Article 267 of the Indian Constitution provides for the establishment of a Contingency Fund for both the Union and the States. This fund acts as an imprest, which is essentially an advance, kept at the disposal of the executive (President or Governor) to meet urgent and unforeseen expenditures when the Parliament or State Legislature is not in session or legislative approval is pending. It ensures that essential government functions are not hampered due to a lack of immediate funds for emergencies.
The existence of this fund is crucial for the smooth functioning of the government, allowing it to respond promptly to crises, natural disasters, or other unforeseen events that require immediate financial outlay, before the necessary funds can be formally sanctioned by the legislature from the Consolidated Fund.
Original Text
(1) Parliament may by law establish a Contingency Fund in the nature of an imprest, to be entitled “the Contingency Fund of India”, into which shall be paid from time to time such sums as may be determined by such law, and the said Fund shall be placed at the disposal of the President to enable advances to be made by him out of such Fund for the purposes of meeting unforeseen expenditure pending authorisation of such expenditure by Parliament by law under article 115 or article 116.
(2) The Legislature of a State may by law establish a Contingency Fund in the nature of an imprest, to be entitled “the Contingency Fund of the State”, into which shall be paid from time to time such sums as may be determined by such law, and the said Fund shall be placed at the disposal of the Governor of the State to enable advances to be made by him out of such Fund for the purposes of meeting unforeseen expenditure pending authorisation of such expenditure by the Legislature of the State by law under article 205 or article 206.
Detailed Explanation
Article 267 of the Constitution authorises the creation of two distinct Contingency Funds: one for the Union government and one for each State government.
Clause (1) deals with the Contingency Fund of India. It states that Parliament has the power to establish this fund by law. The fund is designed as an imprest account, meaning it holds a fixed amount of money advanced from the Consolidated Fund of India. The purpose of this fund is specifically to meet unforeseen expenditures. The amount of money to be kept in the fund is determined by the law passed by Parliament. Crucially, this fund is placed at the disposal of the President. The President is empowered to make advances from this fund to meet unforeseen expenditure. However, this executive action of drawing from the Contingency Fund is subject to subsequent authorisation by Parliament. Once Parliament authorises the expenditure through a supplementary, additional, or excess grant (under Article 115 or Article 116), an equivalent amount is transferred from the Consolidated Fund of India back to the Contingency Fund to replenish it.
Clause (2) mirrors the provisions of Clause (1) but applies to the States. It grants the Legislature of a State the power to establish a Contingency Fund for the State by passing a law. Similar to the Union fund, this fund is an imprest account intended for meeting unforeseen expenditure specific to the State. The amount is determined by the State law. This fund is placed at the disposal of the Governor of the State, who can make advances from it for unforeseen expenses. Like the Union fund, the State legislature must subsequently authorise the expenditure through law (under Article 205 or Article 206) and an equivalent amount is then transferred from the Consolidated Fund of the State to replenish the Contingency Fund of the State.
In essence, the Contingency Fund serves as an emergency fund, managed by the executive, to ensure the government can respond quickly to unexpected financial needs without waiting for the time-consuming legislative process of obtaining grants from the Consolidated Fund. It acts as a temporary bridge to cover expenses until formal legislative sanction is obtained.
Detailed Notes
- Establishes a Contingency Fund for the Union and each State.
- Contingency Fund of India:
- Established by Parliament by law.
- Nature: Imprest (an advance).
- Purpose: Meeting unforeseen expenditure.
- Amount: Determined by law passed by Parliament.
- Control: Placed at the disposal of the President.
- Mechanism: President can make advances from the fund.
- Replenishment: Advances are subsequently recouped from the Consolidated Fund of India after Parliament authorises the expenditure by law (under Article 115 or 116).
- Contingency Fund of a State:
- Established by the Legislature of the State by law.
- Nature: Imprest.
- Purpose: Meeting unforeseen expenditure of the State.
- Amount: Determined by law passed by the State Legislature.
- Control: Placed at the disposal of the Governor of the State.
- Mechanism: Governor can make advances from the fund.
- Replenishment: Advances are subsequently recouped from the Consolidated Fund of the State after the State Legislature authorises the expenditure by law (under Article 205 or 206).
- The fund allows the executive to incur urgent expenses without immediate legislative approval, provided it is subsequently sought and obtained.
- It functions like a ‘petty cash’ fund for the government for emergency situations.
- The amount of the Contingency Fund of India was originally ₹50 crore but has been increased over time; it is currently ₹30,000 crore (as per a 2021 amendment).
Additional Comments
- The Contingency Fund is distinct from the Consolidated Fund and the Public Account. While the Consolidated Fund holds all government revenue and most expenditure is charged upon it, the Contingency Fund is a specific, limited fund for emergencies.
- Drawing money from the Consolidated Fund requires legislative appropriation, whereas drawing from the Contingency Fund is an executive action (President/Governor), which is later regularised by legislative action.
- The fund is a crucial tool for effective executive governance, enabling prompt response to crises like natural disasters or sudden economic shocks.
- The amount of the fund reflects the perceived need for readily available emergency funds and can be revised by the respective legislature through legislation.
Summary
Article 267 of the Indian Constitution establishes Contingency Funds for both the Union and the States. These funds operate as imprests, holding predetermined sums of money to enable the executive (President or Governor) to make immediate advances for unforeseen expenditures. While the President controls the Contingency Fund of India and the Governor controls the State Contingency Fund, any withdrawal from these funds must be subsequently authorised by Parliament or the State Legislature, respectively, after which equivalent amounts are transferred from the Consolidated Fund to replenish the Contingency Fund. This mechanism ensures that the government can address urgent financial needs promptly while maintaining parliamentary or legislative control over public finances in the long run.