CHAPTER 2
APPROPRIATION ACCOUNTS

2.1    Appropriation Accounts (Telecommunications Services) are prepared by the Secretary Department of Telecommunications and are audited and certified by the Comptroller and Auditor General of India. The objective of the Appropriation audit is to ascertain whether expenditure actually incurred under various grants is within the authorisation given under the Appropriation Act and that the expenditure required to be charged under the provision of the Constitution is so charged. It also ascertains whether the expenditure incurred is in conformity with the law, relevant rules, regulations and instructions.

2.2    Budget grant and expenditure

A summary of Appropriation Accounts (Telecommunications Services) presenting the accounts of sums expended during the year 2000-01, compared with the sums authorised in the schedules appended to the Appropriation Act, 2000 passed under Articles 114 and 115 of the Constitution of India, is given in the tables below:

(Rs in crore)

Under Grant No. 12, which relates to Department of Telecommunications, there was a net saving of Rs 18749.04 crore (more than 266 times the original grant) during the year 2000-01. This saving was comprised of a saving of Rs 47.04 crore (67 per cent of the revenue grant) under the Revenue (voted) section and an saving of Rs 18702.00 crore against nil provision of Capital grant under the Capital (voted) section.

Audit noticed that although under Capital (voted) section there was nil provision in the original grant, in the third batch of March Supplementary Grant 2001 under Grant No. 12, the department was allotted Rs 20,002 crore under Capital (voted) section. According to the notes thereto, the justification for this supplementary grant was inter alia to meet the requirement of C-DoT and Telecom Engineering Centre and for investment (Equity Rs 5000 crore, Preference Equity Rs 7500 crore and Loan Rs 7500 crore) in the newly created corporate entity “Bharat Sanchar Nigam Limited”. The notes also indicated that this amount would be balanced by reduction in cumulative capital outlay on Telecom Services as on 30.9.2000 and hence would not entail any cash outgo. The supplementary grant also showed provision of Rs (-) 20,000 crore as recoveries, in reduction of expenditure under Major Head-5225 - Capital Outlay on Telecom Services.

In the explanation to the reasons for savings the department stated that the anticipated transfer of assets to BSNL in the accounts of the department could not be effected since the capital structure of BSNL was yet (31 March 2001) to be approved by the competent authority.

It was noticed by Audit that the department sought sanction in December 2000 (Second Supplementary) for a ways and means advance of Rs 1500 crore in favour of BSNL through reappropriation of provisions made under Grant No.13. In violation of Financial Rules, however, the department booked the advance of Rs 1300 crore to BSNL under Grant No.12 (under Capital Voted Section). Moreover, in the absence of approval of the competent authority for the capital structure of BSNL, the appropriation of Rs 20,002 crore in the supplementary grant at the end of financial year was not justified as it was not used for the purpose for which it was allotted.

(Rs in crore)

Net saving of Rs 17167.87 crore

Under Grant No. 13 relating to Department of Telecom Services, there was a net saving of Rs 17167.87 crore (46 per cent of the original grant) during the year 2000-01, which constituted a saving of Rs 10419.33 crore (48 per cent) under the Revenue (voted) section and saving of Rs 6748.48 crore (42 per cent) as unspent amount under the Capital (voted) section. The huge savings were mainly attributed to corporatisation of DTS and DTO with effect from 1 October 2000, i.e. midway during the year.

2.3    Appropriation Audit

Savings or excess in the grants or appropriation indicate that the expenditure could not be incurred as estimated and planned.

Net savings of Rs 18749.04 crore

Under Grant No. 12, the department registered a saving of Rs 47.04 crore under the Revenue (voted) section and a savings of Rs 18702.00 crore under the Capital (voted) section on account of the following reasons as stated in the Appropriation Accounts:

The saving of Rs 47.04 crore constituted 67 per cent of the sanctioned provision of the Revenue (voted). The savings of Rs 18702.00 crore was against ‘nil’ original grant under Capital (voted) section. The savings was mainly due to non finalisation of capital structure of the BSNL

Under Grant No. 13, the department registered a saving of Rs 10419.33 crore and Rs 6748.48 crore under Revenue (voted) and Capital (voted) section of the grant respectively, for the reasons indicated below:

Savings of Rs 10419.33 crore under Revenue (voted) section require an explanatory note to PAC

The savings of Rs 10419.33 crore under Revenue (voted) section under Grant No. 13, were on account of lower expenditure than estimated under salaries, wages, dearness allowance, overtime allowance, travelling expenses etc. Government decided in September 2000 that the business of providing telecom services, being dealt with and entrusted to the Department of Telecom Services and Department of Telecom Operations, would be transferred to the newly formed company viz., BSNL with effect from 1 October 2000. The department, however, surrendered the excess funds only on 30 March 2001 although the second batch of supplementary grant was obtained in December 2000.

The savings of Rs 6748.48 crore constituted 42 per cent of the sanctioned provision in the Capital (voted) section of Grant No. 13. Out of this, saving of Rs 6445.85 crore was under Major Head 5225 - Local telephone system (Rs 4944.99 crore), long distance switching system (Rs 135.43 crore), long distance transmission system (Rs 750.58 crore), ancillary system (Rs 301.76 crore) and other land and buildings (Rs 313.09 crore). Here, again the department surrendered the excess funds only on 30 March 2001.

