Delegation of Financial Power Rules 1978

Delegation of Financial Powers Rules, 1978

Public Exchequer control

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Session Overview

In the previous session we discussed the General Financial Rules, 2005 and their ,application in disciplining the financial and budgetary control in government spending g y g p getc.


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Session Overview

Another tool of public exchequer control is well defined powers of different pfunctionaries in the Government for incurring expenditure from public funds.g p p


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Session Overview

The General Financial Rules, 2005 are supplemented by the Delegation of pp y gFinancial Powers Rules, 1978, which lay down the financial powers of different pfunctionaries for incurring expenditure of public funds for better and effective control pand monitoring of Government spending out of the allotted funds.


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Session Overview

In this session we will discuss the main features of delegation of financial powers as g plaid down in the Delegation of Financial Powers Rules, 1978.,


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Learning Objective

At the end of the session the trainees will be able to state the powers of various pGovernment Officers and other functionaries as laid down in the Delegation gof Financial Powers Rules, 1978.


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Delegation of Financial PowersDelegation of Financial Powers Rules, 1978

All powers to incur expenditure out of public funds (Consolidated Fund of India) vest with the Government in the Ministry of Finance.

The structure of governance in India and the area of governance is so vast that it is not possible for th Mi i t f Fi t th i ll ththe Ministry of Finance to authorize all the expenditure of Government of India.


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It was necessary to delegate financial powers to incur expenditure out of public p p pfunds to subordinate authorities of various other Ministries/Departments of pGovernment of India.


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The Delegation of Financial Powers Rules, 1978 is the compendium containing all the p gorders delegating powers to authorities other than the Ministry of Finance. y


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These Rules came in to force with effect from the 1st August, 1978 repealing the g , p gDelegation of Financial Powers Rules, 1958

The Rules have been amended from time-The Rules have been amended from timeto-time since their publication in the Gazette of India dated the 22nd July 1978Gazette of India, dated the 22nd July, 1978.


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The President has the powers under Rule 2of these rules to: relax all or any provisions of these rules in

relation to any authority;relation to any authority;delegate to any authority powers in addition

to the powers delegated under these rules;to the powers delegated under these rules;


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reduce the powers delegated to any authority to the extent specified in the order;y p ;impose conditions in addition to those

specified by these rules ;andspecified by these rules ;andfor specified reasons withdraw from any

authority all/any of the powers delegatedauthority all/any of the powers delegated under these rules.


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Basic Concepts

The definitions of some of the frequently used terms in the Rules are as under; ;Appropriation means the assignment to meet specified expenditure of funds p pincluded in a primary unit of appropriation


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Basic Concepts

Contingent Expenditure means all incidental and other expenditure including expenditure on stores which is incurred for the management of an office, for the working of technical establishment, office e penses and the like b t does not incl deoffice expenses and the like but does not include any expenditure which has been specifically classified as falling under some other Head ofclassified as falling under some other Head of expenditure, such as Works, tools and Plant.


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Basic Concepts

Head of the Department in relation to an office or offices under his administrative control, means an authority/person as the concerned department in the Central Government may, by order, specify, as a Head of the Department S ch person has toas a Head of the Department. Such person has to be the Head of an identifiable organization and the minimum of his revised scale of pay should not beminimum of his revised scale of pay should not be lower than that of a Deputy Secretary to Government of India.


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Basic Concepts Head of Office means a Gazetted Officer

declared as such under Rule 14 of these rules (Rule 14 specifies that the Central Government,(Rule 14 specifies that the Central Government, Administrators and Heads of Departments shall have power to declare any Gazetted Officer subordinate to them as Head of an Office for thesubordinate to them as Head of an Office for the purpose of theses rules, and not more than one Gazetted Officer shall be declared as Head of Office in respect of the same office/establishmentOffice in respect of the same office/establishment, unless such office/establishment is distinctly separated from one another).


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Basic Concepts

Recurring expenditure means the expenditure which is incurred at periodical p pintervals. Expenditure other than recurring expenditure is Non-recurring p gexpenditure.

