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«Government of India Ministry of Finance Department of Expenditure General Financial Rules, 2005* (* Amendments issued upto March 2010 have been added as ...»

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The Administrative Ministries should keep watch over the receipt of the annual statements in Form GFR 20 regularly from the Accounts Officer and conduct a close review of the cases of defaults in repayment of the instalments of principal and/or interest due, as revealed from these annual statements and take suitable measures for enforcing repayments of the principal and interest due. If these statements are not received in time, the Accounts Officer should be reminded promptly. To facilitate a proper review of the position of outstanding loans, the Ministries may also arrange to maintain centrally a list of all sanctions issued relating to loans advanced to State Governments and other parties.

CHAPTER - 10

BUDGETING AND ACCOUNTING

OF EXTERNALLY AIDED PROJECTS

Rule 234. Implementation of Projects or Schemes through external aid receipt:

(1) The projects or schemes of the Government of India to be implemented through external aid receipt from multilateral or bilateral funding agencies shall be shown in the budget proposals approved annually by the Parliament.

(2) The external aid comes from bilateral and multilateral sources as follows :

(i) Bilateral funding to finance specific project(s) by the funding agency(ies) under Government to Government agreement(s); and, (ii) Multi-lateral funding by Multi-Lateral Funding Agencies, like the World Bank under agreement(s) between the borrower (Government of India) and the Multilateral Funding Agency(ies).

(3) The Department of Economic Affairs, Ministry of Finance as the nodal agency shall execute the legal agreement for loans or grants from external funding Agency(ies). However, grant agreements for Technical Assistance can also be executed by the beneficiary Ministries or Departments with the approval of Ministry of Finance, Department of Economic Affairs.

(4) The Office of the Controller, Aid Accounts and Audit (CAAA) in the Department of Economic Affairs, Ministry of Finance shall be responsible for implementing the financial covenants laid down in the agreement(s) executed by Department(s) of Government of India and the External Funding Agency(ies). A copy of all such agreements shall be sent to the Office of Controller, Aid Accounts and Audit, Department of Economic Affairs for this purpose.

Rule 235. Currency of external aid : The external aid shall flow from the Funding Agency in foreign currency or Indian Rupees and shall be received by the Reserve Bank of India, Mumbai who shall remit the rupee equivalent to the account of Controller, Aid Accounts and Audit, Department of Economic Affairs at Reserve Bank of India, New Delhi.

The remittances shall be accounted as external loan/Grant receipts in the Consolidated Fund of India.

Rule 236. Accounting of Cash grants : Cash grants, as distinct from commodity grant or other assistance in kind received from external sources shall be accounted for only by the office of Controller of Aid Accounts and Audit, Department of Economic Affairs.

Rule 237. Procedure for withdrawal : The concerned administrative Ministries or Departments shall be required to make provision of funds under the relevant head of account as ‘External Aided Component’ in their Detailed Demands for Grants for release of external aid amounts during the year to the respective Project Implementing Agencies.

There are mainly two procedures laid down for withdrawal of funds from the loan or grant account: – (i) Reimbursement procedure : Under the reimbursement procedure the Project Implementing Agency shall initially spend or incur expenditure and subsequently claim the amount from the Funding Agency through the office of the Controller, Aid Accounts. The remittances shall be accounted as External Loan or Grant receipt in the Consolidated Fund of India. There are two ways of dealing with the reimbursement claims as

given below:

(a) Reimbursement through Special Account (Revolving Fund Scheme) : Under the Revolving Fund Scheme, the Funding Agency disburses the estimated expenditure of four months for the projects as initial advance to Government of India under the respective loan or credit or grant agreement. Office of Controller of Aid Accounts & Audit withdraws the amount specified in the agreement as initial deposit from the Funding Agency, by sending a simple withdrawal application in the prescribed format after the loan is declared effective. Such initial deposit designated in US Dollars is received by Reserve Bank of India, Mumbai and Rupee equivalent shall be passed on to Controller of Aid Accounts & Audit through Government Foreign Transaction (GFT) advice. However, Reserve Bank of India, Mumbai shall maintain a loan wise proforma account for liquidation of advance received from Funding Agency. Office of Controller, Aid Accounts and Audit, on receipt of reimbursement claims from Project Implementing Agency, shall send an advice to Reserve Bank of India, Mumbai advising them to debit the Special Account with the US Dollars equivalent of the amount of the eligible claim. Office of Controller, Aid Accounts and Audit shall consolidate all such claims and submit to Funding Agency for replenishment of Special Account. This will be accompanied by a statement of debits and credits made during the period by Reserve Bank of India, Mumbai and supporting documents received from the Project Implementing Agency.





