Rule 115 of The General Financial Rules 2017 State Government Claims Article 258 3

Rule 115 of The General Financial Rules 2017 State Government Claims Article 258 3

Original Rule Text

Rule 115 The following principles shall be generally observed in dealing with claims preferred by State Governments under Clause (3) of Article 258 of the Constitution: —(i) If the agency work involves the employment of a State Commercial Department, it would be open to that department to charge its normal commercial costs.(ii) Public Works Departments agency costs shall be represented by such percentage charges on the cost of Central Works executed by the State as may be agreed between the Central and the State Government concerned, works outlay being treated as an amount placed at the disposal of the State Government for actual expenditure on the execution of the work.(iii) The cost of regular joint establishment shall be shared as far as practicable on the basis of fixed annual sums settled in agreement with the State Government concerned.(iv) In other cases, the following procedure shall be adopted unless there are special orders to the contrary: -(a) Details of claims preferred by State Governments shall be ascertained.(b) If the work has been performed by the State Government in the past, the charges shall be compared with those charged in the past but it is not necessary to be meticulous in the matter.(c) If the charges are found to be reasonable and do not exceed Rupees Fifty thousand per annum for any individual item (or connected group of items), a five years contract shall be offered to the State Government during which the Central Government would pay the fixed sum per annum for the work. The amount will be subjected to review at the end of each period of five years.(d) If the amount agreed upon exceeds Rupees Fifty thousand, it shall be necessary to have an annual statement of proposed charges from the State Government at the time of preparation of the Budget. However, if in any individual case, the charges are obviously static, then the contract system may be adopted in these cases also.(v) In exceptional cases in which arbitration has to be resorted to, the Ministry of Finance will make the requisite arrangement in the matter.(vi) The Ministry of Finance shall be consulted on all matters arising under Article 258 (3) of the Constitution.

Visual Summary

Claim Principles

General rules for State Government claims under Article 258(3).

Cost Recovery

Commercial departments charge normal costs; PWDs use percentage charges.

Dispute Resolution

Arbitration for exceptional cases, Finance Ministry consultation.

Executive Summary

Rule 115 of The General Financial Rules, 2017, lays down the fundamental principles for handling claims submitted by State Governments under Article 258(3) of the Constitution. It specifies how costs should be recovered for agency work involving State Commercial Departments (normal commercial costs), Public Works Departments (percentage charges on Central Works), and joint establishments (fixed annual sums). For other claims, a detailed procedure is outlined, differentiating between amounts above and below Rupees Fifty thousand per annum. The rule also mandates the Ministry of Finance’s involvement in arbitration for exceptional cases and consultation on all matters arising under Article 258(3), ensuring financial propriety and inter-governmental coordination.

In-Depth Analysis of the Rule

Introduction: Rule 115 provides a structured framework for the Central Government to manage financial claims from State Governments when the latter undertake agency functions on behalf of the Union, as permitted by Article 258(3) of the Constitution. This rule ensures transparency, fairness, and consistency in inter-governmental financial adjustments.

Breakdown of the Rule:

  • (i) State Commercial Departments: If the agency work involves a State Commercial Department, that department is permitted to charge its normal commercial costs for the services rendered. This acknowledges their operational nature.
  • (ii) Public Works Departments (PWDs): For PWDs executing Central Works, agency costs are determined by agreed-upon percentage charges on the cost of the Central Works. The works outlay is treated as funds provided to the State Government for executing the work.
  • (iii) Joint Establishments: The cost of regular joint establishments is to be shared based on fixed annual sums, which are settled through agreement with the concerned State Government, ensuring predictability.
  • (iv) Other Cases: A specific procedure is laid out for claims not covered by the above categories:
    • (a) Ascertain Details: The details of the claims preferred by State Governments must first be ascertained.
    • (b) Past Work Comparison: If the State Government has performed similar work in the past, current charges should be compared with historical charges, though meticulous comparison is not strictly required.
    • (c) Claims up to Rupees Fifty Thousand: If the charges are reasonable and do not exceed Rupees Fifty thousand per annum for an individual or connected group of items, a five-year contract is offered, with the Central Government paying a fixed annual sum. This amount is reviewed every five years.
    • (d) Claims Exceeding Rupees Fifty Thousand: For amounts exceeding Rupees Fifty thousand, an annual statement of proposed charges from the State Government is required during the Budget preparation. However, if charges are static, the contract system may still be adopted.
  • (v) Arbitration: In exceptional circumstances where arbitration becomes necessary, the Ministry of Finance is responsible for making the necessary arrangements.
  • (vi) Ministry of Finance Consultation: The Ministry of Finance must be consulted on all matters arising under Article 258(3) of the Constitution, highlighting its central role in inter-governmental financial relations.

Practical Example: Imagine the Central Government requires a new highway to be built through a State. The State’s Public Works Department undertakes this as an agency function. Under Rule 115(ii), the Central Government and the State Government would agree on a percentage charge on the total cost of the highway project, which the State PWD would receive as its agency cost. If, however, the State’s commercial transport department provides logistical support for the project, Rule 115(i) would apply, allowing them to charge their normal commercial rates for their services.