Primary unit of Appropriation means aPrimary unit of Appropriation means a primary unit of Appropriation referred to in Rule 8


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Rule 8.

Basic Concepts

Re-appropriation means the transfer of funds from one primary unit of p yappropriation to another such unit.

Subordinate Authority means aSubordinate Authority means a Department of the Central Government or any authority subordinate to the Presidentany authority subordinate to the President


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General limitations on power toGeneral limitations on power to sanction expenditure

No expenditure shall be incurred from the public revenue except on legitimate objects p p g jof public expenditure,

The financial powers not specificallyThe financial powers not specifically delegated to any authority (known as Residuary Financial Powers) vest in theResiduary Financial Powers) vest in the Finance Ministry. (Vide Rules 4 and 5).


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Effect of sanction

Expenditure against a sanction shall be incurred only when funds to meet the yexpenditure/liability are made available by valid Appropriation/Re-appropriation pp p pp p


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Effect of sanction

In the case of a recurring expenditure/liability, sanction becomes operative when funds for the first year are made available by valid Appropriation/re-

i ti b d f thappropriation or by an advance from the Contingency Fund, as the case may be, and it remains effective for each subsequentit remains effective for each subsequent year subject to appropriation in such years and subject to the terms of the sanction.


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and subject to the terms of the sanction.

Effect of sanction

It is not within the competence of a Department of the Central Government to porder/agree to re-appropriation without the concurrence of the Ministry of Finance yfrom the funds provided for new items in the budget. (Govt. of India decision under g (Rule 9)


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General restrictions on Appropriation/ Re-General restrictions on Appropriation/ Re-appropriation (Rule 10)]

No funds will be appropriated/ re-appropriated to meet expenditure which has pp p pnot been sanctioned by an authority competent to sanction it p

Funds provided for charged expenditure shall not be appropriated/re-appropriated toshall not be appropriated/re appropriated to meet votable expenditure and vice versa.


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Re-appropriation from one Grant/Appropriation for Charged pp p gExpenditure to another Grant/Appropriation for Charged Expenditure is also not g ppermissible.


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Funds shall not be appropriated /re-appropriated to meet expenditure on a new service/new instrument of service not contemplated in the budget as approved by Parliament.

The limits for deciding New service/New I t t f S i h b di d idInstrument of Service, have been discussed vide Government of Indias decisions under Rule 10


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Prior approval of the Parliament for expenditure from the Consolidated Fund pis required, for setting up a new undertakingfor setting up a new undertakingtaking up a new activity by an existing

departmental undertaking and involvingdepartmental undertaking and involving Capital Expenditure or


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for setting up a new public sector company splitting up of an existing

company/amalgamation of two or morecompany/amalgamation of two or more companies, or taking up a new activity by an existing company

or in respect of investments to be made for the first

time in private sector companies/privatetime in private sector companies/private institutions except in units coming under Government Management (with the approval of Parliament)


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Parliament).


Approval of the Parliament is also required in the cases of additional investmentsabove rupees one crore in an existing undertaking/private sector

i / i t i tit ti d i thcompanies/private institutions and in the case of additional investments in loans above rupees twenty lakhs to an existingabove rupees twenty lakhs to an existing public sector company, where there is no Budget Provision.


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Budget Provision.


In the cases where there is budget provision and paid up capital of the company is p p p p ybetween Rupees 1crore to rupees 100 crore, the limit for seeking approval of the g ppParliament ranges between above twenty lakh to rupees 15 crores p


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The expenditure below the limits (shown for reference to the Parliament for approval) can be met from the re appropriation of savings in a grantmet from the re-appropriation of savings in a grant subject to report to the Parliament. Expenditure above Rs.10 lakhs and upto Rs.50 lakhs, on new p ,Works (Land, Buildings and/or Machinery) can be met from savings in a grant by re-appropriation subject to report to Parliament and with the priorsubject to report to Parliament and with the prior approval of the Parliament if it exceeds Rs.50 lakhs.


