Indian Railway Codes and Manuals-General Financial Rules-2017-Chapter- 10 (X) GFR-2017.

 


Chapter – 10

BUDGETING AND ACCOUNTING OF EXTERNALLY AIDED PROJECTS

Rule 264 (1)

Implementation of Projects or Schemes through external aid receipt. The projects or schemes of the Government of India to be implemented through external aid receipt from multilateral or bilateral funding agencies shall be shown in the budget proposals approved annually by the Parliament.

Rule 264 (2)

The external aid comes from bilateral and multilateral sources as follows: (i) Bilateral funding to finance specific project(s) by the funding agency(ies) under Government to Government agreement(s); and, (ii) Multi-lateral funding by Multi-Lateral Funding Agencies, such as the World Bank under agreement(s) between the borrower (Government of India) and the Multilateral Funding Agency(ies).

Rule 264 (3)

The Department of Economic Affairs, Ministry of Finance as the nodal agency shall execute the legal agreement for loans or grants from external funding Agency(ies). However, grant agreements for Technical Assistance can also be executed by the beneficiary Ministries or Departments with the approval of Ministry of Finance, Department of Economic Affairs.

Rule 264 (4)

The Office of the Controller of Aid Accounts and Audit (CAAA) in the Department of Economic Affairs, Ministry of Finance shall be responsible for implementing the financial covenants laid down in the agreement(s) executed by Department(s) of Government of India and the External Funding Agency(ies). A copy of all such agreements shall be sent to the Office of Controller, Aid Accounts and Audit, Department of Economic Affairs for this purpose.

Rule 265

Currency of external aid. The external aid shall flow from the Funding Agency in foreign currency or Indian Rupees and shall be received by the Reserve Bank of India, Mumbai which shall remit the rupee equivalent to the account of Controller, Aid Accounts and Audit, Department of Economic Affairs at Reserve Bank of India, New Delhi. The remittances shall be accounted as external loan/Grant receipts in the Consolidated Fund of India.

Rule 266

Accounting of Cash grants.Cash grants, as distinct from commodity grant or other assistance in kind received from external sources shall be accounted for only by the office of Controller of Aid Accounts and Audit, Department of Economic Affairs.

Rule 267

Procedure for withdrawal. The concerned administrative Ministries or Departments shall be required to make provision of funds under the relevant head of account as ‘External Aided Component’ in their Detailed Demands for Grants for release of external aid amounts during the year to the respective Project Implementing Agencies. There are mainly two procedures laid down for withdrawal of funds from the loan or grant account:

Rule 267 (1)

Reimbursement procedure. Under the reimbursement procedure the Project Implementing Agency shall initially spend or incur expenditure and subsequently claim the amount from the Funding Agency through the office of the Controller, Aid Accounts. The remittances shall be accounted as External Loan or Grant receipt in the Consolidated Fund of India. There are two ways of dealing with the reimbursement claims as given below: (i) Reimbursement through Special Account (Revolving Fund Scheme). Under the Revolving Fund Scheme, the Funding Agency disburses the estimated expenditure of four months for the projects as initial advance to Government of India under the respective loan or credit or grant agreement. Office of Controller of Aid Accounts & Audit withdraws the amount specified in the agreement as initial deposit from the Funding Agency, by sending a simple withdrawal application in the prescribed format after the loan is declared effective. Such initial deposit designated in US Dollars is received by Reserve Bank of India, Mumbai and Rupee equivalent shall be passed on to Controller of Aid Accounts & Audit through Government Foreign Transaction (GFT) advice. However, Reserve Bank of India, Mumbai shall maintain a loan wise proforma account for liquidation of advance received from Funding Agency. Office of Controller of Aid Accounts and Audit, on receipt of reimbursement claims from Project Implementing Agency, shall send an advice to Reserve Bank of India, Mumbai advising it to debit the Special Account with the US Dollars equivalent of the amount of the eligible claim. Office of Controller, Aid Accounts and Audit shall consolidate all such claims and submit to Funding Agency for replenishment of Special Account. This shall be accompanied by a statement of debits and credits made during the period by Reserve Bank of India, Mumbai and supporting documents received from the Project Implementing Agency. (ii) Reimbursement outside Special Account: Under the reimbursement procedure (where there is no provision in the loan or credit agreement for the Special Account or the balance in the Special Account is ‘Nil’) office of Controller of Aid Accounts and Audit shall send the reimbursement claims r e c e i v e d f r o m t h e P r o j e c t Implementing Agency direct to the Funding Agency after checking the eligibility aspect. The Funding Agency shall disburse the eligible expenditure to the borrower’s account with Reserve Bank of India, Mumbai, who shall pass on the Rupee equivalent to the account of the Controller of Aid Accounts and Audit at Reserve Bank of India, New Delhi by issue of Government Foreign Transaction (GFT) advice.

