The budget goes through six stages in the parliament before it gets passed. These stages are as follows-
1. Presentation of budget
2. General discussion
3. Scrutiny by departmental committees
4. Voting on demands of grants
5. Passing of the appropriation bill
6. Passing of finance bill
Presentation of Budget
Till 2016, there were two separate budgets i.e. Railway Budget and the General Budget in the Lok Sabha. This separate railway budget was first introduced in 1924 based on the recommendations of the Acworth Committee. From 2017, Railway budget was merged with the general budget
In an election year, the budget may be presented twice—first to secure a vote on account for a few months and later in full.
The Union finance minister presents the budget or Annual Financial Statement on behalf of the President of India. The first reading is called the presentation of the budget.
The budget includes the following documents apart from the Budget Speech:
Annual Financial Statement (AFS)
Demands for Grants (DG)
Statements mandated under Fiscal Responsibility and Budget Management Act(FRBM) Act 2013
Macro-Economic Framework Statement
Medium-Term Fiscal Policy
Fiscal Policy Strategy Statement
Budget at a Glance
Earlier, the Economic Survey also used to be presented to the Parliament along with the budget. Now, it is presented one day before the presentation of the budget.
When is the budget presented
The Budget is presented on 1st February (until 2016, it was presented on the last working day of February) so that it can materialise before the commencement of the new financial year which starts on 1st April.
Budget speech: The finance minister presents the General Budget with a speech known as the ‘budget speech’. At the end of the budget speech in the Lok Sabha, the budget is laid before the Rajya Sabha which can only discuss it and has no power to vote on the demand for grants.
There shall be no discussion of the budget on the day on which it is presented to the House
2. General Discussion
In the budget session, general discussion begins a few days after its presentation which takes place in both the houses and usually lasts for three to four days. The Loksabha can discuss the budget as a whole or any question of principles involved but no cut motion can be moved at this stage nor can the budget be submitted to the vote of the House. The discussion only examines the general scheme and structure of the budget. The finance minister has a general right of reply at the end of the discussion.
3.Scrutiny by Departmental Committees
The House is adjourned for about 3-4 weeks after the general discussion. During this period, the demands for grants of the ministries/ departments are examined and discussed by the 24 departmental standing committees of the parliament .
Each departmental committee has 31 members 21 are from Lok Sabha and 10 members are from Rajya Sabha .These committees prepare their reports and submit them to both the Houses of the parliament. These committees prepare separate reports on the demands for grants of each ministry.
4. Voting on Demands of Grants
The expenditure proposed to be made from the Consolidated Fund of India is presented in the form of demand for grants of the various ministries (called as department ). Because as we know the expenditure charged upon the Consolidated Fund of India cannot be voted upon by the Parliament .
In the light of the reports of the departmental standing committees, the Lok Sabha takes up voting of demands for grants. The demands are presented ministry wise. A demand becomes a grant after it has been duly voted.
The estimates of expenditure from the Consolidated Fund included in the Annual Financial Statement and required to be voted by the Lok Sabha are submitted in the form of Demands for Grants in pursuance of Article 113 of the Constitution.Article 113 of the Constitution of India mandates that estimates of expenditure from the Consolidated Fund of India are included in the Annual Financial Statement, which are required to be voted by the Lok Sabha, and submitted in the form of demand for grants.
Demand of grant for Department (Ministries)
Generally, one Demand for Grant is presented in respect of eachministry or department. However, in respect of large ministries or departments more than one demand is presented.
Two Points should be noted in this context-
One, voting of demands for grants is the exclusive privilege of the Lok Sabha and Rajya Sabha has no power.
The voting is confined to the votable part of the budget i.e. the expenditure charged on the consolidated fund of India is not submitted to the vote and can only be discussed.
The General Budget currently has about 101 demands. Each demand is voted separately by the Lok Sabha. During this stage, the members of Parliament can discuss the details of the budget. They can also move to reduce any demand for grants. But increase or upward revisions of estimates are not permissible.
What is a Cut Motion
Members of Loksabha can also move motions to reduce any demand for grants. Such motions are called cut motion.
What is a Motion
The term `motion' means any formal proposal made to the House by a Member for the purpose of eliciting a decision of the House.The motion is written in such a way that if it is passed then it is seen as the will of the house. During discussion on the demand for grants the member of the Lok Sabha can move cut motion against the demand for grants.
Cut motions are of three types:
(i) Policy Cut Motion: It represents the disapproval of the policy underlying the demand. The motion states that the amount of the demand be reduced to Re. 1 which means that the mover disapproves of the policy underlying the demand. The member can also advocate for an alternative policy. The motion expresses the disapproval of the policy followed by the concerned ministry.
(ii) Economy Cut Motion: It represents the economy that can be affected in the proposed expenditure. It states that the amount of the demand will be reduced by a particular amount. The amount suggested for reduction may be either a lump-sum reduction in the demand or omission or reduction of an item in the demand.