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In the case of Grant-in aid to statutory and other public/private institutions under p pRevenue Expenditure, the prior approval of the Parliament for meeting the expenditure g pout of the Consolidated Fund of India is required q


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the prior approval of the Parliament is required above the following limits:q g

Institutions in receipt of grant in aid up to Rs 1

Rs.10 lakh, (limits apply with reference to moneygrant-in-aid up to Rs.1

crore with reference to money disbursed by an individual Ministry/ Department and y pnot by the Government as a whole.


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Institutions in receipt of grant-in-aid above Rs 1

10% of the Budget provision or Rs 2 croresgrant-in-aid above Rs.1

crore provision or Rs. 2 crores, whichever is less.

Grants-in-aid to private institutions other than for

Above Rs.5 lakhs

Export Promotions Schemes, Recurring


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Grants in aid to private Above Rs 10 lakhsGrants-in-aid to private institutions other than for Export Promotions

Above Rs.10 lakhs

pSchemes, Non-Recurring


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Write off of Government loans above Rs.1 lakh (individual case) has to be referred to ( )the Parliament.


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Ministries/Departments have full powers for re-appropriation of funds from one pp pplan head to another plan head in a Grant, except in cases involving foreign exchange p g g gprovided that no re-appropriation from Capital tono re appropriation from Capital to

Revenue and vice versa is made,


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commitments are not made beyond the allocations for the schemes during the plan period.

Savings in Revenue Section are not available for re-appropriation in Capital Section and vice versa in the same Demand for Grants.


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Funds from salary cannot be re-appropriated to any other head.

The Financial Advisors have not to allow diversion of funds /re-appropriation of funds to

i i f laugment provisions for travel expenses. The Administrative Ministries/Departments may

h i i d t l E tenhance provision under travel Expenses up to 10%.


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Powers of subordinate authorities relating to creation of posts and abolition of posts.

Rule 11to 13 deals with powers of subordinate authorities relating to creation gof posts and abolition of posts.

Rule 11 provides that no post shall beRule 11 provides that no post shall be created in the Secretariat office/department of the Central Government unless theof the Central Government unless the scale/rate of pay on which the post is created has been approved by the President


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created has been approved by the President


No post on permanent basis can be created without the previous consent of the Finance pMinistry.


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The subordinate authority authorized to create a permanent post may create similar supernumerary post (a shadow post i.e. no duties are attached to such post) for the

f d ti th li fpurpose of accommodating the lien of a Government servant who, though entitled to hold a lien against regular permanent posthold a lien against regular permanent post cannot be so accommodated because of non-availability of such a post.


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non availability of such a post.


The supernumerary post has to be created only if another vacant permanent post is not y p pavailable to provide lien.

The creation of supernumerary posts isThe creation of supernumerary posts is guided by the principles given in Rule11 (5)


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Powers of subordinate authorities relating to creation gof posts and abolition of posts.

Abolition of posts is covered under Rule 12, which states that a subordinate authority , ymay sanction the abolition of post which it is competent to create.p


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Powers of subordinate authorities

The powers vested in the departments of the Central Government/Administrators and Heads of Departments in relation toHeads of Departments in relation to, creation of permanent posts, temporary posts, Appropriation and re appropriationAppropriation and re-appropriation, incurring of contingent or miscellaneous

expenditure, write off of losses p , are specified in Schedules II to VII of these

Rules.


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No powers can be delegated to any subordinate authority in respect of:Creation of posts;Write off of losses; and;Re-appropriation of funds exceeding 10

percent of the original budget provision for p g g peither of the primary units of appropriation/sub head.


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Rule 16 provides that a Head of Office may have power to authorize a Gazetted Officers pserving under him to incur contingent/miscellaneous expenditure on his g pbehalf subject to restrictions as may be laid down by him. y


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The Administrator/Head of the Department shall, however, continue to be responsible , , pfor the correctness, regularity and propriety of the decisions taken by the Gazetted yOfficer to whom powers have been delegated. g


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Insurance of the GovernmentInsurance of the Government Property

Government property both movable and immovable is not to be insured and no expenditure has to be incurred/liability undertaken in connection with the insurance of such property without the previous consent of the Finance Ministry. y


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Motor vehicles owned by the Central Government used for purposes not connected with any commercial enterprise, are exempt from compulsory insurance

i t thi d t i k b i t f bagainst thirds party risk by virtue of sub-section (2) of Section 94 of the Motor Vehicle Act 1939 Such vehicles shall notVehicle Act, 1939. Such vehicles shall not therefore be insured, with certain exceptions (Rule 15)


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(Rule 15)


In cases where it has been decided to insure properties/goods under the direct/indirect p p gcontrol of the Central Government, the departments shall affect the insurance only p ywith a Nationalized Insurance Organization and follow the procedure that may be laid p ydown by the Ministry of Finance from time to time.


