Ziraat Times Research Desk:

J&K’s Governance Mess
Rs 4000 crore lapse in 2018-19

A staggering amount of public funds – close to Rs 4000 crore – are said to have lapsed in Jammu and Kashmir in fiscal 2018-19. 

The issue has come into the public domain when Socio-Economic Coordination Committee (JKSECC) asked the J&K government to initiate a high-level probe to look into the lapses that have occurred at the levels of Planning and Finance Departments, including the Drawing and Disbursing Officers (DDOs).

The JKSECC – an amalgam of various trade, industrial, travel, tour, tourism, horticulture, educational, contractors, pharmaceutical, houseboat, bakers, transport and other civil society formations  – has asked the government to fix responsibility and initiate stern action against the officers responsible for such huge lapsing of funds.

The amalgam further said that inaction on the part of officials has added to already created liabilities of over Rs 1076 Crores payable to the contractors and other entrepreneurs since 2014. Ironically, according to JKSECC, the Finance Department released funds to the concerned departments on 31st of March while the last date for submitting bills to the treasuries was fixed as 30th of March by the same Department. 

This week Ziraat Times takes a look at the underlying causes of the inability of the public administrative system in J&K in spending the financial resources in time. Is this an issue of the Planning and Development Department and the Finance Department delaying approvals and the physical release of funds?

Nasir Aslam Wani
Provincial President, JKNC

NASIR-ASLAM-WANI..

Governor’s rule has never been any solution neither to the law and order situation and nor to the developmental activities. It is always better for the state to have a democratically-elected government and has always proved beneficial compared to the governor’s rule.

When Omar Abdullah was the CM of the state, there were developmental activities and we cleared liabilities too. But this seems not a good case.

G N Monga
Leader, Congress

G N Monga


It is unfortunate that PDP and BJP-led government created disturbances and then the governor’s rule.

If a state has an elected government, they are answerable. This governor is an agent of Government of India. 

Waheed Ur Rehman Parra
Youth President, PDP

Waheed_Ur_Rehman_Para

Funds lapse are due to the negligence of utilization certificates in respective departments. The main reason is because of the codal formalities and non-execution of works (if either bureaucracy itself or absence of peace). It is important to facilitate the process and reduce bureaucratic hurdles. There is a conventional procedure that needs to be minimized to ensure development process and speed up its pace.

Governor’s rule is more about bureaucrats’ decisions and has no political will to speed up works. It doesn’t help in development as it is more interested in paper works. 

Kashmir’s development is aimed to bring peace and reconciliation as well. It is not just development for the sake of development but also addressing pain and connecting people closer to the system. Development won’t compensate for the loss of people here but certainly, bridge the gaps. Government has to ensure devolution of decisions and do a code review because our financial management and codal formalities are the biggest hurdles to speeding work culture it’s more about the process and no one’s responsibility and very old pattern that’s unchanged since the 70s.

Salman Nizami
Leader, Congress

salman-nizami

This is the failure of the BJP-PDP government. They diverted the attention of the masses from developmental issues.

If Congress comes to power we will ensure the funds be utilized properly. 

Mushtaq Chaya
Chairman, PHDCCI

mushtaqqqq

It’s very unfortunate as we know the situation that we come across. Lapse of funds can be because of the slow process with infinite formalities and less awareness. There should be regular checks on the status of the assigned tasks.

The government should give targets to the departments working on development projects or activities so that they keep up the pace and deliver in a timely manner.

Mubeen Shah
Former President KCC&I

mubeen shah

Lapse of funds usually occurs because the spending is not done with tracking of achievement particularly in central projects which are funded based on utilization certificates. Further funds are not given if no utilization certificates are given. 

I recall that when I was president KCCI, we found out that APEDA had given an advance of about Rs 4 crores for cold storage in Shopian in the year 1990-91 and it never came up as the utilization certificate was never sent. This is the story usually of all projects done under central funding. 

The state projects are historically underfunded and it is surprising if the amounts have not been spent which could be due to different reasons like permissions, land acquisitions, improper project formulations, a very less working season in Kashmir. 

There is a need in every development department a project implementation cell or committee which should monitor the progress every month with quarterly monitoring group at the district level and another one at the state level. All officers need to be made accountable for implementation.

Shahid Iqbal Choudhary
Deputy Commissioner, Srinagar

Shahis iqbal

In the beginning, it was all messy and we had issues with the software. It took around 5-6 months to get hands-on with the software. Since there are DDO’s involved, they were trained properly and whenever there is any new replacement of manpower involved, they are being trained first.

It has proved very effective in order to monitor the status of payment at realtime. It’s just a click away now. It’s working smoothly for now. Departments allocate funds through BEAMS only.

