In its disinvestment programme in the current fiscal, the government recently announced that it would reduce government share holding by 10 per cent in one of our “navratnas”: the Bharat Heavy Electricals Limited (BHEL). The funds raised from this disinvestment would be around Rs 2,000 crore, and that would flow into the newly-created national investment fund (NIF).
But what is the need to set up an NIF? Why can’t the government simply follow the conventional method of letting the proceeds go to the Consolidated Fund of India (CFI)? In the conventional method, the disinvestment proceeds would automatically flow to the CFI and this would then get reflected in the government budget in the normal course. Since the disinvestment proceeds are designed to be used only for the purposes earmarked, they would get reflected in the expenditure plans of the concerned ministries/departments that are to carry out the intended tasks. If the proceeds are not used for the intended purpose in the same year, these would get used up by the government for other purposes. This is because funds going in to the CFI become part of the general kitty.
By taking the unconventional route of creating a separate fund (a national investment fund) outside the government account, the government can overcome the limitations of the constitutional procedure in earmarking of funds. But this unconventional route does not attack the real problem, which relates to the delay in government decision making.
Often, the time lag between the provision of funds for various schemes/ programmes of the various ministries/departments and their actual utilisation is considerable. The finance ministry makes an allocation in a budget but the schemes/programmes for which the allocation is made is readied much later. In actual practice, because of this delay, the earmarked provisions either get diverted for other uses or are surrendered at the end of the year.
This is a recurring malady which has to be addressed. One way to do this is to ensure that the relevant government schemes/programmes are readied earlier, or at least in the first quarter of the fiscal year. Further, there ought to be a mid-course corrective mechanism which can happen only when there is continuous monitoring by Parliament of the various government schemes/programmes.
Irrespective of where the funds are lodged — inside or outside government account — the important point is the timely utilisation of proceeds for the intended purposes. There is vast scope for streamlining and rationalising the existing consultation procedures within the government before a scheme/ programme is formalised and becomes ready for implementation.
The writer is senior fellow, ICRIER, New Delhi