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Remission of disallowances by Audit and writingRemission of disallowances by Audit and writing off of overpayments to Government servants

Rule 17 specifies the principles for remission of disallowances by audit and ywriting off of overpayments made to government servants g


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Expenditure on Schemes orExpenditure on Schemes or Projects

A Department of the Central Government may sanction expenditure on any scheme/ y p yproject, the total outlay on which does not exceed rupees one crore fifty lakhs, , if p y , ,the scheme has been approved by the Finance Ministry. y


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The limit includes the entire cost of the scheme upto the date of completion, both p p ,recurring/ non-recurring), cost of the works, even where the provision for such work is pmade in a demand under the control of another Department p


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Approval of the Finance Ministry shall not be required to sanction excess expenditureq pover the original estimates of a sanctioned scheme up to ten per cent or rupees five p p pcrores which ever is less (in the case of plan scheme), and ten percent or rupees p ), p pthree crores which ever is less (in the case of non-plan scheme


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p


In relation to public works this is subject to the provisions of the Central Public Works pDepartment Code/ Central Public Works Account Code, etc ,


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The powers to sanction expenditure on schemes in respect of the Departments of Central Government having Integrated Finance Advice System under plan

h h b h d t hschemes have been enhanced to schemes costing less than Rs.50 crores (provided the scheme has been accepted by thescheme has been accepted by the Ministry of Finance at the pre-budget stage


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stage


The enhanced powers are, however, to be exercised subject to the approval of the j ppschemes of specified costs by the prescribed authorities. (Rule 18)( )


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The increase in the cost will be approved by the Administrative Ministry/Department in consultation with the Planning Commission, where such increases are due to: ( ) i l i (a) Increase in statutory levies;

(b) Exchange rate variations within the originally d j t ti l G t fapproved project time scale. Government of

Indias decision 2 below Rule 18


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Where the Revised Cost Estimates exceed 5% of the approved completion cost pp p(excluding changes in statutory levies and exchange rate variation) due to scope g ) pchange, addition deletion etc., the same shall be submitted to the Public Investment Board (PIB)/Cabinet Committee on Economic Affairs (CCEA) for approval.


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( ) pp


Any further increases above 3 % is also required to be got approved by the q g pp yPIB/CCEA.

The powers for preparation of FeasibilityThe powers for preparation of Feasibility Report in all cases involving cost of less than Rs 10 crores is delegated to thethan Rs. 10 crores is delegated to the Administrative Ministries [GOI decision 3


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Sanction of Non-Plan Expenditure

The Secretary of a Department with Integrated Finance Scheme can sanction gNon-plan expenditure on schemes costing up to Rs.5 crores, but no Non-plan post p , p pwould be created under this power.


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Major works costing up to Rs 5Major works costing up to Rs.5 lakhs

Ministries/Departments of the Central Government may issue expenditure sanction y pin respect of Major Works costing up to Rs.5 lakhs without consulting the Ministry g yof Finance.


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Power to Release Funds

The Departments of the Central Government have powers to release funds for investment as equity capital of statutory corporations/ companies wholly owned by th C t l G t ithi ththe Central Government, within the allotment in the Budget/Appropriation/Re-appropriation of funds or advanceappropriation of funds or advance sanctioned for the purpose from the Contingency Fund. (Rule 19)


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Contingency Fund. (Rule 19)

Grants and Loans

Rule 20 prescribes the principles as regards powers to sanction grants-in-aid including p g gscholarships and loans.