Rakesh Gupta
President, Jammu Chamber of Commerce and Industry

WhatsApp Image 2019-02-25 at 8.49.44 PM

First and foremost thing that we witnessed in this Governor’s rule is the lax work culture in the administration. There were just announcements and on a ground level, nothing has been done. Even though there have been no political hassles and yet nothing was done.

There is no accountability and nobody has been put to the task either. Trading and business groups need to come forward along with the people. It’s a convergent issue.

Tahir Hussain
Director of Finance

Tahir Hussain DF

Pay and Accounts Office system has already been started at the secretariat level.

There is a major issue of connectivity when it comes to getting far-flung areas on board with the new system.

Public Financial Management System is already working and it has a direct link to the government portal.




Is Pay & Accounts Office (PAO) System working?

A major restructuring initiative, PAO system, was introduced in J&K as an alternative to the archaic system of Treasuries.

The new system was expected to completely change the way the government pays its bills of contracts and services. For contractors, the onus of getting the bill cleared within a specific time was with the official for whom you worked. The new system has, in theory, devoured the very famous ‘drawing and disbursing authority’ of almost all, including the Deputy Commissioners, who will now be assisted by Payment Advisers.

But things are not working as expected. One of the biggest hurdles, as what officials say, is the lack of power and reliable Internet connectivity across districts and tehsil levels.

The PAO system was also expected to help manage better ratios. The J&K government has traditionally been spending its entire budget under 29 grants. In order to see where the public expenditure is being made, the 29 grants are being grouped into five: Administrative Service, Social Service, Infrastructure Service, Economic Service and Financial Service. Corresponding to this structure, there will be an administrative structure. The 29 grants would survive for administrative purposes. The social sector grants will include Social Welfare, Health, Education. Infrastructure grant will include Power, Roads & Buildings and Public Health Engineering.

The treasury was traditionally a central point for every government department in J&K where revenue is deposited, payments are made and even salary disbursed. Gradually, most of this activity has shifted to banks making Treasury Officer pass bills only. All these new measures are going to make Treasury, a household name, a history in J&K.

Specific to geography, an official in particular treasury would traditionally deal with all kinds of bills related to different departments. According to the Economic Survey, 2017, the larger question is: If work is the same, why should a payment officer be restricted to a particular geography?

The PAO was expected to check if the bill is right, fulfilling all the codal procedures, and will make the payment. However, as things stand on the ground, most of the payments continue to be done manually.

In the new system, “payment was expected to be done by the unknown face” on basis of the submissions made by the officer who is mandated to carry out the work and not the contractor. An officer will receive the bill, check it, converted it into GPF file and upload on the system and the competent authority will check it for all the procedures, and credit the liability to the bank account.

The PAO offices were planned to be departmentally aligned and would deal with those Heads of accounts which are related to the function of their concerned departments only. This was expected to ensure a better understanding of the department resulting in better forecasting, budgeting, accounting, and reporting.

The original PAO system is equipped with a pre-check system which was expected to help in monitoring and controlling the purpose and objective of payments, budget sanctions, ceilings, and proper classifications. However, that is rarely happening.

The physical submission of bills was expected to be fully replaced by computerized Integrated Financial Management System (IFMS). In the IFMS, bills were planned to be processed online at all levels viz generation of financial sanctions by the competent authority, generation of bill and passing and payment by the PAO. However, things are not happening that way, causing huge delays in the system.

PUBLIC FINANCIAL MANAGEMENT SYSTEM (PFMS)

What is PFMS?

The Public Financial Management System (PFMS), earlier known as Central Plan Schemes

Monitoring System (CPSMS), is a web-based online software application. PFMS was initially started during 2009 as a Central Sector Scheme of Planning Commission with the objective of tracking funds released under all Plan schemes of GoI, and real-time reporting of expenditure at all levels of programme implementation. Subsequently, the scope was enlarged to cover direct payment to beneficiaries under all the schemes.

The latest enhancement in the functionalities of PFMS commenced in late 2014, wherein it has been envisaged that digitization of accounts shall be achieved through PFMS and the additional functionalities would be built into PFMS in different stages. The primary objective of PFMS is to facilitate sound Public Financial Management System by establishing an efficient fund flow system as well as a payment cum accounting network. PFMS provides with a real-time, reliable and meaningful management information system and an effective decision support system.

There are various Centrally Sponsored Schemes (CSS) which are implemented by the State Governments and funded by Central Government. For these schemes, the PFMS facilitates instant availability of sanction orders, credit advice, and date of payments to State Governments. This supports the administrative Secretaries of State Ministries and to the Finance Secretary in the authorization and release of the funds to the executing agencies.

