Finance Department.
BUDGET ESTIMATES OF REVENUE
23 (1) The budget estimates of revenue should be based on existing rates, and no increase or decrease in rates should be proposed in the budget estimates, which has not been sanctioned by Government. If such proposals have already been sent to Government separately, their financial effect should be indicated in the remarks column. In the case of the more important heads of revenue, the actuals of the first five months should be compared with those of the corresponding period of each of the past three years. When several items of a miscellaneous nature are grouped under a single detailed head, details of the more important items should be given in the remarks column.
2) The budget estimates of revenue should be prepared, keeping in view the extent of arrears as at the end of the preceding year, the reasons therefor, and the steps taken or proposed to be taken or proposed to be taken to speed up collection.
PROVISION TO BE MADE ONLY FOR SANCTIONED SCHEMES
24. Provision should be made for all sanctioned schemes, but not for new schemes awaiting Government’s sanction. When discontinuance of a sanctioned item of expenditure requires Government’s approval and proposals have already been submitted, no provision need be made, but the reason should be explained in the remarks column
.
SCHEMES PROVIDED FOR UNDER MORE THAN ONE HEAD OF ACCOUNT
25. Certain schemes may involve expenditure under more than one head of account. While providing for such schemes under any one head, details of the provision proposed under other heads should also be indicated in the remarks column so that a complete picture of the financial requirements may be available.
CODE RULES TO BE STRICTLY FOLLOWED
26. In the case of both receipts and disbursements, every Estimating Officer should observe strictly the rules governing classification of transactions in Government accounts, allocation of leave salaries and pensions between the Central and State Governments, etc., and such other rules, laid down in the Financial and Account Codes. Provision should be made in the budget estimates only for such receipts and charges as are definitely allocable to the State.
GRANTS TO LOCAL BODIES, PRIVATE MANAGEMENTS, ETC.
27. As already mentioned, lump provisions should, as a rule, not be made in the budget estimates. In some cases, however, lump provisions are unavoidable, e.g., provision for grants to local bodies for water supply and drainage schemes, maintenance of roads, etc., and to private managements in respects of educational medical and other institutions. The provision proposed, in such cases, should be supported by a statement, in one of the following forms, showing the commitments due to standing sanctions:—
AMOUNT OF ESTIMATES TO BE ROUNDED
28. The amount of estimate in respect of each detailed head of account and each subsidiary entry (where this is required) should be rounded to the nearest hundred.
29. The following instructions, which apply to certain classes of expenditure, should also be borne in mind, while preparing the budget estimates.
A. SALA RIES
(1) The provision should include pay and allowances in all forms of officers and staff, except travel expenses. The provision should be worked out, based on the number of incumbents likely to be on duty in the coming year (regardless of the sanctioned strength), and the actual pay likely to be drawn by them. However, in the case of a cadre which includes leave reserve, the estimates should provide not only for members likely to be on duty, but also for those likely to be on leave, no separate provision being made for leave salaries. Provision should not normally be made for posts kept in abeyance.
(2) The permanent staff should be distinguished from the temporary; temporary establishments expected to continue during the coming year should also be provided for. In the case of temporary officers and establishments for which a full year’s provision is not made, the period for which provision has been made should be indicated. If, on the basis of the approved programme of work, additional temporary posts are required for any sanctioned scheme or project, provision therefor should be made explaining their necessity and indicating whether the cost involved is included in the sanctioned cost of the scheme or project.
(3) Pay and fixed allowances of an officer for a month become due only after the end of the month. Provision therefore for the month of March should, therefore, be made in the budget estimates of the following year.
(4) To verify calculations, a statement showing the sanctioned strength, the actual strength, the scales of pay of the various incumbents, and their actual pay should be furnished. The strength of staff provided for in the current year’s budget should be compared with that proposed for the next year, and variations, if any, adequately explained, enclosing copies of the relevant sanctions. Statements should also be furnishes, showing separately the provision proposed for (a) Dearness Allowance,
(b) Local Allowance, (c) House Rent Allowance, and, (d) any other kind of allowance. Large, variations, when compared to the actuals of the past three years and the Revised Estimate for the current year, should be briefly explained.
(5) Number Statements.—Details of officers and establishments provided for in the budget estimates, such as their strength, the number of officers on different scales of pay, the number of officers drawing Dearness Allowance and House Rent Allowance at different rates, etc., are not given in the body of the budget, but are appended to the Detailed Budget Estimates. To prepare this appendix (Appendix I to the Detailed Budget Estimates), statements showing the number of officers on different rent scales of pay; the number of officers drawing Dearness Allowance at different rates, the number of officers drawing House Rent Allowance at different rates, the number of full-time and part-time contingent staff should be furnished in Forms KBM 1-4 respectively. Besides, statements in Forms KBM 5-7, showing the sanctioned posts in each permanent and temporary establishment, fixed allowances, and the details of posts created/abolished respectively should also be furnished along with the estimates.
