HomeBusinessEXPLAINED: India’s ‘Contingency Fund’

EXPLAINED: India’s ‘Contingency Fund’

Article 267 of the Constitution demands the establishment of a contingency fund to deal with any unforeseen crisis. It is an imprest placed at the President of India’s disposal.

Without Parliament’s permission, the government cannot remove funds from it. After that, the corpus must be replaced with the same amount.

It is one of three categories under which the central government accounts must be kept in accordance with the constitution. The Consolidated Fund of India and the Public Account are the other two.

The Contingency Fund has a single Major Head in government accounts to accommodate all of the fund’s transactions. It is placed at the President’s disposal, who provides cash at the request of the Union Cabinet during a crisis, such as a natural disaster.

Any expenditures made from this fund must be approved by the Parliament afterward.

The fund is held on behalf of the President by the Union Finance Ministry. The government also increases the fund’s size from time to time. The fund’s capital was increased from Rs 5 crore to Rs 500 crore in 2005.

Through the Finance Bill 2021, the government increased the Contingency Fund of India from Rs 500 crore to Rs 30,000 crore in the recent Union Budget.

When Parliament is in session, the fund can be expanded by a Finance Bill. If the House is not in session and the situation permits, it can be done through Ordinance. In accordance with the Contingency Fund of India Act, 1950, withdrawals from the fund require the consent of the Secretary of the Department of Economic Affairs.

While increasing the fund’s corpus last year, the government also gave the Expenditure Secretary more authority over the fund.

The Expenditure Secretary now has access to funds equivalent to 40% of the corpus. Beyond this point, all additional Contingency Fund releases will require the consent of both the Expenditure Secretary and the Economic Affairs Secretary.