Rule 229 of The General Financial Rules 2017 General Principles for Autonomous Organisations

Original Rule Text

Rule 229 General Principles for setting up of Autonomous Organisations referred to under Rule 228(a): – (i) No new autonomous institutions should be created by Ministries or Departments without the approval of the Cabinet. (ii) No new autonomous institution should be created by an Autonomous Body itself, the appraisal/approval process for creation of new autonomous bodies would apply in such cases too. However, Regional Centres/Offices/Sub-Stations of any autonomous body can be created with prior approval of the administrative ministry in consultation with Ministry of Finance. (iii) Stringent criteria should be followed for setting up of new autonomous organisations and the type of activities to be undertaken by them. The Ministry or Department should examine in detail: (a) whether the activities proposed to be taken up are necessary at all; (b) whether these activities, if necessary, need to be undertaken by setting up an autonomous organisation only or whether these could be performed by the concerned Government agency or any other organisation already existing. (iv) All autonomous organisations, new or already in existence should be encouraged to maximise generation of internal resources and eventually attain self-sufficiency. (v) The Ministry or Department may consider creating a Corpus Fund for an Autonomous Body only with prior concurrence of Ministry of Finance if the corpus is created out of budgetary allocation. If the corpus is created out of internal accruals of the body, approval of the administrative Ministry must be obtained. (vi) User Charges: Governing Body of the Autonomous Body shall review user charges/ sources of internal revenue generation at least once a year and inform the administrative Ministry. This exercise should preferably be completed before the formulation of Union Annual Budget. (vii) All Autonomous Bodies should maintain database relating to grants, income, expenditure, investment assets and employee strength in the format prescribed by the Department of Expenditure, Ministry of Finance. (viii) Financial advice for Autonomous Bodies: Every autonomous organisation should designate an officer at appropriate level to render financial advice whose concurrence should be obtained for sanction and incurring of expenditure. The financial limits up to which such concurrence is mandatory may be drawn up by each organisation. The Chief Executive Officer of the Autonomous body will be responsible for overall financial management of the autonomous bodies. (ix) Peer review of autonomous organisations: Ministry shall put in place a system of external or internal peer review of autonomous organisations every three or five years depending on the size and nature of activity. Such a review should be the responsibility of the concerned administrative division of the Ministry/Department and should focus, inter alia, on; (a) the objective for which the autonomous organisation was set up and whether these objectives have been or are being achieved; (b) whether the activities should be continued at all, either because they are no longer relevant or have been completed or if there has been a substantial failure in achievement of objectives. (c) whether the nature of the activities is such that these need to be performed only by an autonomous organisation. (d) whether similar functions are also being undertaken by other organisations, be it in the Central Government or State Governments or the Private Sector, and if so, whether there is scope for merging or winding up the organisations under review. (e) whether the total staff complement, particularly at the support level, is kept at a minimum: whether the enormous strides in information technology and communication facilities as also facilities for outsourcing of work on a contract basis, have been taken into account in determining staff strength; and whether scientific or technical personnel are being deployed on functions which could well be carried out by non-scientific or non-technical personnel etc. (f) whether user charges including overhead/institutional charges /management fee in respect of sponsored projects, wherever the output or benefit of services are utilised by others, are levied at appropriate rates (g) the scope for maximizing internal resources generation in the organization so that the dependence upon Government budgetary support is minimised. (x) An organisation whose performance is found to be outstanding and internationally acclaimed as a result of the review envisaged under Para (ix) above should be granted greater autonomy and increased flexibility in matters of recruitment and financial rules thereby enabling it to devise and adopt staff structures, procedures and rules suited to improving their productivity. (xi) Autonomous organisations as also others with a budgetary support of more than Rupees five crores per annum, should be required to enter in to a Memorandum of Understanding with the Administrative Ministry or Department, spelling out clearly performance parameters, output targets in terms of details of programme of work and qualitative improvement in output, along with commensurate input requirements. The output targets, given in measurable units of performance, should form the basis of budgetary support extended to these organisations. The roadmap for improved performance with clear milestones should form part of the MoU. (xii) Findings of the peer review should be examined and put up for appropriate decision to the Secretary by the concerned programme division of the Administrative Department. Further releases of Grant (after three or five years, as the case may be), should be made conditional on conduct and decisions on the findings of such peer review.

