Article 202 of the Indian Constitution assumes a pivotal role in the realm of financial governance by setting forth the preparation and presentation of the annual financial statement of a state. It underscores the principles of fiscal transparency by mandating that the Governor of each state presents a comprehensive statement to the state legislature detailing the anticipated receipts and expenditures for the upcoming fiscal year.
What does Article 202 states ?
Annual financial statement
(1) The Governor shall in respect of every financial year cause to be laid before the House or Houses of the Legislature of the State a statement of the estimated receipts and expenditure of the State for that year, in this Part referred to as the annual financial statement
(2) The estimates of expenditure embodied in the annual financial statement shall show separately
(a) the sums required to meet expenditure described by this Constitution as expenditure charged upon the Consolidated Fund of the State; and
(b) the sums required to meet other expenditure proposed to be made from the Consolidated Fund of the State; and shall distinguish expenditure on revenue account from other expenditure
(3) The following expenditure shall be expenditure charged on the Consolidated Fund of each State
(a) the emoluments and allowances of the Governor and other expenditure relating to his office;
(b) the salaries and allowances of the Speaker and the Deputy Speaker of the Legislative Assembly and, in the case of State having a Legislative Council, also of the Chairman and the Deputy Chairman of the Legislative Council;
(c) debt charges for which the State is liable including interest, sinking fund charges and redemption charges, and other expenditure relating to the raising of loans and the service and redemption of debt;
(d) expenditure in respect of the salaries and allowances of Judges of any High Court;
(e) any sums required to satisfy and judgment, decree or award of any court or arbitral tribunal;
(f) any other expenditure declared by this Constitution, or by the Legislature of the State by law, to be so charged
Clauses of Article 202
Clause(1) :-
- According to the first provision of Article 202 in the Indian Constitution, it is stipulated that the Governor has the responsibility of ensuring the presentation of a “Annual Financial Statement” before the State Legislature at the conclusion of the fiscal year, specifically pertaining to the state’s yearly budget. The Annual Financial Statement is required to include the projected revenues and expenses of the State for a one-year period.
Clause(2) :-
- The content of the annual financial statement is stipulated under the second clause of Article 202 of the Indian Constitution. The report should include individual predictions of expenditures that are classified within the following categories:
- The funds necessary to pay expenses outlined in the Constitution, which are to be paid from the Consolidated Fund of the State, as well as the funds needed to cover all other expenses not specified in the Constitution, also to be paid from the Consolidated Fund of the State. The statement should clearly differentiate between the spending recorded on the revenue account and other types of expenditures.
Clause(3) :-
- According to the third clause of Article 202 of the Indian Constitution, it is imperative that the specified expenses be allocated to the Consolidated Fund of every State.
- The remuneration of the Governor, along with any supplementary benefits and directly related expenses pertaining to their office, are encompassed within this category. Additionally, the salaries and allowances of the Speaker and Deputy Speaker of the Legislative Assembly, as well as the Chairman and Deputy Chairman of the Legislative Council in states where such a council exists, are included.
- Furthermore, this category covers the funds required for the repayment of state debts, including interest, charges for sinking funds or redemption, as well as expenses associated with obtaining loans and servicing them, including debt redemption.
- Any expenses incurred in relation to the salaries and allowances of judges serving in any High Court are also accounted for. Moreover, any necessary funds to settle judgments or orders issued by courts or arbitration councils are encompassed within this category. Finally, it encompasses any other additional expenditures that are stipulated by the Constitution or the State Legislature.
Key aspects of Article 202
- Annual Financial Statement: The Governor of a state is required to present an annual financial statement before the legislative body (House or Houses of the Legislature of the State) for each financial year. This statement contains estimates of the state’s expected receipts (revenues) and expenditures for that year. This financial statement is commonly referred to as the “annual financial statement.”
- Estimates of Expenditure: The estimates of expenditure provided in the annual financial statement must be categorized and presented distinctly:
- (a) Expenditure Charged on Consolidated Fund: This refers to expenditures that are constitutionally mandated to be funded directly from the Consolidated Fund of the State. This category includes expenses like the emoluments and allowances of the Governor, Speaker, Deputy Speaker, Chairman, Deputy Chairman, debt charges, judicial salaries, court judgments, etc.
- (b) Other Expenditure from Consolidated Fund: This refers to all other expenditures that are proposed to be funded from the Consolidated Fund of the State but are not constitutionally categorized as “charged expenditures.”
- Expenditure on revenue account is separated from other types of expenditure in the estimates.
- Expenditure Charged on Consolidated Fund: The following types of expenditure are considered as charges on the Consolidated Fund of the state:
- (a) The emoluments (salary and allowances) and other expenses related to the Governor’s office.
- (b) Salaries and allowances of the Speaker and Deputy Speaker of the Legislative Assembly. For states with a Legislative Council, this also includes the Chairman and Deputy Chairman of the Legislative Council.
- (c) Debt charges including interest, sinking fund charges, redemption charges, and other expenses related to loans, debt servicing, and redemption.
- (d) Expenditure related to the salaries and allowances of Judges of any High Court.
- (e) Sums required to satisfy judgments, decrees, or awards of any court or arbitral tribunal.
- (f) Any other expenditure declared by the Constitution or by state legislature through law to be charged on the Consolidated Fund.
Procedure for Financial statement by the Governor
- Preparation of Estimates: At the beginning of each financial year (typically starting on April 1 and ending on March 31), the government authorities prepare estimates of the expected receipts (revenues) and expenditures for the state. These estimates are compiled by the state’s finance department and other relevant departments.
- Formation of Annual Financial Statement: Based on the estimates, the annual financial statement is prepared. This statement contains detailed information about the estimated receipts (revenues) and proposed expenditures for various purposes.
- Governor’s Role: The Governor, as the head of the state, plays a key role in this process. The Governor, upon receiving the prepared annual financial statement, reviews and approves it. The Governor ensures that the estimates of receipts and expenditures are accurate and comply with the legal requirements.
- Presentation to the Legislature: Once the Governor approves the annual financial statement, it is presented before the House or Houses of the Legislature of the State. The presentation is usually made through a formal address by the Governor to the members of the legislature.
- Laying Before the House: The Governor “causes to be laid” the annual financial statement before the legislature. This means that the statement is formally introduced and made available to the members of the legislature for their review and consideration.
- Discussion and Approval: After the annual financial statement is presented, it is subject to discussion and deliberation by the members of the legislature. The members analyze the estimates of receipts and expenditures, question the government on various aspects, and express their views on the financial plan.
- Passing the Appropriation Bill: Once the annual financial statement has been discussed and reviewed, the legislature passes the Appropriation Bill. This bill provides the legal authority to spend money from the Consolidated Fund of the State for the various expenditures outlined in the annual financial statement.
- Separate Approval for Charged Expenditure: As per Article 202, certain expenditures are “charged” on the Consolidated Fund and do not require separate approval each year. However, even for charged expenditures, a detailed statement is provided in the annual financial statement for transparency and accountability.
- Implementation and Reporting: After the Appropriation Bill is passed, the government authorities implement the financial plan as outlined in the annual financial statement. Throughout the financial year, the government provides periodic reports and updates to the legislature regarding the utilization of funds and progress on various projects.