Rule 267 (2)

Direct Payment Procedure. Under this procedure adopted in some cases the Funding Agency, on the request of the Project Implementing Agency (received through Controller of Aid Accounts and Audit), duly supported by relevant documents, shall directly pay to the contractor or supplier or consultant from the loan or credit or grant account. The Funding Agency, after satisfying itself as to the eligibility of the expenditure etc. remits the amount directly to the account of the payees as per the payment instructions. The Funding Agency apprises the office of Controller of Aid Accounts and Audit and the Project Implementing Agency of the particulars of the payment made. Office of Controller of Aid Accounts and Audit shall work out the rupee equivalent of the foreign currency payment. This rupee equivalent shall be recovered by office of Controller of Aid Accounts and Audit from the Project Implementing Agencies or State Governments which have availed of the Direct Payment Procedure. Note : In the case of Central Projects, Centrally Sponsored Projects and Public Sector or Financial Institutions, the concerned administrative Ministry or Department shall release the fund to the Project Implementing Agency with the instruction to deposit rupee equivalent of the foreign currency that have been availed of under Direct Payment Procedure by them to the account of Controller of Aid Accounts and Audit at Reserve Bank of India, New Delhi or Branch of SBI so authorized.

Rule 268 (1)

Fund Flow for State Projects financed from external aid source. T h e respective Departments of the State Government shall provide in the Budget such expenditure proposed to be incurred under Plan Schemes during the financial year by the Project Implementing Agencies. These shall be in respect of State projects to be financed from external aid sources both under loan or credit and grants and eligible for disbursement from Funding Agency under Reimbursement or Direct Payment Procedure.

Rule 268 (2)

Fund flow for State Projects under Reimbursement Procedure. The disbursements under the “Reimbursement through Special Account ” and “Reimbursement out side Special Account”, referred to in Rule 267 (i), shall be consolidated at periodical intervals under each loan or credit State-wise by the office of the Controller of Aid Accounts and Audit. The details of the same shall be sent to Plan Finance Division of the Department of Expenditure in the Ministry of Finance for release of funds to the respective State Governments. The Plan Finance division of Department of Expenditure in the Ministry of Finance shall issue sanctions for actual release of the disbursement for each State. A copy of such sanction shall be endorsed to the Finance Department of the concerned State Government for information. The office of the Chief Controller of Accounts, Ministry of Finance shall issue the Inter-Government (IG) Advice to Reserve Bank of India, Central Accounts Section, Nagpur, for effecting the release to the concerned State Governments. The account of the State Government maintained at Reserve Bank of India, Central Accounts Section, Nagpur, shall be credited with the amount so released, thus, completing the cycle of funds from the expenditure incurred from the Budget of the State till receipt of funds of such expenditure from Government of India to the State.

Rule 268 (3)

Fund flow for State Projects under D i r e c t P a y m e n t P r o c e d u r e . Under Direct Payment Procedure the claims shall be processed as mentioned in Rule 267 (ii). Office of Controller of Aid Accounts and Audit shall work out the Rupee equivalent of such Direct Payment based on Reserve Bank of India buying rate applicable for the value date on which the Direct Payment was made. Office of Controller of Aid Accounts and Audit shall consolidate such disbursement in Rupees, and send a list of such disbursement State wise to Plan Finance Division of Department of Expenditure at periodical intervals requesting them to release the amount to the State concerned notionally and recover the same for credit to Controller of Aid Accounts and Audit’s account. The Plan Finance Division shall issue a separate sanction for the amount to be released to the State concerned and for simultaneous recovery and credit back to the account of the Controller of Aid Accounts and Audit. A copy of such sanction shall also be endorsed to the Finance Department of the State Government concerned. The office of the Chief Controller of Accounts, Ministry of Finance shall advise Reserve Bank of India, Central Accounts Section, Nagpur, for making necessary adjustment entries in the accounts of the State concerned under intimation to the Finance Department of the State and Controller of Aid Accounts and Audit. This completes the cycle of funds flow in the case of direct payment claims.

Rule 269

Fund flow for Central or Central sponsored Projects. Under the Central or Central sponsored project financed from external aid, whether loan or grant, the process of disbursement of such claims by the Funding Agency shall be the same as explained in Rule 267. The respective Ministry or Department get EAP funds under a separate budget head when Demands for Grants are passed in the Parliament and advised by the Budget Division of the Ministry of Finance. The funds shall be released to Project Implementing Agency within six weeks by the administrative Ministry or Department with reference to expenditure incurred by the Project Implementing Agency.