(b) Reimbursement outside Special Account : Under the reimbursement procedure (where there is no provision in the loan or credit agreement for the Special Account or the balance in the Special Account is ‘Nil’) office of Controller of Aid Accounts and Audit shall send the reimbursement claims received from the Project Implementing Agency direct to the Funding Agency after checking the eligibility aspect.

The Funding Agency shall disburse the eligible expenditure to the borrower’s account with Reserve Bank of India, Mumbai, who shall pass on the Rupee equivalent to the account of the Controller of Aid Accounts and Audit at Reserve Bank of India, New Delhi by issue of Government Foreign Transaction (GFT) advice.

(ii) Direct Payment Procedure : Under this procedure adopted in some cases the Funding Agency, on the request of the Project Implementing Agency (received through Controller of Aid Accounts and Audit), duly supported by relevant documents, shall directly pay to the contractor or supplier or consultant from the loan or credit or grant account. The Funding Agency, after satisfying itself as to the eligibility of the expenditure etc. remits the amount directly to the account of the payees as per the payment instructions. The Funding Agency apprises the office of Controller of Aid Accounts and Audit and the Project Implementing Agency of the particulars of the payment made. Office of Controller of Aid Accounts and Audit shall work out the rupee equivalent of the foreign currency payment. This rupee equivalent shall be recovered by office of Controller of Aid Accounts and Audit from the Project Implementing Agencies or State Governments which have availed of the Direct Payment Procedure.

Note : In the case of Central Projects, Centrally Sponsored Projects and Public Sector or Financial Institutions, the concerned administrative Ministry or Department shall release the fund to the Project Implementing Agency with the instruction to deposit rupee equivalent of the foreign currency that have been availed of under Direct Payment Procedure by them to the account of Controller of Aid Accounts and Audit at Reserve Bank of India, New Delhi or State Bank of India, Tis Hazari, Delhi through a challan.

Rule 238.

(1) Fund Flow for State Projects financed from external aid source: The respective Departments of the State Government shall provide in the Budget such expenditure proposed to be incurred under Plan Schemes during the financial year by the Project Implementing Agencies. These shall be in respect of State projects to be financed from external aid sources both under loan or credit and grants and eligible for disbursement from Funding Agency under Reimbursement or Direct Payment Procedure.

(2) Fund flow for State Projects under Reimbursement Procedure: The disbursements under the “Reimbursement through Special Account” and “Reimbursement out side Special Account”, referred to in Rule 237 (i), shall be consolidated at periodical intervals under each loan or credit State-wise by the office of the Controller of Aid Accounts and Audit. The details of the same shall be sent to Plan Finance Division of the Department of Expenditure in the Ministry of Finance for release of funds to the respective State Governments. The Plan Finance division of Department of Expenditure in the Ministry of Finance shall issue sanctions for actual release of the disbursement for each State. A copy of such sanction shall be endorsed to the Finance Department of the concerned State Government for information. The office of the Chief Controller of Accounts, Ministry of Finance shall issue the Inter-Government (IG) Advice to Reserve Bank of India, Central Accounts Section, Nagpur, for effecting the release to the concerned State Governments. The account of the State Government maintained at Reserve Bank of India, Central Accounts Section, Nagpur, shall be credited with the amount so released, thus, completing the cycle of funds from the expenditure incurred from the Budget of the State till receipt of funds of such expenditure from Government of India to the State.

(3) Fund flow for State Projects under Direct Payment Procedure: Under Direct Payment Procedure the claims shall be processed as mentioned in Rule 237 (ii). Office of Controller of Aid Accounts and Audit shall work out the Rupee equivalent of such Direct Payment based on Reserve Bank of India buying rate applicable for the value date on which the Direct Payment was made. Office of Controller of Aid Accounts and Audit shall consolidate such disbursement in Rupees, and send a list of such disbursement State-wise to Plan Finance Division of Department of Expenditure at periodical intervals requesting them to release the amount to the State concerned notionally and recover the same for credit to Controller of Aid Accounts and Audit’s account. The Plan Finance Division shall issue a separate sanction for the amount to be released to the State concerned and for simultaneous recovery and credit back to the account of the Controller of Aid Accounts and Audit. A copy of such sanction shall also be endorsed to the Finance Department of the State Government concerned. The office of the Chief Controller of Accounts, Ministry of Finance shall advise Reserve Bank of India, Central Accounts Section, Nagpur, for making necessary adjustment entries in the accounts of the State concerned under intimation to the Finance Department of the State and Controller of Aid Accounts and Audit. This completes the cycle of funds flow in the case of direct payment claims.

