What are Contingency, Consolidated Funds?

Finance Minister Nirmala Sitharaman is poised to make history by presenting her sixth consecutive Budget, consisting of five annual Budgets and one interim, a feat previously accomplished only by former Prime Minister Morarji Desai.

The upcoming interim Budget for the fiscal year 2024-25, scheduled to be unveiled by Sitharaman on February 1, will be a vote-on-account. This essentially grants the government the authority to expend specific sums of money until a new government assumes office following the general elections in April-May.

Amid the discussions surrounding the annual financial exercise, it is essential to familiarize ourselves with certain regular Budget-related terms that will frequently be part of conversations in the coming days. Among these, two crucial terms that warrant understanding are as follows:

Contingency Fund

The Contingency Fund serves as an imprest account designed to address urgent or unforeseen government expenditures. Any immediate expenses are met through the Contingency Fund, which is released by the President under Article 267. However, any disbursement from this fund necessitates subsequent approval from Parliament, and the withdrawn amount is returned to the fund from the Consolidated Fund.

Consolidated Fund

The Consolidated Fund of India holds paramount importance among all government accounts. It encompasses revenues received by the government and its expenditures, excluding exceptional items. As per Article 266 (1), the Consolidated Fund comprises all revenues derived from direct and indirect taxes, money borrowed, and receipts from loans extended by the government. Every government expenditure is financed through this fund, except for exceptional items, which are covered by the Contingency Fund or the Public Account. Crucially, no funds can be withdrawn from the Consolidated Fund without the approval of Parliament.