Related Provisions

Rule 115 is part of a broader set of regulations governing financial transactions between the Central and State Governments. Other relevant provisions include:

Learning Aids

Mnemonics
  • CPJ OAF: To remember the six key principles for State Government claims: Commercial, PWD, Joint, Other, Arbitration, Finance.
Process Flowchart
State Govt Claim(Art 258(3))Is Commercial Dept?Charge Commercial CostsIs PWD Agency?Percentage ChargesIs Joint Est.?Share Fixed SumsOther Cases?Ascertain DetailsIf <= 50k: 5-Year ContractIf > 50k: Annual Budget StatementExceptional Arbitration? MoF ArrangesAll Art 258(3) Matters: MoF Consulted

Multiple Choice Questions

1. What is the primary purpose of Rule 115 of the General Financial Rules, 2017?

  • A) To regulate Central Government expenditure on defense projects.
  • B) To establish principles for handling claims preferred by State Governments under Article 258(3) of the Constitution.
  • C) To define the process for inter-departmental adjustments within the Central Government.
  • D) To outline rules for procurement of goods and services by Ministries.
Show Answer

Correct Answer: B) To establish principles for handling claims preferred by State Governments under Article 258(3) of the Constitution.

2. Under Rule 115(i) of the General Financial Rules, 2017, what is the charging principle for a State Commercial Department involved in agency work?

  • A) It must charge a fixed percentage determined by the Central Government.
  • B) It is open to that department to charge its normal commercial costs.
  • C) The costs are fully reimbursed by the Central Government without any charges.
  • D) Costs are shared equally between the State and Central Governments.
Show Answer

Correct Answer: B) It is open to that department to charge its normal commercial costs.

3. According to Rule 115(ii) of the General Financial Rules, 2017, how are Public Works Departments’ agency costs determined for Central Works?

  • A) By a fixed lump sum amount decided by the State Government.
  • B) By such percentage charges on the cost of Central Works as may be agreed between the Central and State Government.
  • C) Based on the actual expenditure incurred by the PWD, without any additional charges.
  • D) Through a competitive bidding process among various State PWDs.
Show Answer

Correct Answer: B) By such percentage charges on the cost of Central Works as may be agreed between the Central and State Government.

4. For “other cases” under Rule 115(iv) of the General Financial Rules, 2017, if charges are reasonable and do not exceed Rupees Fifty thousand per annum, what procedure is adopted?

  • A) An annual statement of proposed charges is required from the State Government.
  • B) The Ministry of Finance arranges for arbitration.
  • C) A five-year contract shall be offered to the State Government, with a fixed annual sum.
  • D) The claim is automatically rejected if it falls under “other cases.”
Show Answer

Correct Answer: C) A five-year contract shall be offered to the State Government, with a fixed annual sum.

5. Which Ministry must be consulted on all matters arising under Article 258(3) of the Constitution, as per Rule 115(vi) of the General Financial Rules, 2017?

  • A) Ministry of Home Affairs
  • B) Ministry of Law and Justice
  • C) Ministry of Finance
  • D) Ministry of External Affairs
Show Answer

Correct Answer: C) Ministry of Finance

Frequently Asked Questions

What is the scope of Rule 115 of the General Financial Rules, 2017?

Rule 115 of the General Financial Rules, 2017, outlines the principles for handling financial claims made by State Governments when they perform agency functions for the Central Government under Article 258(3) of the Constitution. It covers various scenarios for cost recovery and dispute resolution.

When is the Ministry of Finance consulted under Rule 115 of the General Financial Rules, 2017?

The Ministry of Finance must be consulted on all matters arising under Article 258(3) of the Constitution. Additionally, in exceptional cases requiring arbitration for claims, the Ministry of Finance is responsible for making the necessary arrangements.

How are claims exceeding Rupees Fifty thousand handled in “other cases” under Rule 115 of the General Financial Rules, 2017?

For claims exceeding Rupees Fifty thousand per annum in “other cases,” it is necessary to obtain an annual statement of proposed charges from the State Government at the time of preparing the Budget. However, if the charges are consistently static, a contract system may still be adopted.

Key Takeaways

  • Rule 115 establishes principles for State Government claims under Article 258(3) of the Constitution.
  • Cost recovery methods vary based on the nature of the State department involved (commercial, PWD, joint establishment).
  • Claims in “other cases” are handled differently based on their annual value (up to or exceeding Rupees Fifty thousand).
  • The Ministry of Finance plays a critical role in arbitration and overall consultation for all matters under Article 258(3).

Conclusion

Rule 115 of The General Financial Rules, 2017, is essential for maintaining financial order and accountability in the complex inter-governmental relations of India. By clearly defining how State Government claims for agency functions are to be handled, it ensures that public funds are managed efficiently, transparently, and in accordance with constitutional provisions, fostering trust and cooperation between the Union and State Governments.

Related posts:

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  2. Part 5 of Indian Constitution The Union
  3. Rule 111 of The General Financial Rules 2017 Petty Isolated Claims Not Preferred
  4. Rule 108 of The General Financial Rules 2017 Adjustments with State Governments