(iii) Token Cut Motion: It ventilate a specific grievance within the sphere of responsibility of the government. It states that the amount of the demand will be reduced by Rs. 100.
A cut motion to be admissible should satisfy the following conditions:
i. It should relate to one demand only.
ii.. It should be confined to one specific matter which should be stated in precise terms.
iii. It should not make suggestions for the amendment or repeal of existing laws.
iv. . It should not relate to expenditure ‘Charged’ on the Consolidated Fund of India.
If the cut motion is passed then it means that the government has lost majority in the house.
What is a guillotine
Lok Sabha allots time for discussion for each demand for grants and the house discusses each demand for grants But sometimes due to various reasons like disruption in the house etc there is a time constraint. In such cases all the pending demands for grants are bunched together and put to vote in the house. This is called a guillotine.
After the Lok Sabha has passed the demand for grants of the departments then the Finance minister moves Appropriation Bill under article 114 of the constitution.
The Appropriation bill includes the Expenditure proposed to be made from the Consolidated Fund of India in the form of demand for grants and the expenditure charged upon the Consolidated Fund of India.
Can the Appropriation bill be amended
The parliament has no power to change the amount mentioned in the demand for grants.
Passage of the Appropriation Bill
The Appropriation bill is passed by the Lok Sabha through a simple majority . It is certified as a Money bill by the Speaker of Lok Sabha and sent to the Rajya Sabha.
The Rajya Sabha has no power and it can either reject the bill or pass it or delay it for a maximum period of 14 days.
The Appropriation bill is then sent to the President who has to sign the bill and it becomes an act. Now the various departments of the government can withdraw money from the Consolidated Fund of India.
In addition to the budget that contains the ordinary estimates of income and expenditure for one financial year various other grants are made by the Parliament under extraordinary or special circumstances.Supplementary, additional or excess grants and Votes on account, votes of credit and exceptional grants are mentioned in the Constitution of India 1949.
Article 115: Supplementary, additional or excess grants.
Article 116: Votes on account, votes of credit and exceptional grants.
What is a Supplementary Grant?
It is granted when the amount authorised by the Parliament through the appropriation act for a particular service for the current financial year is found to be insufficient for that year.
What is an additional Grant?
It is granted when a need has arisen during the current financial year for additional expenditure upon some new service not completed in the budget for that year.
What is Excess Grant?
It is granted when money has been spent on any service during a financial year in excess of the amount granted for that service in the budget for that year. It is voted by the Lok Sabha after the financial year. Before the demands for excess grants are submitted to the Lok Sabha for voting, they must be approved by the Public Accounts Committee of Parliament.
What is Vote of credit?
It is granted for meeting an unexpected demand upon the resources of India when on account of the magnitude or the indefinite character of the service, the demand cannot be stated with the details ordinarily given in a budget. Hence, it is like a blank cheque given to the Executive by the Lok Sabha.
What is Vote on accounts
Vote on Account is a grant in advance to enable the government to carry on until the voting of demands for grants and the passing of the Appropriation Bill and Finance Bill.
What is Token Grant?
Token grant It is granted when funds to meet the proposed expenditure on a new service can be made available by reappropriation. Demand for the grant of a token sum (of Re 1) is submitted to the vote of the Lok Sabha and if assented, funds are made available. Reappropriation involves the transfer of funds from one head to another. It does not involve any additional expenditure.
What is an Exceptional grant?
It is granted for a special purpose and forms no part of the current service of any financial year
Passing of the Finance Bill
What is the Finance Bill
The taxation proposal of the government is introduced in the form of a Finance bill.
The procedure in respect of the finance bill is the same as in the case of other money bills.
At the time of presentation of the Annual Financial Statement before Parliament, a Finance Bill is also presented in fulfillment of the requirement of Article 110(1 )(a) of the Constitution, detailing the imposition, abolition, remission, alteration, or regulation of taxes proposed in the Budget.
A Finance Bill is a Money Bill as defined in Article 110 of the Constitution. It is accompanied by a Memorandum explaining the provisions included in it.
The finance bill is introduced immediately after the presentation of the budget. The introduction of the bill cannot be opposed. According to the Provisional Collection of Taxes Act, 1931, the finance bill has to be passed by parliament and assented to by the president before the expiry of the seventy-fifth day after the day on which it was introduced.
As the finance bill contains taxation proposals, it is considered and passed by the Lok Sabha only after the demands for grants have been voted and the total expenditure is known. The Finance Act completes the process of the enactment of the budget
Unlike the Appropriation Bill, the amendments (seeking to reject or reduce a tax) can be moved in the case of a finance bill.
The Finance Act legalises the income side of the budget and completes the process of the enactment of the budget.
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