The government managed to save interest cost of around Rs 10,000 crore during the financial year 2021-22 (FY22) with the help of a new accounting mechanism that aims to release funds for government schemes ‘just in time’.
This was disclosed by Finance Secretary TV Somanathan during an event organized by Finance Minister Nirmala Sitharaman to launch Single Nodal Agency (SNA) Dashboard. The dashboard is part of a public financial management reform that was launched in 2021 with regard to the way funds are released, distributed and monitored for Centrally Sponsored Schemes (CSS).
“About 4.46-lakh crore go through centrally sponsored schemes and it is not a small amount. Today we are in a position to track that money. This is a great success in making governance transparent. That amount of money is also sent equally on time. What better value realization could there be for every rupee delivered,” said Sitaraman while launching the dashboard.
Under the new system, each state has to identify and designate one SNA for each scheme. All funds for that state in a particular scheme will be deposited in this bank account, and all expenses will be borne by all other implementing agencies involved in this account. It ensures that the allocation of funds to the states for CSS is done in a time bound manner and after fulfilling various conditions. Stating that there are three magic words in ‘just in time’ fund transfer, he said that SNA will make payments easy.
trimming expenses
Somanathan said the system would help cut interest expense as the money would be released at the level where it would be needed. “If money is stuck somewhere, we want to reduce what is stuck and keep it where it is kept more efficiently. The Government of India wants to pay as little as possible to the public money in the form of interest,” he said.
SNA and TSA (Treasury Single Account) help us to reduce the interest cost borne by the government and it is not a nominal cost. “It really helps us a lot, especially in a tough year like the current financial year. These are extremely helpful in keeping the fiscal deficit within the range of possible.”
Later, a senior government official said that with the help of the new mechanism, the states have more than ₹ 1.20 lakh crore unspent balance as on March 31, 2022. “That means we had to borrow less,” he explained.
What is TSA?
Earlier, after approval, funds were allocated and distributed to various ministries, departments, autonomous bodies and states. This system needed to be changed as the money was not being used and lying idle in bank accounts while the government had to borrow and pay interest. Accordingly, the TSA was designed.
According to an International Monetary Fund (IMF) working paper, the TSA is an integrated structure of government bank accounts that gives a consolidated view of government cash resources. Based on the principle of unity of cash and unity of treasury, a TSA is a bank account or a set of linked accounts through which the government transacts all its receipts and payments. The principle of unity follows from the optionality of all cash regardless of its end use. While the separation of cash transactions is necessary for control and reporting purposes, this objective is achieved through the accounting system and not by holding/depositing cash in transaction-specific bank accounts. This enables the Treasury to de-link the management of cash from control at the transaction level.
Published on
June 07, 2022