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The bucks stop here

Print edition : Jul 14, 2006 T+T-

The redefinition of the role of Financial Advisers is going to make transaction of business in Ministries even more complex than it has been so far.

THE Ministry of Finance has reportedly issued a memorandum to all Ministries of the Government of India redefining the role of Financial Advisers. The Expenditure Secretary is quoted as saying that their role will now be akin to that of Chief Financial Officers in a company. If the report accurately reflects what the memorandum says, then it is going to make the transaction of business in Ministries even more complex than it has been so far.

To begin with, the term `Financial Adviser' is not really correct; the officer so designated has always been more a Financial Controller. He rarely advises; his is the veto or the clearance, on terms he lays down, for every single issue in any Ministry that has any element of expenditure (or even of revenue earned). He is technically subject to the overall control of the Secretary of the Ministry, but in fact is not, since he reports to the Secretary in the Finance Ministry as well, and, being an officer sent by the latter, one can well imagine where his loyalty lies.

Why is this anything more than a minor administrative issue? Why does it merit consideration by anyone other than bureaucrats involved in the procedures of government? For a very simple reason: the decisions of Financial Advisers can change the way a Ministry functions, not perhaps in a macro sense, but certainly in the very many lesser decisions that need to be taken, and all of these, together, actually give the Ministry its final identity more than professed policies and plans. Just as a patchwork quilt assumes a special identity as a patchwork quilt; the identity is not of the little pieces that go to make it up, but of the whole thing.

Not that Financial Advisers are dispensable, far from it. Where the expenditure of public funds is involved, it is essential that there is someone to oversee that expenditure and ensure that it is unavoidable, and being incurred for the stated purposes, and that it is in keeping with the rules framed for financial prudence and economy. They have a difficult and very responsible function, and no officer who has held such a position has, I would imagine, really enjoyed the work. It is so easy for other officers to attribute the delay or failure of a specific activity to the Financial Adviser; and an activity later found to have been financially irresponsible in some way can be, again, hived off to the hapless Financial Adviser.

This said, one must look a little carefully at this very key functionary in a Ministry. Over the years the Financial Adviser has become, quite often, a brake in the process of getting a crucial scheme going. Not because he blocks it, but because a huge amount of time is spent in convincing him about the validity of the manner in which the scheme is being implemented.

In the many years that I have worked with a variety of Financial Advisers it must be admitted that most have not been too negative or obstructive; in fact, some have been not only sources of encouragement but wise voices pointing out the pitfalls in a particular course of action, even suggesting ways in which rules can be observed and yet the given project or issue could also be achieved or completed.

That, ironically, is the problem. The system depends on the attitudes and the mindset of individual officers. Many civil servants will agree that one negative officer can cause more damage in terms of delays and slippages in achieving targets than any other factor.

Recent media reports have highlighted the fact that the three Service chiefs have written to the Defence Minister asking that more funds be made available to the services for immediate and urgent acquisition of equipment and weaponry. In fact, it has been a general perception among service chiefs through the years that enough has never been made available to them to make the armed forces as combat worthy as they would like them to be. True, they are certainly combat worthy now; but they could, it is argued, be far more formidable if they had the hardware that the chiefs have wanted them to have, be it tanks, ships or aircraft.

But while this joint note from the chiefs has been reported in the media, what has also been carried, though not as prominently, has been the report of the Comptroller and Auditor-General on the accounts of the Defence Ministry for the previous financial year; that report says that Rs.4,500 crores was returned by the services unspent. There will be, certainly, very convincing reasons given for this inability to spend what was allocated while a note is sent up for more funds, and it would be surprising if, among those reasons, one of them is not the complex procedures laid down for expenditure, and, indeed, some occasions where funds could not be spent because of the numerous questions asked and shortcomings listed by the financial advisers.

I have actually seen this happen, when I was serving in the Defence Ministry, as a desperately needed item - admittedly expensive - was acquired after something like a year and a half of the file going to and fro between the Financial Adviser and the Service concerned. And this is not the only case; in other Ministries there have been several instances of this kind of batting around of files taking so long that the cost of a project has gone up, resulting in the files going to and fro again.

One would imagine that a single definitive meeting where all questions and perceived shortcomings could be set up to resolve such terribly damaging delays, but the issues are not so simple. These procedures have a sub-text. Items of equipment or weaponry made by different manufacturers are often evaluated by, say, the armed forces as all being qualitatively acceptable. That absolves them of the major responsibility of pinpointing the one they want.

The onus then shifts to the Financial Advisers in the Defence Ministry, who are as human as everyone else. There is an equal reluctance in them to clear an expenditure of Rs.800 crores on one item, particularly as they can never know the technical nature of the different makes as well as the Service officers do. So the queries start, the process of acquisition gets delayed and as the financial year ends with the issues not resolved, the money earmarked for this equipment has necessarily to be returned.

Again, one is not saying that this is the sole cause for delays; but it is a cause that can be removed if the process were studied and modified to make it quicker without sacrificing the essential need for financial prudence. It is in this context that the reported instructions from the Expenditure Secretary need to be seen. Have the infirmities of the existing procedures been studied carefully before Financial Advisers are granted even more powers? Is it possible to insulate the system that exists, and the new powers being given, from the vagaries of individual perception - from the overzealous Financial Adviser who sees great virtue in saying no to the one who overlooks some essential financial requirement when clearing a proposal?

There are obviously no clear and simple answers or solutions. But solutions can be found if they are looked for, carefully and without losing sight of the twin requirements of keeping expenditure of public funds within the limits of prudence and the achievement of the planned objectives of different schemes in different Ministries. It just needs an awareness of the fact that existing systems are not satisfactory and a willingness, and confidence, to alter established procedure for the public good.

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