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Indents, Contracts and Purchases

A department of the Central Government shall have full powers to sanction expenditure for purchase and execution of contracts subject topurchase and execution of contracts subject to the:

Delegation of financial powers in the DFP Delegation of financial powers in the DFP Rules, 1978;

Purchasing powers delegated from time-to-time to the indenting departments for making purchases directly and not through the Central Purchase Organization


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Purchase Organization.


Previous consent of the Finance Ministry is required in the following cases: q g

a) any purchase or contract the value of which exceeds Rs 5 crorewhich exceeds Rs. 5 crore ,

b) any negotiated or single tender contract exceeding Rs 1 crore in value a limitedexceeding Rs. 1 crore in value, a limited or open tender


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c) any indent for stores of a propriety nature , the value of which exceeds Rs. 60 lakh;;

d) any agreement or contract for technicald) any agreement or contract for technical collaboration or consultancy services with firms or foreign governmentsfirms or foreign governments


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e) any purchase which has normally to be affected through the Central Purchasing g gOrganization, but which is proposed to be made direct on the grounds of emergency, if g g y,the value exceeds Rs. 50 lakh.


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In the case of Department of Supply, the monetary limits under (a), (b) and (c) shall y ( ), ( ) ( )be Rs. 5 crore for purchases made by the Central Purchasing Organization in India or g gabroad.


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Cases where the consent of theCases where the consent of the Finance Ministry is essential

Sl No Details Reference (DFPSl. No Details Reference (DFP Rules, 1978)

1 Lump provisions in budget for certain urgent schemes

Govt. of Indias Decision under

not ready in sufficient detail at the pre budget stage.

Rule 7


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Cases where the consent of theCases where the consent of the Finance Ministry is essential

2 Re-appropriation from the funds provided for new items

G.O.Is decision under Rule 9 p

3 Excess of expenditure beyond 15 per cent over the approved/

Rule 10(5)

sanctioned amount for a work where savings are available

d i t d h dunder appropriate words head.


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Cases where the consent of the Finance Ministry is essential

4 Re-appropriation for a new public k i 10 l kh

Rule 10 work costing rupees 10 lakhs or above but less than rupees 50 lakhslakhs

5 Re-appropriation from and to the Rule provisions for the Secret Service Expenditure

10(6)

6 Re-appropriation of funds to augment the secretariat

di

G.O.Is decision

dPublic Exchequer control

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expenditure under Rule 10


7 Re-appropriation of funds between direct expenditure in the Revenue Section to Grants in Aid to

G.O.Is decision under RuleSection to Grants-in-Aid to

States/Union territories in the same Section and vice versa

under Rule 10

Section and vice versa 8 Re-appropriation of funds between

Capital Outlay and loans or vice G.O.Is decision p y

versa. under Rule 10


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9 All cases of re-appropriation GOIs involving savings of more than Rs.10 lakhs under individual plan schemes and more than Rs 100 lakh

decision below Schedule Vschemes and more than Rs.100 lakh

for the plan heads relating to the Ministry/department as a whole

Schedule V

Ministry/department as a whole10 Any purchase/contract the value of

which exceeds rupees five crores,Rule 21

p ,any negotiated/single tender contract exceeding rupees one


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crore, etc

Delegation of Financial Powers inDelegation of Financial Powers in IA&AD

Under Article 148(5) of the Constitution of India, the conditions of service of persons , pserving in the Indian Audit and Accounts Department and the administrative powers p pof the Comptroller and Auditor General may be prescribed by rules made by the y p y yPresident after consultation with the Comptroller and Auditor General.


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p

Delegation of Financial Powers inDelegation of Financial Powers in IA&AD

The financial and administrative powers of the Comptroller and Auditor General of India under the provisions of the Delegation of Financial powers Rules, 1978, and the General Financial R les 2005 and the po ers delegated to theRules, 2005 and the powers delegated to the subordinate authorities in the Indian Audit and Accounts Department are compiled in theAccounts Department are compiled in the Comptroller and Auditor Generals Manual of Standing Orders (Administrative) Volume II


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Documents

Delegation of Financial Power Rules 1978