Why in news
- The Public Accounts Committee (PAC) flagged the non-transfer of ₹9,222 crore in collected cesses to their designated non-lapsable reserve funds.
- The panel criticized the practice of retaining cess proceeds within the Consolidated Fund of India to artificially reduce the accounting fiscal deficit.
Key terms
Cess
An additional tax levied by the Union for a specific statutory purpose under Article 270.
Public Accounts Committee
A 22-member parliamentary committee that examines CAG audit reports on government expenditure.
What is the accounting procedure for cesses?
- Cesses are special-purpose levies collected under statutory provisions for earmarked development purposes.
- Statutory rules require gross cess proceeds to be credited to the Consolidated Fund of India (CFI) first and subsequently transferred to dedicated public account funds.
Key observations by the PAC
- ₹9,222 crore collected under specific cesses remained uncredited to designated non-lapsable funds.
- Retaining proceeds inside the CFI violates statutory intent and diverts funds intended for dedicated infrastructure or social programs toward general fiscal expenditure.
Why it matters
- Fiscal Transparency: Short-transfers distort true fiscal deficit figures and obscure actual availability of scheme resources.
- Federal Fiscal Structure: Cesses are not part of the divisible pool shared with States under Article 270, making non-dedication a major federal concern.
Prelims facts
- Cesses are levied for specific purposes and are excluded from the Article 270 divisible pool.
Mains discussion
- Examine the impact of cess accumulation in the Consolidated Fund of India on fiscal transparency and federal resource allocation.
Source: The Hindu Business
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