The above savings being more than Rs 100 crore would require an explanatory note to the Public Accounts Committee (PAC) in terms of the recommendations contained in the 60th Report of the Committee presented to tenth Lok Sabha in February 1994.

It is pertinent to mention here that a comment was made in Audit Report No. 6 of 2000 of the Comptroller and Auditor General of India regarding consistent surrender of funds over a period of time under the head “Long Distance Transmission System”. The Ministry in their ATN, in September 2000 stated that the department, as a result of a review of progress in expenditure and procurement of equipment taken up during 1998-99, had scaled down the requirement under this head from Rs 2602 crore in 1998-99 to Rs 1600 crore in 1999-2000. The department further assured that efforts would continue to frame the estimates more realistically and to utilise the sanctioned grant effectively. During the period 1 April to 30 September 2000, the department had savings of Rs 750.58 crore under this head.

The position of budget allotment, expenditure and savings under Capital (voted) section during the last four years was as under;

The Ministry in their ATN in response to an Audit comment made in Report No. 6 of 2000 of the Comptroller and Auditor General of India, regarding savings under this section stated in August 2001 that the savings were due to shortfall in installation of manual telephone exchanges, less procurement of apparatus and plant, cables, lines and wires and shortfall in installation of village public telephones and further stated that efforts will be made to frame estimates more realistically. Audit noticed, however, that net savings under the Capital (voted) section, which had come down from Rs 2053 crore in 1997-98 to Rs 214 crore in 1999-2000 again shot up to Rs 6748.48 crore in 2000-01 under Grant No.13. Savings under sub-heads ‘Long distance switching systems’ and ‘Ancillary systems’ in particular were becoming a general feature as shown below:

(Rs in crore)

As a proportion of the original grant in the respective years, the savings under “Long distance switching systems” varied from 84 per cent in 1998-99 to 78 per cent in 2000-01. Such percentage savings in the case of “Ancillary systems”, however, shot up from 20 per cent in 1998-99 to 77 per cent in 2000-01.

Rule 69 of General Financial Rules stipulates that Ministry/Department should surrender the savings as soon as these are anticipated rather than waiting for the end of the year. This provision for “surrender” of savings is made to ensure that the portion of grant or appropriation not utilised by the spending department is communicated to the Ministry of Finance which can reallocate the surrendered amount to any other needy sectors of the economy.

Against the total unspent amount of Rs 35916.91 crore the Department surrendered only Rs 18381.38 crore (Rs 18340.06 crore under Grant NO.13 and Rs 41.32 crore under Grant NO.12) on 30 March 2001 at the fag end of financial year leaving a balance of Rs 17535.53 crore, thus violating Rule 69 of General Financial Rules. It would also appear that the Department was not aware of the financial requirement of funds even at the close of the financial year and failed to control the expenditure adequately as desired by the PAC in their reports time and again..

In view of the above there is an immediate need for the department to improve their accounting information system as desired by the PAC in their report number Ten (Thirteenth Lok Sabha).

Test check of appropriation accounts with reference to re-appropriation revealed that out of total sanctioned provision of Rs 431.31 crore and Rs 37,478.08 crore under Grant No. 12 and 13 respectively, an amount of Rs 38.32 crore and Rs 18,340.05 crore, respectively, were re-appropriated between different primary units of appropriation defeating the original purpose/activity as authorised by Parliament. The details of such re-appropriations are given below:

There were five cases of injudicious re-appropriation of funds

In five sub-heads, from which amounts aggregating Rs 56.36 crore as shown in Appendix - IV were transferred to other heads, the re-appropriation was injudicious because the actual expenditure either exceeded the original provision before such re-appropriation or the final expenditure exceeded the reduced provision after re-appropriation from these sub-heads.

The demands for grant are for the gross amount of expenditure i.e. inclusive of recoveries arising from use of stores etc., procured in the past or expenditure transferred to other departments or Ministries. Appropriation Audit was conducted by comparing gross expenditure with gross amount of grant; the excess and shortfall in recoveries indicate inaccurate estimation of recoveries and deficient budgeting.

In the Revenue Section under Grant No. 12, there was no recovery against the estimated recoveries of Rs 7.00 crore. There was no provision for recoveries under Capital (voted) section in the original grant. However, in the third batch of Supplementary Grant an amount of Rs 20,000 crore was provided as recovery under Capital (voted) section. Against this provision of Rs 20,000 crore, Nil recovery was effected.

In the explanation to the reasons for Nil recovery the department stated that the anticipated transfer of assets to BSNL in the accounts of the department could not be effected since the capital structure of BSNL was yet (31 March 2001) to be approved by the competent authority.

Under Grant No. 13 in Revenue Section against the estimated recoveries of Rs 1657 crore, the actual recovery was Rs 869.19 crore and in the Capital Section, against the estimated recoveries of Rs 16,014.01 crore, the actual recovery was Rs 8537.43 crore. Less recovery had the effect of increasing the expenditure by Rs 7.00 crore in Revenue section under Grant No. 12 and Rs 787.81 crore in Revenue section and Rs 7476.58 crore under capital section under Grant No. 13.