Rule 270

Fund flow for Public Sector or Financial Institutions. When the Project Implementing Agency under Loan or Credit Agreement is a Public Sector or Financial Institution or Autonomous Body and Government of India is the Borrower, the Administrative Ministry concerned shall provide in its budget funds required to be passed on to the Project Implementing Agency for the expenditure incurred by the latter under the externally aided project. The Project Implementing Agency shall submit claims under reimbursement or direct payment procedures to the office of the Controller of Aid Accounts and Audit, Department of Economic Affairs. The disbursement of the claims by the Funding Agency shall be similar as explained in Rule 267. The concerned administrative Ministry or Department releases the amount to Project Implementing Agency based on the certification of disbursement received from the Funding Agency as certified by the office of the Controller of Aid Accounts and Audit. However, where the loan is negotiated directly by a particular Public Sector Undertaking or Financial Institution, the funds from the Funding Agency shall flow direct to the borrowing entity.

Rule 271

Repayment of loans. Office of Controller of Aid Accounts and Audit shall be responsible for prompt repayment of principal on the due date as per the agreements. The remittance of foreign currency is arranged through designated Public Sector Commercial Banks and Reserve Bank of India. The Rupee equivalent and the amount of foreign currency remitted shall be intimated by the Banks to Controller of Aid Accounts and Audit. The Rupee equivalent of the foreign currency remitted is credited to the respective Banks’ account maintained at Reserve Bank of India, New Delhi, by debit to Controller of Aid Accounts and Audit’s account as per standing arrangement. On the receipt of the advice from Reserve Bank of India, New Delhi, Controller of Aid Accounts and Audit shall debit the concerned loan account in the Consolidated Fund of India. The repayment of loans shall be classified as charged expenditure. In cases where the funds from externally aided Projects are further passed on as loans, the recovery of the loan along with interest shall be the responsibility of the respective administrative Ministry or Department.

Rule 272

Interest Payments. Interest on external loans shall be paid on the due date as stipulated in the loan or credit agreements against the budget provision made for this purpose. Interest payments shall be accounted for as debit under the Major Head ‘2049-Interest Payments’ for external loans in the Consolidated Fund of India. The procedure for transfer of amount shall be the same as followed in the case of repayment of loans, referred to in Rule 271 above. The interest payment shall be classified as charged expenditure.

Rule 273

Accounting of exchange variation. The exchange variation in respect of foreign loans that have been fully repaid shall be adjusted written off to “8680- Miscellaneous Government Accounts - Write off in terms of Government Accounting Rules and the procedures prescribed by CGA in consultation with CAG.

Rule 274

Aid in form of materials and equipment. In cases where materials, equipment and other commodities, without involving any cash inflow, are received as aid from foreign countries, the Funding Agency issues an advice to the concerned Ministry or Department giving details of materials supplied along with the value thereof. The Ministry or Department concerned in turn shall intimate the details to the office of the Controller of Aid Accounts and Audit, Department of Economic Affairs for making the budget provision in regard to aid material or equipment. Note : Refer to Para 4.8.1 of Civil Accounts Manual and Note (1) below Major Head ‘3606-Aid Materials and Equipments’ of List of Major and Minor Heads of Account of Union and States for detail procedure of adjustment of value of the materials etc. received.

Multiple choice questions:

. Which department is responsible for executing legal agreements for loans or grants from external funding agencies?

  • A) Ministry of External Affairs
  • B) Ministry of Commerce
  • C) Department of Economic Affairs, Ministry of Finance
  • D) Reserve Bank of India

Answer: C) Department of Economic Affairs, Ministry of Finance


2. Where must the external aid projects or schemes be shown for approval?

  • A) Government of India’s annual financial statement
  • B) Budget proposals approved annually by the Parliament
  • C) State Government’s budget proposals
  • D) International Funding Agency reports

Answer: B) Budget proposals approved annually by the Parliament


3. Which office is responsible for implementing financial covenants in agreements executed by the Government of India and External Funding Agencies?

  • A) Office of the Chief Controller of Accounts
  • B) Reserve Bank of India
  • C) Office of the Controller of Aid Accounts and Audit (CAAA)
  • D) Plan Finance Division of the Department of Expenditure

Answer: C) Office of the Controller of Aid Accounts and Audit (CAAA)


4. What is the role of the Reserve Bank of India in relation to external aid?

  • A) Managing foreign exchange reserves
  • B) Receiving external aid and remitting the rupee equivalent to the account of the Controller of Aid Accounts and Audit
  • C) Issuing currency notes
  • D) Executing loan agreements with foreign countries

Answer: B) Receiving external aid and remitting the rupee equivalent to the account of the Controller of Aid Accounts and Audit


5. Who is responsible for the accounting of cash grants received from external sources?

  • A) Plan Finance Division
  • B) Reserve Bank of India
  • C) Department of Economic Affairs
  • D) Office of Controller of Aid Accounts and Audit

Answer: D) Office of Controller of Aid Accounts and Audit


6. Under which procedure does the Project Implementing Agency initially incur expenditure and later claim the amount from the Funding Agency?