Rule 239. Fund flow for Central or Central sponsored Projects : Under the Central or Central sponsored project financed from external aid, whether loan or grant, the process of disbursement of such claims by the Funding Agency shall be the same as explained in Rule 237.

The respective Ministry or Department get funds when Demands for Grants are passed in the Parliament and advised by the Budget Division of the Ministry of Finance. The funds shall be released to Project Implementing Agency by the administrative Ministry or Department with reference to expenditure incurred by the Project Implementing Agency.

Rule 240. Fund flow for Public Sector or Financial Institutions : When the Project Implementing Agency under Loan or Credit Agreement is a Public Sector or Financial Institution or Autonomous Body and Government of India is the Borrower, the Administrative Ministry concerned shall provide in its budget funds required to be passed on to the Project Implementing Agency for the expenditure incurred by the latter under the externally aided project.

The Project Implementing Agency shall submit claims under reimbursement or direct payment procedures to the office of the Controller of Aid Accounts and Audit, Department of Economic Affairs. The disbursement of the claims by the Funding Agency shall be similar as explained in Rule 237. The concerned administrative Ministry or Department releases the amount to Project Implementing Agency based on the certification of disbursement received from the Funding Agency as certified by the office of the Controller of Aid Accounts and Audit.

However, where the loan is negotiated directly by a particular Public Sector Undertaking or Financial Institution, the funds from the Funding Agency will flow direct to the borrowing entity.

Rule 241. Repayment of loans : Office of Controller of Aid Accounts and Audit shall be responsible for prompt repayment of principal on the due date as per the agreements.

The remittance of foreign currency is arranged through designated Public Sector Commercial Banks and Reserve Bank of India. The Rupee equivalent and the amount of foreign currency remitted shall be intimated by the Banks to Controller of Aid Accounts and Audit. The Rupee equivalent of the foreign currency remitted is credited to the respective Banks’ account maintained at Reserve Bank of India, New Delhi, by debit to Controller of Aid Accounts and Audit’s account as per standing arrangement. On the receipt of the advice from Reserve Bank of India, New Delhi, Controller of Aid Accounts and Audit shall debit the concerned loan account in the Consolidated Fund of India. The repayment of loans shall be classified as charged expenditure.

Rule 242. Interest Payments : Interest on external loans shall be paid on the due date as stipulated in the loan or credit agreements against the budget provision made for this purpose.

Interest payments shall be accounted for as debit under the Major Head ‘2049-Interest Payments’ for external loans in the Consolidated Fund of India. The procedure for transfer of amount shall be the same as followed in the case of repayment of loans, referred to in Rule 241 above. The interest payment shall be classified as charged expenditure.

Rule 243. Accounting of exchange variation : The exchange variation in respect of foreign loans that have been fully repaid shall be written off to “8680-Miscellaneous Government Accounts - Write off from Heads of Accounts closing to balance” per contra credit to relevant Minor Head, Sub Head under “6002-External Debt” to which the expenditure or repayment stands debited.

Rule 244. Aid in form of materials and equipments : In cases where materials, equipments and other commodities, without involving any cash inflow, are received as aid from foreign countries, the Funding Agency issues an advice to the concerned Ministry or Department giving details of materials supplied along with the value thereof.

The Ministry or Department concerned in turn shall intimate the details to the office of the Controller of Aid Accounts and Audit, Department of Economic Affairs for making the budget provision in regard to aid material or equipment.

Note : Refer to Para 4.8.1 of Civil Accounts Manual and Note (1) below Major Head ‘3606-Aid Materials and Equipments’ of List of Major and Minor Heads of Account of Union and States for detail procedure of adjustment of value of the materials etc. received.

CHAPTER - 11

–  –  –

Rule 245. The power of the Union Government to give guarantees emanates from and is subject to such limits as may be fixed in terms of Article 292 of the Constitution of India, the Fiscal Responsibility and Budget Management Act, 2003 and Rules framed there under.

Rule 246.

(1) Guidelines for grant of Government of India Guarantee :Powers to grant Government of India Guarantee vest with the Ministry of Finance, Budget Division. The following guidelines should be followed by the Ministries or Departments of the Government of India for recommending guarantee or counter guarantee:i) A proposal for guarantee by Government must be justified by public interest such as in the case of borrowings by public sector institutions for approved development purposes or borrowings by public sector undertakings from Banks for working capital and other purposes.



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