A New Account System Helps Save Interest Expenditure : Daily Current Affairs

Relevance: GS-3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment; Government Budgeting;

Key Phrases: SNA and TSA; ‘Just in time’ Principle; save around ₹10,000 crores of interest cost during FY22; a new accounting mechanism; principle of unity of cash and transfer; trimming expenditure.

Why in News?

  • The Finance ministry has recently launched Single Nodal Agency (SNA) dashboard.
  • This dashboard forms part of a public financial management system (PFMS) reform that was initiated in 2021.
    • It deals with the manner in which funds for Centrally Sponsored Schemes (CSS) are released, disbursed and monitored
  • The government managed to save around ₹10,000 crores of interest costs during FY22 with the help of the principle of ‘Just in time’

Key Highlights

What is the ‘Just in Time’ release of funds?

  • It refers to a new accounting mechanism that aims to release funds for government schemes at the right time.
  • On the basis of the previous usage pattern of the received amount by states, through technology, funds can be made available as per the needs of the state government.

What is SNA?

  • Single Nodal Agency (SNA) Dashboard would require each state to identify and designate an SNA for every scheme.
  • All funds for that State in a particular scheme will be credited to this bank account.
  • Further, all expenses by Implementing Agencies will be from this account.

What is TSA?

  • Treasury Single Account is similar in function to that of SNA but for various ministries, departments and autonomous bodies.
  • As per an International Monetary Fund (IMF) Working Paper, TSA is a unified structure of government bank accounts that gives a consolidated view of government cash resources.
  • A TSA is a bank account or a set of linked accounts through which the government transacts all its receipts and payments.
  • It is based on the principle of unity of cash and transfer.

Why were TSA and SNA required?

  • Central Government usually borrows money for spending on Central Sponsored Schemes. These borrowings create pressure on the central government in form of interest expenditure.
  • These borrowings are shared with states so that developmental expenditure through Central Sponsored Schemes can be performed in an efficient manner.
  • But, it was noticed that, despite the states having received the funds timely, they hardly spent the stipulated amount.
  • So, the Central government was paying the interest on the loan but the amount borrowed remained unspent in the accounts of the state governments.

Benefits of TSA and SNA

  • Trimming Expenditure
    • As less amount of public money will be spent on payment of interest on borrowed loans.
  • Streamline the borrowing
    • As per Finance Ministry, Rs 1.2 Lakh Crore is lying unspent at the state government's level by 31st March 2022, which means that GOI should have borrowed less.
  • Efficient storing of borrowed cash at a particular level will be helpful to cut down on interest expenditure.
  • Reducing fiscal deficit
    • This will be crucial, especially in years where big crisis (pandemic or global economic shocks) affects the government coiffeurs.
  • Help to track state governments' expenditure
    • This will provide better value realisation for every rupee disbursed to the state governments.
    • Approx ₹4.46-lakh crore will be spent through the Centrally Sponsored Schemes.
  • Helps to make governance more transparent.

Source: The Hindu BL

Mains Question

Q. Explain Single Nodal Agency Framework (SNA) and Treasury Single Agency? Why were they required? What are the potential benefits of SNA and TSA?