58. Under the rules and instructions issued by the Governor under Article 166 (2) and (3) of the Constitution, the Finance Department is required to examine and advise on all schemes of new expenditure for which it is proposed to make provision in the Budget and is empowered to decline to make provision for any scheme which has not been so examined.

*59. There is no authoritative definition of the term "new service" occurring in the Constitution [cf. Article 205 (1) (a)]. However, a working arrangement has been arrived at, under which the term "new service", though undefined, has been taken as synonymous with term "new expenditure". It is also not possible to define rigidly the term "new expenditure" and in actual practice based on convention it bears a wide interpretation. Broadly speaking, expenditure involved on a new scheme, in the adoption of a new policy, provision of a new facility, or any substantial alteration in character or extent of an existing facility, will normally be treated as constituting "new expenditure". In some cases, increase in expenditure, other than increase due to normal growth or rise in the price of commodities, on the extension or development of an existing scheme or facility, is also, where it is appreciable, treated as "new expenditure".

For the purpose of general guidance, some examples of "new expenditure" are given below:

(1) Starting of new schemes, establishments or undertakings.

Explanation - (1) Cases of "New Schemes" treated as "New Expenditure" and acted upon in the previous years will, however, be treated as "New Expenditure"  if no budget provision has been made in the last five years.

Explanation - (2) Where provision for an existing service has been made either in the Revenue, Capital or Loan section and it is proposed to change the character of service by transferring it from the existing section to any other section, it will require prior approval of the Legislature.

Explanation - (3) Expenditure on existing service under one head but involving provision of funds under a different head within the same section due to change in classification of expenditure can be made by re-appropriation without prior approval of or report to the Legislature.

(2) Increase in coverage and / or revision of rate of scholarships, stipends, social security pensions etc. when the additional liability exceeds the budget provision for the scheme by Rs. 50 lakh or ten percent of the budget provision for the scheme whichever is higher.

(3) Grants-in-aid to new institutions or in excess of the approved scales.

(4) Remission of loans not covered by existing rules and orders regulating such remissions.

(5) Any loans to or investment in Public Undertakings or local bodies, institutions and private bodies, etc., except where such loans or investments are covered by the existing rules or standing orders.

(6) Purchase of tools and plant, except where the cost is met from the provision for a sanctioned project or from a duly constituted Depreciation Reserve Fund.

(7) Purchase of equipment, vehicle and furniture where the cost of individual item exceeds Rs. One lakh.

Explanation - Replacement of equipment, vehicle and furniture will not be treated as new expenditure irrespective of the amount of individual item.

(8) Alienation/ transfer of Government assets

Explanation - (1) Transfer of Government assets shall include leasing them out for more than 36 months except leasing out of housing accommodation to government employees or others under existing rules or standing orders.

Explanation - (2) Relief in respect of leasing out of Government assets to a private body or individual at concessional rates shall be given through a grant-in-aid rather than by remission of dues.

Explanation - (3) The cases of alienation of Government assets to a State owned company / statutory body / society shall be reported to the Legislature along with the next batch of supplementary demands.

(9) Strengthening, reorganisation, modernisation or extension of an already existing scheme, establishment or undertaking where its cost exceeds Rs 25 lakh recurring or Rs 1.00 crore non-recurring

Explanation - (1) Where the additional expenditure does not exceed Rs 1.00 crore recurring and Rs 3.00 crore non-recurring, the expenditure can be made by reappropriation of savings in a Grant but if the additional expenditure exceeds Rs 25 lakh recurring or Rs 1.00 crore non-recurring, it shall be subject to report to Legislature.

Explanation - (2) Employment of additional staff or provision of service for normal increase of work involving no change in policy or the sanction of new scheme, shall not be treated an item of new expenditure.

Explanation - (3) Expenditure on purchase of arms and ammunition against the indent approved by the Home Department where the expenditure is within the budget provision irrespective of the cost of individual item shall not be treated an item of new expenditure.

(10) A committee / commission constituted, except under a statute by the Government if the recurring expenditure exceeds Rs. 10 lakh per annum or Rs. 20 lakh non-recurring.

(11) Surveys and studies not provided for in a project or scheme, where the expenditure is estimated  to exceed Rs. 10 lakh per annum recurring or Rs. 20 lakh non-recurring.

(12) Any new authorization or increase in the amount of existing authorization or change in nature of 'Secret Service Expenditure'.

(13) Any new authorization or increase in the corpus of a Discretionary Grant.

(14) In respect of schemes receiving assistance from the Central Government, autonomous bodies etc, and in respect of expenditure relating to natural calamities, the expenditure shall not be treated as "New Expenditure" if the expenditure can be met from savings, however, such cases should be brought to the notice of the Legislature by specific inclusion in the next batch of supplementary demands.

60. To enable a proper and detailed examination by the Government, all proposals and schemes for 'new expenditure' should be submitted by the Heads of Departments or estimating officers to the administrative departments concerned of the Secretariat, through the usual channels, as soon as they are ready and should not be held up for being submitted towards the last date. The administrative departments will examine them thoroughly, both from the administrative and financial aspects, and recommend to the Finance Department only such of them as are not only administratively sound but also really essential and urgent. The proposals should reach the Finance Department in sufficient time and, in no case, later than the prescribed date, complete in all respects, to enable it to carry out proper examination and obtain such further information as may be considered necessary by it. The proposals or schemes which the administrative departments may have themselves to formulate must also be referred to the Finance Department very early. After the prescribed date, the Finance Department will be at liberty to decline to accept any proposals, whatever may be the reason for delay.

