Rule 129 of The General Financial Rules 2017 Pensionary Liability Commercial Departments
Original Rule Text
Visual Summary
Government Departments and Undertakings operating commercially.
Adjustment of pensionary liability in regular accounts.
Based on average 15th year service percentage and monthly contribution rates.
Executive Summary
Rule 129 of the General Financial Rules, 2017 outlines the method for adjusting pensionary liability in government departments and undertakings that operate on a commercial basis. It mandates that this adjustment be calculated by charging the average percentage for the 15th year of service, derived from the prescribed monthly contribution rates for pensions, as per Appendix-II of the Fundamental and Supplementary Rules.
In-Depth Analysis of the Rule
Introduction: Rule 129 addresses a specific financial accounting aspect for government entities that function commercially. It ensures that their financial statements accurately reflect pension obligations, aligning with commercial accounting principles while operating under government oversight.
Breakdown of the Rule:
- Scope: Applies exclusively to Government Departments and Undertakings that have been officially designated as ‘commercial’. This distinction is crucial as it implies a different accounting treatment for pension liabilities compared to purely administrative government bodies.
- Mechanism of Adjustment: The core of the rule is the “adjustment of Pensionary liability” in the “regular accounts”. This means the pension costs are not merely a general government expense but are specifically allocated and accounted for within the commercial entity’s financial records.
- Calculation Basis: The adjustment is made by “charging the average of the percentage for 15th year of service”. This indicates a standardized, actuarial-like approach to quantify the liability.
- Reference for Rates: The specific “rates of monthly contribution of pension” are “prescribed in the appropriate order issued from time to time under Appendix-II of Fundamental and Supplementary Rules”. This points to a detailed regulatory framework that underpins the calculation.
Practical Example: A government-owned commercial port authority, operating under the General Financial Rules, 2017, needs to account for its employees’ pension liabilities. Instead of simply relying on the central government’s general pension fund, Rule 129 requires the port authority to calculate and adjust this liability within its own commercial accounts. This calculation would involve taking the average percentage for the 15th year of service, as defined by the monthly pension contribution rates specified in Appendix-II of the Fundamental and Supplementary Rules, and incorporating this cost into its financial statements. This ensures that the port’s financial performance reflects its true operational costs, including long-term employee benefits.
Related Provisions
To further understand the context and related regulations, consider exploring these provisions:
- Rule 128 of The General Financial Rules 2017 Adjustment of Pensionary Charges Commercial Departments
- Rule 284 of The General Financial Rules 2017 Proposals for Additions to Establishment
Learning Aids
Mnemonics
- Pension Liability Calculation: Commercial Departments Adjust Accounts Via 15th Year Service Percentage (PLC-CDAA-15YSP)
Process Flowchart
Multiple Choice Questions
1. What is the primary purpose of Rule 129 of the General Financial Rules, 2017?
- A) To define capital expenditure for government undertakings.
- B) To outline the procedure for remitting revenue.
- C) To specify the adjustment of pensionary liability for commercial government entities.
- D) To detail the process for inter-departmental consultations.
Show Answer
Correct Answer: C
2. According to Rule 129 of the General Financial Rules, 2017, for which entities is pensionary liability adjustment mandated?
- A) All Central Government Ministries and Departments.
- B) Government Departments and Undertakings declared as commercial.
- C) Autonomous Bodies receiving grants-in-aid.
- D) State Governments and Union Territories.
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Correct Answer: B
3. How is the adjustment of pensionary liability calculated under Rule 129 of the General Financial Rules, 2017?
- A) Based on a fixed percentage of the entity’s annual revenue.
- B) By charging the average of the percentage for the 15th year of service.
- C) As a direct deduction from the Consolidated Fund of India.
- D) Through a negotiation process with the Ministry of Finance.
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Correct Answer: B
4. Rule 129 of the General Financial Rules, 2017 refers to which document for prescribed rates of monthly pension contribution?
- A) Delegation of Financial Powers Rules.
- B) Treasury Rules of the Central Government.
- C) Appendix-II of Fundamental and Supplementary Rules.
- D) Government Accounting Rules, 1990.
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Correct Answer: C
5. What kind of accounts are affected by the pensionary liability adjustment as per Rule 129 of the General Financial Rules, 2017?
- A) Public Account of India.
- B) Contingency Fund of India.
- C) Regular accounts of the commercial government departments/undertakings.
- D) Consolidated Fund of India.
Show Answer
Correct Answer: C
Frequently Asked Questions
Q: Why is there a specific rule for pensionary liability in commercial government entities under the General Financial Rules, 2017?
A: Rule 129 ensures that government departments and undertakings operating commercially account for their pensionary liabilities within their regular financial statements. This aligns with commercial accounting principles, providing a clearer picture of the entity’s true financial health and operational costs, rather than treating pensions solely as a general government expense.
Q: What is the significance of the “15th year of service” in calculating pensionary liability under Rule 129 of the General Financial Rules, 2017?
A: The “average of the percentage for 15th year of service” serves as a standardized benchmark for calculating pensionary liability. This specific reference point, combined with monthly contribution rates from Appendix-II of the Fundamental and Supplementary Rules, provides a consistent and regulated method for quantifying these long-term obligations in commercial government entities.
Key Takeaways
- Rule 129 mandates specific accounting for pensionary liability in government departments and undertakings declared as commercial.
- The adjustment is made in regular accounts, reflecting commercial accounting principles.
- Calculation is based on the average percentage for the 15th year of service, using prescribed monthly contribution rates.
- This ensures accurate financial reporting for commercially operating government entities.
Conclusion
Rule 129 of the General Financial Rules, 2017 is a vital provision for maintaining financial transparency and accountability within government departments and undertakings that operate on a commercial footing. By prescribing a clear method for adjusting pensionary liabilities in their regular accounts, the rule ensures that the true cost of operations, including long-term employee benefits, is accurately reflected, fostering sound financial management and informed decision-making.