Rule 128 of The General Financial Rules 2017 Pensionary Charges of Commercial Departments
Original Rule Text
Visual Summary
Pension liability assessed on contribution basis.
Pension liability factored into product/service pricing.
Calculations based on rates fixed by the Government.
Executive Summary
Rule 128 of The General Financial Rules, 2017, outlines the method for adjusting pensionary charges for commercial departments and undertakings. For those maintaining pro forma commercial accounts, pensionary liability is assessed on a contribution basis at government-fixed rates. For departments that charge for products or services but do not maintain regular commercial accounts, pensionary liability is included in overhead and manufacturing costs to determine pricing. Notably, Railways, Posts, and Defence Departments are treated as separate governments for these adjustments.
In-Depth Analysis of the Rule
Introduction: Rule 128 of The General Financial Rules, 2017, provides specific guidelines for how pensionary liabilities are to be accounted for within government commercial departments and undertakings. This ensures a standardized and transparent approach to financial management, particularly where commercial principles are applied to government operations.
Breakdown of the Rule:
- Commercial Departments with Pro Forma Accounts: If a commercial department or undertaking maintains pro forma commercial accounts, its pensionary liability is determined on a contribution basis. The specific rates for this contribution are fixed by the Government periodically.
- Departments Charging for Products/Services (without regular commercial accounts): For departments and undertakings that do not maintain full commercial accounts but are authorized to charge for their products or services, the pensionary liability is integrated into the estimation of overhead charges and manufacturing costs. This inclusion is crucial for accurately calculating the issue price of goods manufactured or fees for services rendered.
- Calculation Rates: In both scenarios, the calculation of pensionary liability must adhere to the rates prescribed by the Government for this purpose.
- Special Consideration for Key Departments: The Rule explicitly notes that the Railways, Posts, and Defence Departments are considered “separate Governments” for the purpose of adjusting pensionary charges, implying distinct accounting or operational frameworks for these entities in this context.
Practical Example: Consider a government-run manufacturing unit (a commercial undertaking) that maintains pro forma commercial accounts. Under Rule 128, this unit would assess its pensionary liability for its employees not by direct payment but by contributing to a central pension fund at a rate specified by the Government. This contribution would be a regular expense in its pro forma accounts. Similarly, if a government department offers specialized services for a fee (e.g., a printing press charging other departments), but doesn’t have full commercial accounts, the pension costs of its staff would be factored into the ‘overhead charges’ when determining the price it charges for its printing services, ensuring that the cost recovery is comprehensive.
Related Provisions
Understanding Rule 128 is enhanced by examining related provisions within the General Financial Rules, 2017, which govern various aspects of financial management and inter-departmental adjustments.
- Rule 127 of The General Financial Rules 2017 Interdepartmental Adjustments in Account Year: This rule details how inter-departmental and other adjustments are to be made within the account year, providing context for the financial interactions between government entities.
- Rule 129 of The General Financial Rules 2017 Pensionary Liability of Commercial Government Departments: This subsequent rule further elaborates on pensionary liability specifically for government departments and undertakings that are declared commercial, offering a continuation of the principles discussed in Rule 128.
Learning Aids
Mnemonics
- Pension Costs: Commercial Departments Use Contributions, Others Include Overheads, Rates Governed By Government. (Pension Costs: Commercial Departments Use Contributions, Others Include Overheads, Rates Governed By Government)
Process Flowchart
Multiple Choice Questions (MCQs)
1. What is the primary method for assessing pensionary liability for commercial departments maintaining pro forma commercial accounts under Rule 128 of The General Financial Rules, 2017?
- A) Direct payment from annual profits
- B) Assessment on a contribution basis
- C) Inclusion in capital expenditure
- D) Based on employee’s last drawn salary
Show Answer
Correct Answer: B) Assessment on a contribution basis
2. For departments that charge for products or services but do not maintain regular commercial accounts, where is pensionary liability taken into account as per Rule 128 of The General Financial Rules, 2017?
- A) Directly from the Consolidated Fund
- B) As a separate budgetary allocation
- C) In the estimate of overhead charges and manufacturing costs
- D) Through a special pension fund managed by the Ministry of Finance
Show Answer
Correct Answer: C) In the estimate of overhead charges and manufacturing costs
3. According to Rule 128 of The General Financial Rules, 2017, who fixes the rates for calculating pensionary liability for both types of departments mentioned?
- A) The individual department’s Financial Adviser
- B) The Comptroller and Auditor General of India
- C) The Government
- D) The Ministry of Finance in consultation with the department
Show Answer
Correct Answer: C) The Government
4. Which of the following departments are specifically regarded as “separate Governments” for the purpose of adjusting pensionary charges under Rule 128 of The General Financial Rules, 2017?
- A) Health, Education, and Agriculture
- B) Railways, Posts, and Defence
- C) Home Affairs, External Affairs, and Law
- D) Finance, Commerce, and Industry
Show Answer
Correct Answer: B) Railways, Posts, and Defence
5. If a government undertaking maintains pro forma commercial accounts, its pensionary liability under Rule 128 of The General Financial Rules, 2017, is assessed:
- A) Annually based on actual pension payouts.
- B) On a contribution basis at government-fixed rates.
- C) As a percentage of its total revenue.
- D) By deducting from employee salaries.
Show Answer
Correct Answer: B) On a contribution basis at government-fixed rates.
Frequently Asked Questions
Q: How does Rule 128 of The General Financial Rules, 2017, differentiate between types of government entities for pensionary charge adjustments?
A: Rule 128 distinguishes between commercial departments/undertakings maintaining pro forma commercial accounts and those that charge for products/services but lack regular commercial accounts. The former assesses liability on a contribution basis, while the latter includes it in overhead/manufacturing costs.
Q: Are the rates for pensionary liability calculation uniform across all departments under Rule 128 of The General Financial Rules, 2017?
A: Yes, the calculation of pensionary liability for both types of entities mentioned in Rule 128 is made at rates prescribed by the Government, ensuring uniformity in the assessment methodology.
Q: Why are Railways, Posts, and Defence Departments specifically mentioned in Rule 128 of The General Financial Rules, 2017?
A: These departments are explicitly regarded as “separate Governments” for the purpose of adjusting pensionary charges, indicating a unique or distinct framework for handling their pension liabilities compared to other government entities.
Key Takeaways
- Rule 128 of The General Financial Rules, 2017, mandates distinct methods for pensionary liability adjustment based on the commercial nature and accounting practices of government entities.
- Commercial departments with pro forma accounts assess liability on a contribution basis, while charging departments without full commercial accounts integrate it into their overheads for pricing.
- All calculations for pensionary liability must adhere to rates prescribed by the Government.
- The Railways, Posts, and Defence Departments are treated as separate governments for these specific pensionary charge adjustments.
Conclusion
Rule 128 of The General Financial Rules, 2017, is a foundational provision for ensuring accurate and consistent accounting of pensionary liabilities within government commercial operations. By clearly defining how these costs are to be assessed and integrated into financial statements or pricing mechanisms, the rule promotes transparency and sound financial management, particularly in sectors where government entities operate on quasi-commercial principles.