Visual Summary

Cabinet Approval

New autonomous bodies require Cabinet approval.

Resource Generation

Autonomous bodies must maximize internal resources.

Peer Review

Periodic external/internal peer review is mandatory.

Executive Summary

Rule 229 of the General Financial Rules, 2017, outlines the fundamental principles for establishing and managing autonomous organizations. It mandates Cabinet approval for new autonomous institutions and stringent criteria for their setup. The rule emphasizes maximizing internal resource generation, regular review of user charges, and maintaining comprehensive financial databases. It also requires periodic external or internal peer reviews to assess performance, relevance, and efficiency, with a focus on staff complement and user charge implementation. Organizations demonstrating outstanding performance may receive greater autonomy, while those with significant budgetary support must enter into Memoranda of Understanding (MoUs) with administrative ministries to define performance parameters and output targets. The findings of these peer reviews are crucial for future grant releases and strategic decisions.

In-Depth Analysis of the Rule

Introduction: Rule 229 provides a comprehensive framework for the governance and financial management of autonomous organizations, ensuring accountability, efficiency, and optimal resource utilization. It sets clear guidelines from inception to ongoing operations and performance evaluation.

Breakdown of the Rule:

Creation and Approval (i-iii): New autonomous institutions require Cabinet approval. Autonomous bodies cannot create new ones without a similar appraisal process. Stringent criteria must be followed, including detailed examination of necessity and alternative performance mechanisms.
Financial Sustainability (iv-viii): Autonomous organizations are encouraged to maximize internal resource generation and achieve self-sufficiency. User charges and internal revenue sources must be reviewed annually. Creation of a Corpus Fund requires prior Ministry of Finance concurrence (for budgetary allocation) or administrative Ministry approval (for internal accruals). All autonomous bodies must maintain a database of grants, income, expenditure, assets, and employee strength. Financial advice and concurrence for expenditure are mandatory.
Performance Monitoring and Review (ix-xii): Ministries must implement a system of external or internal peer review every three or five years. This review assesses objectives, continuation of activities, nature of functions, duplication with other organizations, staff complement, user charge implementation, and resource generation. Outstanding organizations may receive greater autonomy. Those with significant budgetary support must enter into MoUs with performance parameters. Peer review findings are critical for future grant releases.

Practical Example:

Consider a Ministry proposing to establish a new research institute as an autonomous body. According to Rule 229, the Ministry must first secure Cabinet approval. It must then detail the institute’s objectives, ensure stringent criteria are met, and justify why an autonomous structure is necessary over an existing government agency. Once established, the institute’s governing body would be responsible for reviewing user charges for its research services annually and striving for financial self-sufficiency. Periodically, the administrative Ministry would conduct a peer review, evaluating the institute’s research output, financial management, and operational efficiency. The findings of this review would directly influence the continuation and quantum of future government grants, potentially leading to increased autonomy if performance is exceptional, or restructuring if objectives are not met.

Related Provisions

Rule 229 is part of a broader framework for financial management and grants. Other relevant provisions include:

Rule 228 of The General Financial Rules 2017 Grants-in-aid: Defines the general principle for providing grants-in-aid to various entities, which forms the basis for autonomous organizations.
Rule 230 of The General Financial Rules 2017 Principles and Procedure for Award of Grants-in-aid: Details the process and conditions for awarding grants, directly impacting the financial support autonomous bodies receive.
Rule 231 of The General Financial Rules 2017 Grants-in-aid to Voluntary Organisations: Provides specific conditions for grants to voluntary organizations, which can sometimes overlap with the functions of autonomous bodies.

