Restoration of Inherent Financial Powers of Defence Services

The Ministry of Defence (MoD) by an order dated October 26, 2015 has put on hold the withdrawal of the financial powers which were earlier exercisable by the Defence Services (Services) authorities without financial concurrence of their internal financial advisers (formally known as Integrated Financial Advisers or IFAs), normally termed inherent powers, prior to the enhanced delegation to the Services from May 01, 2015.

While enhancing the delegated financial powers operative since 2006, the MoD had withdrawn the inherent powers of the Services across the board, except in case of remote areas where IFAs were not co-located with the transaction sanctioning authorities, i.e. the Competent Financial Authorities (CFAs) of the Services, and for mobile units, ships and submarines, etc. The powers without financial concurrence were limited to Rs. one lakh per transaction. In retrospect, it appears that this decision of the MoD withdrawing inherent powers was not well conceived and did not take into cognisance the operational realities on the ground.

The moot point is that in respect of transactions of higher order, i.e., of huge transactional value, more diligence was necessary towards factoring in financial inputs and appraisals through the system of IFA concurrence in the realm of delegated powers. Instead of doing so, the MoD and its Finance Division adopted a short-sighted decision on withdrawing the meager financial powers of the Services’ CFAs which was unlikely to have a substantial overall financial impact, but instead led to day-to-day operational and logistical constraints for the Services. The constraints arose because the proposals for obtaining expenditure sanctions had perforce to be referred to finance officers who were to convey financial concurrence/to be consulted, at echelons distantly placed vis-à-vis the CFAs, and also in many cases not concerned with the transactions in their normal functional jurisdiction. It is understood that this hiatus and the consequent difficulties had become a matter of concern for the Services. The MoD has now constituted a committee to review the working of the institutional arrangements post-enhanced delegation, along with the functioning of the inherent powers, and take a view on the matter in a time-bound manner.

As it is, the system on the Defence side pertaining to the Services in the delegated sphere has been functioning such that the financial inputs are not reckoned comprehensively before expenditure is incurred. The arrangements concerning Defence are substantively different as compared to the arrangements long institutionalised for other ministries and departments. As per the statutory rules applicable to all others, vide the Delegation of Financial Powers Rules (DFPRs), it is mandatory for IFAs to be intimately associated with the formulation of plans, schemes and projects of their departments/organisations, the conveying of concurrence to proposals for incurring expenditure, the budgeting and monitoring of progress in execution of the above elements, the vetting of mid-course corrections, etc. The de facto position is that the IFAs are only kept apprised but not fully involved with the Services’ CFAs on a priori basis at all tiers, on the pattern codified in the DFPRs, particularly in the formulation of plans and budget. This is notwithstanding the intention of the government expressed through the MoD Order issued on April 20, 2015 notifying the enhanced delegation to be operative from May 01, 2015.

The above-cited MoD Order mentions that the IFAs are expected to give due attention to macro- management issues, inter alia, highlighting the need for them to be involved in the planning and plan-review process as well as in the budget estimation and monitoring exercise. These are laudable objectives, but a well-knit mechanism for their implementation does not seem to exist at present. A sine qua non for comprehensive finance involvement in the functional areas referred to above is to have the professionals of the Indian Defence Accounts Service (IDAS) assume a comprehensive role in this respect. The existence of Financial Planning Directorates in the Services Headquarters appears to be an anomaly. As a prerequisite for professional financial advice flowing to the CFAs, these directorates should be fully subsumed in the IFA set-up staffed by the IDAS officers, with the set-up vertically linked with the Finance Division of the MoD. The MoD and Controller General of Defence Accounts (the cadre authority of the IDAS) should endeavour to put in place a system as mentioned above, in concert with the Services Headquarters, towards consummation of an adequate internal financial advisory or IFA arrangement on the lines outlined in the DFPRs.

As argued in my earlier commentary, more empowerment of the Services is needed, with the Service Chiefs being responsible to the parliament for obtaining of appropriations and accounting for them. In the process, each of the Service Headquarters could be converted into a department of the government under Allocation of Business Rules. For appropriate outcomes and to enable the Service Chiefs (through their Vice Chiefs who would wield most of the highest tier powers on behalf of their Chiefs) to function judiciously and optimally, the Financial Planning Directorates of such departments should, however, be staffed by the IDAS professionals.

In case of the shortage of IDAS officers (as the IDAS is also responsible for internal audit and payments), some of the Services’ officers could be made proficient in finance matters, taken on deputation to the IDAS or absorbed in the IFA set-up and placed in an internal financial advisory-cum-budgeting role along with IDAS officers under IDAS IFAs apropos the Services’ CFAs. A central police force like the Border Security Force (BSF) has some of their combatant officers professionally trained in finance matters, and placed under their Finance Adviser (who is invariably an officer from an organised Central Service e.g., IDAS, ICAS, etc.) for internal financial advisory and budgeting work, and the BSF system has been working with reasonable efficiency.

With a reorganisation as suggested above, greater professionalism in finance matters as well as a more integrated defence set-up could be achieved. Some of the Services’ officers, who would be more cognisant or attuned to operational and logistical needs of their Services by virtue of their experience in combatant or operational logistic roles, could also serve as IFAs even for lower threshold powers which are presently exercisable without financial concurrence in lower and mobile Services’ establishments or in remote areas . This then will obviate the need to have the inherent powers in the present form, which in some ways is a unique phenomenon vis-à-vis Defence Services and establishments.

The author is an ex- Additional Controller General of Defence Accounts of Govt. of India, former Adviser (14th Finance Commission) of Govt. of Nagaland, and presently Adviser to former Chief Minister of Nagaland & sitting MP (Lok Sabha).

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India