Rule 108 of The General Financial Rules 2017 Adjustments with State Governments

Rule 108 of The General Financial Rules 2017 Adjustments with State Governments

Original Rule Text

Rule 108 Adjustments with State Governments. Subject to the relevant provision of the Constitution or of law made by Parliament or any orders issued thereunder, adjustments in respect of financial transactions with State Governments shall, unless otherwise provided for, be made in such manner, and to such extent as may be mutually agreed upon between the Central Government and the State Government concerned. However, adjustments with State Government in respect of the matters mentioned below shall be regulated by the rules contained in Appendix-5 to the Government Accounting Rules, 1990. The rules are based on reciprocal arrangements made with the State Governments and are, therefore, binding on all of them: – (i) Pay and Allowances, other than Leave Salaries. (ii) Leave Salaries. (iii) Pensions. (iv) Expenditure involved in Audit and keeping Accounts. (v) Cost of Police functions on Railways including the cost of protecting Railway Bridges. (vi) Cost of Forest Surveys carried out by the Survey of India, and Forest maps prepared by that Department. (vii) Leave Salary and Pension Contributions recovered in respect of Government servants lent on Foreign Service

Visual Summary

Mutual Agreement

Adjustments based on Central & State Government accord.

Regulated Matters

Specific financial transactions follow Appendix-5 rules.

Binding Rules

Reciprocal arrangements are binding on all State Governments.

Executive Summary

Rule 108 of the General Financial Rules, 2017, outlines the procedures for financial adjustments between the Central Government and State Governments. Generally, these adjustments are based on mutual agreement. However, for specific matters such as pay and allowances, leave salaries, pensions, audit costs, police functions on railways, forest surveys, and leave salary/pension contributions for deputed government servants, the adjustments are strictly governed by the rules detailed in Appendix-5 of the Government Accounting Rules, 1990. These rules are founded on reciprocal arrangements and are thus binding on all State Governments, ensuring uniformity and clarity in inter-governmental financial transactions.

In-Depth Analysis of the Rule

Rule 108 is a cornerstone for financial harmony between the Central Government and State Governments, providing a framework for settling financial transactions. It distinguishes between general adjustments, which allow for flexibility through mutual agreement, and specific categories of transactions that are subject to a more rigid, predefined set of rules.

Breakdown of the Rule:
  • General Adjustments: Unless explicitly stated otherwise by law or order, financial transactions between the Central and State Governments are to be settled through mutual agreement. This provides a degree of flexibility for unique or less common financial interactions.
  • Specific Regulated Matters: A crucial aspect of Rule 108 is the enumeration of specific financial matters that are not left to mutual agreement but are instead governed by the rules in Appendix-5 of the Government Accounting Rules, 1990. These include:
    • Pay and Allowances (excluding Leave Salaries)
    • Leave Salaries
    • Pensions
    • Expenditure related to Audit and Account Keeping
    • Costs associated with Police functions on Railways, including bridge protection
    • Costs of Forest Surveys conducted by the Survey of India and related map preparation
    • Leave Salary and Pension Contributions for Government servants on Foreign Service
  • Binding Nature: The rules in Appendix-5 are based on reciprocal arrangements, making them binding on all State Governments. This ensures consistency and predictability in handling these common inter-governmental financial obligations.
Practical Example:

Imagine a scenario where the Central Government needs to reimburse a State Government for the pension contributions of a Central Government employee who was on deputation to the State. According to Rule 108, this specific financial transaction falls under item (vii) “Leave Salary and Pension Contributions recovered in respect of Government servants lent on Foreign Service.” Therefore, instead of negotiating a new agreement, both governments would refer to the established rules in Appendix-5 of the Government Accounting Rules, 1990, to determine the exact procedure and amount for the adjustment. This streamlines the process, prevents disputes, and ensures adherence to a pre-agreed, binding framework.

Related Provisions

Understanding Rule 108 is enhanced by examining other related provisions within the General Financial Rules, 2017:

Learning Aids

Mnemonics:
  • All States Pay Leave Pensions And Forest Costs: Helps remember the specific matters regulated by Appendix-5 (Allowances, Salaries, Pensions, Leave Salaries, Police functions, Audit, Forest Surveys, Contributions).
Process Flowchart:
StartCentral-State Financial Transaction?Is it a specified matter?(Pay, Pension, Audit, etc.)YesRegulated by Appendix-5NoMutually Agreed UponEnd

Multiple Choice Questions (MCQs)

1. According to Rule 108 of the General Financial Rules, 2017, what is the primary method for financial adjustments between the Central Government and State Governments, unless otherwise specified?

