Systemic Malpractices: Fund Parking, Diversion, 'March Rush' Spending, Delays

Effective utilisation of public funds is crucial to meet development goals. Critically examine the reasons for under-utilization and mis-utilisation of public funds and their implication Whistle blower, who reports corruption and illegal activities,

Rajesh Kumar is a senior public servant, with a reputation of honesty and forthrightness, currently posted in the Finance Ministry as the Head of the Budget Division. His department is presently busy in organizing the budgetary support to the states, four of which are due to the polls within the financial year. This year’s annual budget had allotted Rs 8300 crores for the National Housing Scheme (NHS), a centrally sponsored social housing scheme for the weaker sections of society. Rs 775 crores have been drawn for NHS till June. The Ministry of Commerce had long been pursuing a case for setting up a Special Economic Zone (SEZ) in a southern state to boost exports. After two years of detailed discussion between the center and state, the Union Cabinet approved the project in August. The process was initiated to acquire the necessary land. Eighteen months ago a leading Public Sector Unit (PSU) had projected the need for setting up a large natural gas processing plant in a northern state for the regional gas grid. The land is already in possession of the PSU. The gas grid is an essential component of the national energy security strategy. After three rounds of global bidding, the project was allotted to an MNC, M/s XYZ Hydrocarbons. The first tranche of payment to the MNC is scheduled to be made in December. Finance Ministry was asked for a timely allocation of an additional Rs 6000 crores for these two developmental projects. It was decided to recommend re-appropriation of this entire amount from NHS allocation. The file was forwarded to the Budget Department for their comments and further processing. On studying the case file, Rajesh Kumar realized that this re-appropriation may cause an inordinate delay in the execution of NHS, a project much publicized in the rallies of senior politicians. Correspondingly, the non-availability of finances would cause a financial loss in the SEZ and national embarrassment due to delayed payment in the international project. Rajesh Kumar discussed the matter with seniors. He was conveyed that this politically sensitive situation needs to be processed immediately. Rajesh Kumar realized that diversion of funds from the NHS could raise difficult questions for the government in the Parliament. Discuss the following with reference to this case: (a) Ethical issues involved in re-appropriation of funds from a welfare project to the developmental projects. (b) Given the need for proper utilization of public funds, discuss the options available to Rajesh Kumar. Is resigning a worthy option?"

A few weeks later, you ask her about the well-being of her father and she informs you about his successful surgery and that he is recovering. She then confides in you that the bank manager was kind enough to facilitate the release of 10 lakhs from a dormant account of someone to pay for the operation with a promise that it should be confidential and be repaid at the earliest. She has already started paying it back and will continue to do so until it is all returned.

As Administrative Officer, Rajesh is regularly interacting with his immediate boss, who is his reporting officer for writing his ACR. One day he calls Rajesh and wants him to buy computer-related stationery on priority from a particular vendor. Rajesh instructs his office to initiate action for procuring these items. During the day, the dealing Assistant brings an estimate of Rupees Thirty Five Lakhs covering all stationery items from the same vendor. It is noticed that as per delegated financial powers, as provided in the GFR (General Financial Rules) as applicable in that Organisation, expenditure for office items exceeding Rupees Thirty Lakhs requires sanction of the next higher authority (boss in the present case). Rajesh knows that immediate superior would expect all these purchases should be done at his level and may not appreciate such lack of initiative on his part. During discussions with office, he learns that common practice of splitting of expenditure (where large order is divided into a series of smaller ones) is followed to avoid obtaining sanction from higher authority. This practice is against the rules and may come to the adverse notice of Audit.