Learning Aids

Mnemonics:

C.A.R.E.F.U.L P.E.E.R: Cabinet approval, Appraisal process, Resource generation, Expenditure advice, Financial database, User charges, Limits on creation, Periodic review, Evaluation of objectives, Efficiency focus, Release conditions.

Process Flowchart:

Multiple Choice Questions (MCQs)

1. What is the primary requirement for creating a new autonomous institution under Rule 229 of the General Financial Rules, 2017?

A) Approval of the administrative Ministry
B) Approval of the Cabinet
C) Approval of the Ministry of Finance
D) Approval of the Comptroller and Auditor General of India

Show Answer

Correct Answer: B) Approval of the Cabinet

2. According to Rule 229(iv) of the General Financial Rules, 2017, what are autonomous organizations encouraged to do?

A) Increase their dependence on government budgetary support
B) Maximize generation of internal resources and attain self-sufficiency
C) Prioritize capital expenditure over revenue expenditure
D) Seek external funding without government approval

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Correct Answer: B) Maximize generation of internal resources and attain self-sufficiency

3. How often should the Governing Body of an Autonomous Body review user charges/sources of internal revenue generation as per Rule 229(vi) of the General Financial Rules, 2017?

A) Once every three years
B) Once every five years
C) At least once a year
D) Only when there is a significant deficit

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Correct Answer: C) At least once a year

4. Rule 229(ix) of the General Financial Rules, 2017, mandates a system of external or internal peer review for autonomous organizations. What is the frequency of this review?

A) Annually
B) Every two years
C) Every three or five years
D) Only upon request from the Ministry of Finance

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Correct Answer: C) Every three or five years

5. For autonomous organizations with budgetary support exceeding Rupees five crores per annum, what is required as per Rule 229(xi) of the General Financial Rules, 2017?

A) A detailed audit by the Comptroller and Auditor General of India
B) A Memorandum of Understanding (MoU) with the Administrative Ministry
C) Complete financial independence from government grants
D) A public tender for all procurement activities

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Correct Answer: B) A Memorandum of Understanding (MoU) with the Administrative Ministry

Frequently Asked Questions

Q1: What is the primary approval required for setting up a new autonomous institution?

A1: As per Rule 229(i) of the General Financial Rules, 2017, no new autonomous institutions should be created by Ministries or Departments without the explicit approval of the Cabinet.

Q2: How do autonomous organizations ensure financial sustainability under Rule 229?

A2: Rule 229 encourages autonomous organizations to maximize internal resource generation and attain self-sufficiency. This includes reviewing user charges annually and, if a Corpus Fund is created, obtaining prior concurrence from the Ministry of Finance (for budgetary allocation) or administrative Ministry (for internal accruals).

Q3: What is the role of peer review for autonomous organizations?

A3: Rule 229(ix) mandates a system of external or internal peer review every three or five years. This review assesses whether the organization’s objectives are being achieved, the relevance of its activities, efficiency, and scope for resource generation. The findings directly influence future grant releases and strategic decisions.

Key Takeaways

The creation of new autonomous institutions requires Cabinet approval, ensuring high-level scrutiny and justification.
Autonomous organizations are strongly encouraged to achieve financial self-sufficiency by maximizing internal resource generation and regularly reviewing user charges.
Comprehensive financial management, including maintaining databases and seeking financial advice, is crucial for accountability.
Periodic external or internal peer reviews are mandatory to assess performance, relevance, and efficiency, with findings directly impacting future government support.

Conclusion

Rule 229 of the General Financial Rules, 2017, establishes a robust governance framework for autonomous organizations, emphasizing strategic creation, financial prudence, and continuous performance evaluation. By mandating Cabinet approval, promoting self-sufficiency, and institutionalizing peer reviews, the rule aims to ensure that these bodies operate effectively, efficiently, and in alignment with public interest, optimizing the utilization of public funds and achieving their stated objectives.

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