(6) It is possible that the estimates prepared carefully in accordance with the foregoing instructions may still be too high, especially in big departments like Police, Education, Medical, Public Works, etc. They should, therefore, be re-examined in the light of the actuals of past years, and a lump reduction made for probable savings.
B. TRAVEL EXPENSES
In the case of fluctuating charges like travel expenses, a note should be made of the actual expenditure in each of the past three years, together with a brief explanation of any abnormal variation. If, in any such case, the estimate for the coming year differs from that of the current year, full explanation must be given.
C. OFFICE EXPENSES, RENT, RATES AND TAXES OTHER CHARGES, ETC.
(1) The detailed head “Office Expenses” will include all contingent expenditure for running an office, such as on furniture, postage, purchase and maintenance of office machines and equipment, liveries, telephones, water and electricity, stationery, printing of forms, purchase, and maintenance of staff cars and other vehicles for office use, etc. The detailed head “Rent, Rates and Taxes” is meant to accommodate rent for hired buildings, leave charges for land municipal rates and taxes, etc. The detailed head “Other Charges” is a residuary head, that will embrace all charges which cannot appropriately be brought to account under any other detailed head.
(2) The provision proposed against each of these detailed heads should be accompanied by supporting statements, indicating the requirements for component items, such as furniture, postage, telephone charges, etc. Recurring items should be distinguished from non¬recurring items. Provision for non-recurring items should be made as a matter of course, copying the average expenditure of previous years, but should be based on a realistic assessment of the actual requirements during the budget year.
(3) The actuals of the past three years should be given in the ‘Remarks’ column, against each detailed head; abnormal charges should be specified and excluded from the total in calculating the average of the preceding three years. Provision in excess of the normal average may be proposed, only if there is full justification.
(4) In the case of expenditure which usually brings in revenue, e.g., on agricultural farms, purchase of raw materials for jail manufacture, etc., increased provision for expenditure should entail proportionate increase in the estimates of revenue.
D. MAJOR WORKS
A major work is one, the estimated cost of which exceeds Rs. 1.00 lakh. In the case of the Public Works, Public Health Engineering, and Forest Departments, details of major works in progress.
N.B.—In the case of road maintenance works two columns ‘Length of road’ and ‘Rate per kilo meter’ may be inserted in addition.
E. MINOR WORKS
Works, the estimated cost of each of which does not exceed Rs. 1.00 lakh, should be treated as minor works.
F. PROVISION FOR STORES
The provision for stores should be worked out, based on past consumption, anticipated variation, stock in hand, and forecast of requirements for works during the coming year. The estimate should be strictly in accordance with the system of gross vote, detailed instructions regarding which are contained in Government’s Circular No. 72/76/Fin., dated 27 th July, 1976, vide Appendix 5.
G. DECRETAL CLAIMS
Provision should be proposed for meeting “charged’ expenditure that may be necessary to satisfy court decrees. A special review of all suits that have gone to court or are likely to be taken to court should be conducted for assessing the likely requirements. It is also desirable to provide for unforeseen expenditure arising from court decrees.
- INTER-DEPARTMENTAL ADJUSTMENTS
The Estimating Officers should ensure that adequate provision is proposed in the original estimate itself for carrying out inter-departmental adjustments and adjustments between different heads of account, as this is not an item for which a supplementary demand could justifiably be made.
EXPLANATORY MEMORANDUM
- 30.For the preparations of the Explanatory Memorandum on the Budget, the Heads of Departments should furnish the following particulars:—
(i) Cases already approved by the Legislature, but where the expenditure is subsequently expected to exceed appreciably the amount originally intimated to the Legislature (in Form KBM 9).
(ii) Full details of Government properties or assets proposed to be transferred free of cost or sold at concessional rates to outside bodies/institutions/parties (in Form KBM 9).
(iii) Statements of guarantees given by Government (in Form KBM 10).
(iv) Particulars of Government properties leased out at subsidised or concessional rates of rent and for which standard rent has not been fixed (in Form KBM 11).
SUBMISSION OF DEPARTMENTAL ESTIMATES TO GOVERNMENT
31. (1) The Heads of Departments and other Estimating Officers should prepare their estimates in duplicate, in the form prescribed in paragraph 17, and send one copy direct to the Finance Department, and the other to the Administrative Department of the Secretariat, according to the following time-table:—
Date by which estimates should reach Government
| Non-Plan |
Not later than September 15 |
| Plan |
Not later than November 30 |
| Revenue |
Not later than November 30 |
A list who have to prepare and submit estimates of Government in respect of Revenue, Debt, Deposit and Remittance Heads of Account is given in Appendix 6*.
(2) Punctuality in the submission of departmental estimates is essential. The time available for examination and consolidation of these estimates is limited, and delay, in a single case, would seriously dislocate the work of the Finance Department.
(3) The estimates should be accompanied by the various statement prescribed in the preceding paragraphs and such other statements and memoranda as may be necessary to elucidate the estimates. Covering letters, forwarding departmental estimates, should be as brief as possible, inviting attention to special points, if any, which may require the orders of Government.