  • A) Direct Payment Procedure
  • B) Reimbursement Procedure
  • C) Advance Payment Procedure
  • D) Cash Grant Procedure

Answer: B) Reimbursement Procedure


7. Which of the following describes the Revolving Fund Scheme?

  • A) A method where funds are directly paid to contractors or suppliers
  • B) A method where the Funding Agency disburses an estimated expenditure of four months as an initial advance
  • C) A procedure where loans are directly transferred to the borrowing entity
  • D) A system where funds are reimbursed after the project completion

Answer: B) A method where the Funding Agency disburses an estimated expenditure of four months as an initial advance


8. How is the rupee equivalent of a foreign currency payment recovered in the Direct Payment Procedure?

  • A) Through adjustment entries made by the State Government
  • B) By the Project Implementing Agency depositing it in the account of the Controller of Aid Accounts and Audit
  • C) By direct remittance to the contractor's account
  • D) By issuing bonds in the international market

Answer: B) By the Project Implementing Agency depositing it in the account of the Controller of Aid Accounts and Audit


9. Which procedure involves the Funding Agency making payments directly to contractors, suppliers, or consultants?

  • A) Reimbursement Procedure
  • B) Special Account Procedure
  • C) Direct Payment Procedure
  • D) Revolving Fund Scheme

Answer: C) Direct Payment Procedure


10. In the context of external aid, what does the term "Special Account" refer to?

  • A) An account where excess funds are stored
  • B) An account used for direct payments to suppliers
  • C) An account where the estimated expenditure for four months is deposited by the Funding Agency as an initial advance
  • D) An account used for internal government transactions only

Answer: C) An account where the estimated expenditure for four months is deposited by the Funding Agency as an initial advance


11. How are cash grants distinct from commodity grants or other assistance in kind accounted for?

  • A) By the Reserve Bank of India
  • B) By the concerned Ministry or Department
  • C) Only by the Office of Controller of Aid Accounts and Audit
  • D) By the Funding Agency

Answer: C) Only by the Office of Controller of Aid Accounts and Audit


12. What is the role of the Plan Finance Division in relation to external aid for State Projects under Reimbursement Procedure?

  • A) To provide funds directly to the Funding Agency
  • B) To consolidate disbursements and release funds to the respective State Governments
  • C) To manage foreign currency exchanges
  • D) To oversee the execution of legal agreements

Answer: B) To consolidate disbursements and release funds to the respective State Governments


13. Which type of external aid involves materials and equipment without involving any cash inflow?

  • A) Commodity grants
  • B) Cash grants
  • C) Equipment loans
  • D) Bilateral aid

Answer: A) Commodity grants


14. What must the respective Departments of State Government provide in their budget concerning externally aided Plan Schemes?

  • A) A separate budget for foreign loans only
  • B) Details of administrative costs
  • C) Proposed expenditure for Plan Schemes financed from external aid
  • D) A detailed report on foreign currency transactions

Answer: C) Proposed expenditure for Plan Schemes financed from external aid


15. How are interest payments on external loans classified in the budget?

  • A) As capital expenditure
  • B) As charged expenditure
  • C) As miscellaneous receipts
  • D) As non-plan expenditure

Answer: B) As charged expenditure


16. Who is responsible for the repayment of loans as per the agreements?

  • A) Reserve Bank of India
  • B) Funding Agency
  • C) Office of Controller of Aid Accounts and Audit
  • D) Project Implementing Agency

Answer: C) Office of Controller of Aid Accounts and Audit


17. Where is the exchange variation in respect of foreign loans that have been fully repaid adjusted?

  • A) In the Consolidated Fund of India
  • B) Under the Major Head ‘2049-Interest Payments’
  • C) As Miscellaneous Government Accounts
  • D) In the Special Account for foreign loans

Answer: C) As Miscellaneous Government Accounts


18. For Central or Central-sponsored projects, how soon must the funds be released to the Project Implementing Agency after the Demands for Grants are passed in Parliament?

  • A) Within two weeks
  • B) Within six weeks
  • C) Immediately
  • D) After the project completion

Answer: B) Within six weeks


19. What happens to the funds from externally aided projects when passed on as loans to other entities?

  • A) The Funding Agency manages the recovery
  • B) The funds are written off
  • C) The respective administrative Ministry or Department is responsible for recovery
  • D) The funds remain in the Special Account

Answer: C) The respective administrative Ministry or Department is responsible for recovery


20. What happens if there is a variation in the exchange rate after a foreign loan is repaid?

  • A) The amount is refunded to the Funding Agency
  • B) The variation is adjusted under Miscellaneous Government Accounts
  • C) The exchange difference is added to the project cost
  • D) The variation is ignored

Answer: B) The variation is adjusted under Miscellaneous Government Accounts

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