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Time to abolish financial advisers to end 'action paralysis'

Gyanendra Keshri, Executive Editor, INCLUSION

Financial advisers work independently in the departments concerned and report to the Finance Ministry.

One of the major pending economic reforms in India is related to the process and management of expenditure. The government has appointed a panel called Expenditure Management Commission under the chairmanship of former Reserve Bank of India (RBI) governor Bimal Jalan to look into the various aspects of expenditure reforms and suggest ways to improve fiscal discipline.

One important area of reform in this regard is related to the internal financial advisers, who create unnecessary delays in projects and hardly add any value. They have no accountability to the department where they are deployed and often take decisions irrationally resulting in delays. Clearance of the projects largely depends on the “personal relations” of the administrative secretary with the financial advisers.

This indicates the seriousness of the problems plaguing the current dispensation. Developmental projects concerning millions of people should not be left on the whims and fancies of an individual officer. Many a time a project is not cleared just because ego of the financial adviser is not satisfied.

The concept of financial adviser was introduced in mid 1970s, initially with a few selected departments and gradually it was expanded to all. They are mandated to advise and support the departments concerned and at the same time be the “eyes and ears” of the Ministry of Finance.

However, the ground reality is disturbing. Financial advisers work independently in the departments concerned and report to the Finance Ministry. So their accountability is only to the Finance Ministry.

In the national budget each department is allocated specific amounts for development and administrative expenses. Budget is decided by the Finance Minister, and each department is supposed to follow it. Then what is the use of finance advisers? Aren’t they just an unproductive extra layer in the process that defies the basic spirit of “Minimum Government Maximum Governance”.

Interestingly, financial advisers are not made accountable for any irregularity or mismanagement of funds in the concerned departments. For any irregularity or mismanagement officials of the concerned departments are made responsible. I am not suggesting that they should not be held accountable. Of course, they have to be. But isn’t it unfair to held someone accountable for somebody else’s misdeeds?

As a representative of the Finance Ministry the financial advisers are supposed to be the custodian of public finance. Aren’t the secretaries and other senior officials of the concerned departments also the custodians of public finance? Then why do we need multiple custodians? Who is responsible for the losses to the exchequer due to the delays in projects resulting out of the ego clash of these so-called custodians?

Take the example of Air India. It is a classic example of the mismanagement of public money. The government-run carrier incurred an operating loss of Rs 2,123 crore in the financial year ended March 2014. In the preceding years the losses were even higher. What was the financial adviser in the civil aviation department doing? How did they allow the drain on the public finances? Many officials argue that to a large extent financial advisers are responsible for such a precarious financial situation of the national carrier. 

The appointment of financial advisers creates the situation of trust deficit among departments and officials. All the communications from the Finance Ministry should be addressed to the secretaries and officials of the concerned departments and not the financial advisers, which is the practice currently. It’s like the Finance Ministry keeping a tab on other ministries through its agent. It is often frustrating and demeaning for the secretaries to run after the financial advisers, who are usually junior officials. Financial advisers are usually in the ranks of additional secretaries or joint secretaries.

In the past four decades the Indian economy has matured and undergone a huge transformation. Technology has changed. Now things can be monitored at a click of a button. Instead of appointing agents in the name of financial advisers, the government should focus on modern technology that would help improve efficiency and ensure transparency and accountability.

(Gyanendra Keshri can be reached at gyanendra@skoch.in)

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