January 2, 2011

In Parliament

Could the Parliament’s financial oversight mechanisms have prevented the 2G scam?
The Winter Session of Parliament was almost entirely washed out as the government and the opposition fought over the mechanism to investigate the issues related to the allocation of radio spectrum for second-generation (2G) mobile telephony. The government insisted that the Public Accounts Committee (PAC) was the appropriate body to look into the issue, whereas the opposition parties demanded a joint parliamentary committee (JPC) be formed for the purpose.

Under the Westminster model, Parliament has the role and responsibility to oversee the functioning of the government. It also has the “power of the purse” as it sanctions and monitors government spending. Parliament has several mechanisms for financial oversight of the government. These include procedures for raising issues on the floor of the House, as well as detailed examination by committees such as standing committees and the PAC. Parliament can also set up ad hoc committees such as JPCs to examine or investigate any issue. Here we discuss these mechanisms and see how effective Parliament has been in fulfilling this role.

Proceedings on the floor of the House
Members can raise issues in the question hour and zero hour. In addition, Parliament can discuss any issue or policy in detail with the concurrence of the Speaker of Lok Sabha or Chairman of Rajya Sabha (this is usually decided by the all-party Business Advisory Committee).

The annual Union Budget is the most important issue related to government finances. Scrutiny of the budget on the floor of the house takes place in two stages. The first involves a general discussion held after the presentation of the Budget by the Finance Minister. At this stage, the discussion is confined to the general examination of the Budget and policies of taxation expressed during the budget speech.

This is followed by a discussion on the Demand for Grants of different ministries. A certain number of days or hours are allocated for the discussion of all the demands. However, not all the demands are discussed within the allotted number of days. The remaining undiscussed demands are disposed of by the Speaker after the agreement of the House. This process is known as the ‘guillotine’. Over the last five years, around 90 percent of all Demands for Grants of Ministries have been guillotined every year. This also implies that a large portion of the budgetary allocations requested in the Demands for Grants does not get discussed. In 2009-10 for example, 79 percent of the total amount requested in the Demands for Grants was not discussed on the floor of the House.

Departmentally Related Standing Committees
There are 24 Departmentally Related Standing Committees covering all Ministries/ Departments of the Government of India. The Committees prepare reports on individual Demands for Grants submitted by various departments in which they make recommendations which may or may not be accepted by the concerned department. Over the last five years, approximately 50 percent of the recommendations made by Standing Committees were accepted by the government.

Standing Committees also look into other aspects of a department’s functioning, such as policies formulated by it. The Committee on Information Technology had prepared a report on spectrum management in 2005. In this report, the Committee had stressed on a transparent system of spectrum allocation, and had requested the Department of Telecommunications to formulate the same. The Committee has, however, not examined the policy since then. This raises the issue of whether the Standing Committee has been an effective mechanism of oversight.

Public Accounts Committee
The Public Accounts Committee examines audit reports submitted by the Comptroller and Auditor General (CAG). This Committee is chaired by a senior member of the opposition (currently the BJP’s Murli Manohar Joshi). In addition to the CAG reports, the PAC is authorised to look into whether the expenditure by the government has been as per the allocations authorised by Parliament, and whether the government has complied with the relevant rules in spending the money allocated to it. The PAC is therefore empowered to look into issues of financial irregularity regarding spectrum allocation, regardless of the topics covered in the CAG report.

Between 2005 and 2010, the PAC prepared 54 reports and examined ministries that have cumulatively received around 80% of the budgetary allocations. Since it is not possible to examine every CAG audit finding in a formal manner, ministries have to submit Action Taken Notes to the PAC on all audit paragraphs. A 2009-10 report of the PAC, however, noted that there were 4,934 audit paragraphs still pending with various ministries. It is interesting to note that during the last five years, the number of different Ministries that were discussed varies significantly. For example, while the PAC has prepared 10 reports on the Ministry of Finance between 2005 and 2010, no reports were prepared on a number of Ministries, including the Ministry of Communications and Information Technology.

Joint Parliamentary Committee
Parliament can constitute a JPC to examine or investigate any issue. It is set up for a specific object and duration. Joint committees are set up by a motion passed in one house and agreed to by the other. The details regarding membership and subjects are also decided by Parliament. Although a number of joint committees have been formed since independence, four investigated significant issues that have caused controversy: the Bofors contracts, the two securities scams (involving Harshad Mehta and Ketan Parekh respectively); and the incidence of pesticides in soft drinks.

One significant difference between the JPC and the PAC lies in the powers to summon Ministers. Financial Committees of Parliament are expressly barred from summoning Ministers. Standing Committees and JPCs may do so with the permission of the Speaker/ Chairman. Indeed, the four current and former finance ministers (Yashwant Sinha, Jaswant Singh, P Chidambaram and Manmohan Singh) testified before the JPC that investigated the Ketan Parekh scam.

Parliament has several mechanisms that enable oversight of government finances. Effective utilisation of these mechanisms has the potential to significantly reduce financial irregularities within the government. However, the spectrum scam is just one indicator of the failure of Parliament to scrutinise the functioning of government departments. While it is important to investigate financial irregularities and bring the guilty to book, it is equally important to increase the efficiency of existing mechanisms to prevent such scams. The Parliament must look at ways to strengthen the committee system to better monitor government functioning.

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