61. Every proposal or scheme involving new expenditure must be explained as fully and concisely as possible and its financial implications, both immediate and ultimate, as also the physical target clearly brought out. It should also be explained and shown distinctly whether the proposal forms a part of the development programme included in the Five Year Plan, and, if so, yearly allocation and ceiling fixed under the Plan should be specified. The estimates of cost should show the recurring and the non-recurring expenditure separately, by the major and minor heads, sub-heads, detailed heads and primary units of account. In the case of recurring expenditure and of non-recurring expenditure proposed to be spread over a series of years, the estimates for each year should be given. If any assistance in the shape of loans, grants, contributions or donations or any other receipts or recoveries are expected, details thereof for each year should be given and the heads of account to which they will be creditable or taken in reduction of expenditure indicated. Necessary details should be given as in Annexure-A to this chapter.

62. In framing the estimates of cost, the date from which a new scheme is likely to be introduced and whether it will be introduced in full from the beginning or by stages must be carefully considered. Account should be taken of any administrative or other difficulties likely to be encountered and the time likely to be taken in the various sanctioning processes. In brief, only so much should be provided in the estimates as will actually be spent in a particular year. In the case of schemes to be taken up by stages or under a phased programme, the different stages and the expenditure expected to be incurred and the income anticipated, if any, at each stage should be indicated.

63. Schemes relating to engineering projects or works must be accompanied by preliminary plans and approximate estimates. In the case of buildings, the number and dimensions of the various types of rooms proposed to be constructed and the basis for providing accommodation should be clearly explained. The Finance Department may decline to make provision in the budget for any project or work for which the administrative approval of the competent authority has not been obtained. The total estimated cost of the project, the time likely to be required for its completion and the expenditure to be incurred each year should be stated in every case after consulting the agency to whom the execution of the project is to be entrusted. It has to be borne in mind that even after provision has been made in the budget on the basis of preliminary plans and approximate estimates, time is required for preparing detailed plans and estimates and according necessary sanctions, inviting tenders and settling contracts. In many cases land has to be acquired under the Land Acquisition Act which takes time. Sometimes seasonal conditions and scarcity of labour or of building materials in the market also delay the start or the progress of a work. All relevant factors should be carefully taken into account. If as a result of the construction of new buildings any of the existing buildings are likely to be rendered surplus, it should be indicated how they are proposed to be utilised.

64. Deleted

65. Proposals for starting of new undertakings, or of additional undertakings similar to those already existing, should give full financial and other details as well as the justification. In the case of the latter, the pattern and average cost of existing undertakings should be mentioned for comparison.

66. Proposals relating to sanction of loans or grants-in-aid to local bodies and other non-Government institutions, corporations, private parties and individuals, etc., should not be submitted to the Government until the admissibility of the loan or the grant-in-aid applied for in each case has been fully examined with reference to any existing rules or orders or approved schemes. If the loan or the grant-in-aid applied for is for a new scheme or for expansion of an existing scheme, it is necessary to satisfy that full details have been worked out and have received the approval of the competent authority. Proper assessment of the latest financial position of the party concerned is absolutely necessary to determine whether (i) Government aid is really called for; (ii) the balance of the expenditure, if any, can be met by the party concerned from its own resources ; and (iii) there is likely to be any difficulty in effecting recovery of the loan proposed to be granted and the interest thereon. The terms and conditions to be attached to the proposed loan or grant-in-aid should be clearly mentioned.

67. It is quite possible that some schemes (both Plan and Non-plan) which are under implementation are not very useful to the public at large. A quick review has to be made to ascertain whether economy could be effected in those schemes so that cost thereon and staff could be utilized for more useful schemes. Preference will, therefore, be given to schemes of those Heads of Departments, who come forward with economy measures elsewhere.

            It is better that new schemes are proposed well within time so that a thorough evaluation can be made. It is necessary that the practice of sending all the proposals together only in October – November is avoided.

68. In all cases in which purchase of articles from outside India is involved, the name of the foreign country and the currency in which payment will be made should be stated, it being also indicated whether or not supplies have been assured when required in the event of firm orders being placed.

69. After the Finance Department has examined the proposal and raised no objection to it, the administrative department will prepare explanatory note in such form or manner as may be prescribed by the Finance Department and send it to the Finance Department for being taken over.

No reference should ordinarily be made in the explanatory note to official correspondence. Each note should be signed by an officer of the department concerned not below the rank of Secretary.

70. In order to enable the Finance Department to check up the schedule of new expenditure and to avoid inadvertent omissions, each the administrative department will maintain a list of the items which have been examined and passed by the Finance Department, a separate list being maintained, with the various items arranged in order of priority, for each demand for grant/Charged Appropriation. A copy of each of these lists must be furnished to the Finance Department within a week after the last date prescribed, for accepting items of new expenditure has expired.

71. It must be carefully understood that the acceptance by the Finance Department of a proposal, item, or scheme of new expenditure does not constitute any authority for the incurring of any liability in connection therewith until necessary provision has been included in the Appropriation Act and the competent authority has sanctioned the incurring of the expenditure in each case.

72. The instructions contained in the preceding paragraphs should be borne in mind also while dealing with proposals for new expenditure arising in the course of the current year for which provision is required to be made through supplementary estimates.

(*) Approved by the Legislative Assembly in their sitting of August 07, 2009.