  • A) Unilateral decision by the Central Government
  • B) Mutual agreement between the concerned governments
  • C) Arbitration by the Ministry of Finance
  • D) Automatic adjustment by the Reserve Bank of India
Show Answer

Correct Answer: B) Mutual agreement between the concerned governments

2. Which of the following matters, as per Rule 108 of the General Financial Rules, 2017, is *not* typically regulated by specific rules in Appendix-5 of the Government Accounting Rules, 1990, but rather by mutual agreement?

  • A) Pay and Allowances (other than Leave Salaries)
  • B) Leave Salaries
  • C) Pensions
  • D) Unforeseen emergency expenditures
Show Answer

Correct Answer: D) Unforeseen emergency expenditures

3. Rule 108 of the General Financial Rules, 2017, states that adjustments for specific matters are regulated by rules in Appendix-5. What is the basis of these Appendix-5 rules?

  • A) Unilateral directives from the Ministry of Finance
  • B) Reciprocal arrangements made with the State Governments
  • C) International financial treaties
  • D) Decisions of the Comptroller and Auditor General of India
Show Answer

Correct Answer: B) Reciprocal arrangements made with the State Governments

4. Which of the following is explicitly listed in Rule 108 of the General Financial Rules, 2017, as a matter for which adjustments with State Governments are regulated by Appendix-5 rules?

  • A) Cost of Public Works projects
  • B) Revenue sharing from national taxes
  • C) Cost of Police functions on Railways
  • D) Grants for disaster relief
Show Answer

Correct Answer: C) Cost of Police functions on Railways

5. According to Rule 108 of the General Financial Rules, 2017, if a Central Government servant is lent on Foreign Service, how are their Leave Salary and Pension Contributions adjusted with the State Government?

  • A) Through a special ad-hoc committee
  • B) As per mutual agreement on a case-by-case basis
  • C) Regulated by rules in Appendix-5 of the Government Accounting Rules, 1990
  • D) Directly by the employee to the Central Government
Show Answer

Correct Answer: C) Regulated by rules in Appendix-5 of the Government Accounting Rules, 1990

Frequently Asked Questions

What is the primary principle for financial adjustments between Central and State Governments under Rule 108 of the General Financial Rules, 2017?

The primary principle is mutual agreement between the Central Government and the State Government concerned, unless specific provisions or laws dictate otherwise.

Are all financial transactions between Central and State Governments subject to mutual agreement as per Rule 108 of the General Financial Rules, 2017?

No, Rule 108 specifies certain matters, such as pay and allowances, pensions, and audit costs, that are regulated by specific rules contained in Appendix-5 of the Government Accounting Rules, 1990, based on reciprocal arrangements.

What makes the rules in Appendix-5, referenced by Rule 108 of the General Financial Rules, 2017, binding on State Governments?

The rules in Appendix-5 are based on reciprocal arrangements made with the State Governments, which makes them binding on all participating governments, ensuring consistent application.

Key Takeaways

  • Rule 108 governs financial adjustments between Central and State Governments.
  • General adjustments require mutual agreement.
  • Specific matters (e.g., Pay, Pensions, Audit, Police functions on Railways, Forest Surveys, Leave Salary/Pension Contributions for deputed staff) are regulated by binding reciprocal arrangements in Appendix-5 of the Government Accounting Rules, 1990.
  • The rule ensures clarity and consistency in inter-governmental financial transactions.

Conclusion

Rule 108 of the General Financial Rules, 2017, is vital for maintaining fiscal order and cooperation between the Central and State Governments. By clearly delineating between matters requiring mutual agreement and those governed by binding reciprocal rules, it provides a robust framework that minimizes ambiguity and facilitates efficient financial administration across different levels of government. Adherence to these provisions is essential for transparent and accountable governance.

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  2. Rule 110 of The General Financial Rules 2017 When Adjustment Necessary
  3. Rule 111 of The General Financial Rules 2017 Petty Isolated Claims Not Preferred
  4. Rule 114 of The General Financial Rules 2017 Claims of State Governments Agency Functions