Till now the process has been dependent on the physical authorizations but due to enhanced technological interventions, it has become now more feasible at Central Ministry and at the State Government levels to carry out certain processes under e-governance ecosystem.

Is it working in J&K?

PFMS has been implemented across J&K in all the Ministries. The fund flow of various CSS is now being monitored through PFMS portal. 

In theory, the scope and extent of PFMS are very vast. State Government can instantly receive details of funds devolved from Government of India. The utilization can be monitored by State Departments for the Schemes where Funds received from Government of India is further transferred to Implementing Agencies. The information on releases will be known to each Department.

What PFMS was expected to achieve:

  • Tracking of the flow of funds to the lowest level of implementation.
  • Online information of bank balances to facilitate “just-in-time” provision of funds to implementing agencies.
  • E-Payment to ultimate beneficiaries.
  • Decision Support System for all levels of programme managers.
  • Dissemination of relevant information to citizens.
  • Enhance transparency and accountability in public expenditure.

Bank and Treasury Interface Module

Treasury Interface enables sharing State Treasury data with PFMS for tracking utilization of funds for all Central Schemes and CSS. PFMS – Core Banking Solution (CBS) interface helps to track funds transferred from Central Ministries at each successive stage, starting with the initial release to the level of actual realization. PFMS-Core Banking Solution Interface facilitates online validation of beneficiaries, and Agencies bank account details. Electronic payment files are generated through PFMS for three modes of payments, viz. Print payment Advice (PPA), Digital Signature Certificate (DSC) and Corporate Internet Banking (CINB).

PFMS has a multi-tiered project organizational structure which was planned to achieve the following:

State Advisory Committee (SAC) at apex level

The State Advisory Committee is headed at the apex level by the Chief Secretary of the State. The State Advisory Body has been formulated to monitor progress under the implementation of PFMS in the State of Jammu and Kashmir. But this committee meets rarely. There are no records available in the public domain to suggest the findings and corrective measures taken at such review meetings.  This body is expected to address the infrastructural and systemic deficiencies of the system.

State Project Management Unit (SPMU) at State level

State Project Monitoring Unit has been created in the State and manpower to administer the SPMU has been provided by the Government of India, Ministry of Finance and also rest of the staff is augmented by the State Government.

District Project Management Unit (DPMU) at district level

District Project Management Units are a small group of people positioned at the District level to oversee training and coordination. Personnel required for the DPMU need to have the skill- sets in the areas of training, handholding. SPMU is empowered to provide the manpower through outsourcing as the need arises to DPMU.

Challenges:

Various impediments are coming forth in the expenditure monitoring part due to classification and mapping issues.

The implementation was expected to better cash management for government, transparency in public expenditure and real-time information on resource availability and utilization across schemes. This is not happening due to a general interim in the public administrative system that has clogged the state.

Budget Estimation Allocation Monitoring System (BEAMS)

In 2017, Government of Jammu and Kashmir introduced what it called the Budget Estimation Allocation Monitoring System (BEAMS) with the objective of facilitating easy co-ordination among the Drawing and Disbursing Officer, Head of Departments, respective Departments, Finance Department and State Treasuries/PAO offices through an Electronic Platform. The BEAMS is an online computerized system to distribute the budget and to authorize expenditure.

This system owes its origin from the Government of India’s National e-governance Plan (NeGP) to support budgeting process more efficiently, improve cash flow management, promote real-time reconciliation of accounts, and strengthening management information systems.

Although, in theory, this system is an excellent way of improving budget estimation, allocation and spending monitoring, frequent changes in the political-executive landscape and a general accountability-deficit environment of the state administration has failed the original purpose of BEAMS. 

As soon as the budget is released, the Administrative Departments can allocate funds to their Controlling Officers / Drawing and Disbursing Officers through this system. All the expenditure is thereafter not only checked for budget availability before the bills can be submitted, but also the monthly cash flows are controlled against pre-determined targets. 

Due to lack of proper skills among its users in the governments, infrastructural deficiencies like power and Internet, parallel reliance on paper-based systems is not allowing this system to work as per its core design and purpose.

One of the important features of this system is that it provides a limited facility to modify cash flows. Discretionary modification of cash flows has been a serious systemic challenge in J&K. Although this new facility was expected to help in addressing this issue, the system is yet to work to its full potential.

In 2017-18, after the implementation of BEAMS, funds to each department under the revenue component were released through BEAMS. The departments further allocated funds through this route only. In furtherance to it, budget estimates for the next financial year 2018-19 and revised estimates for the current financial year 2017-18 were also received online using BEAMS application.

However, this system is failing now, as could be gauged from the extent of the funds that are said to have lapsed in 2017-18.


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