Rule 4 of the General Financial Rules 2017 Departmental Regulations of financial character
Original Rule Text
Visual Summary
Financial Regulations
Applies to any departmental rule, order, or instruction that has a financial impact.
Ministry of Finance Approval
Such regulations must be made by or with the mandatory approval of the Ministry of Finance.
No Exceptions
This requirement is invariable, meaning it must be followed without exception for all financial matters.
Executive Summary
Rule 4 establishes a fundamental principle of financial discipline within the government. It mandates that any regulation, order, or instruction created by a government department that has financial implications must be approved by the Ministry of Finance. This ensures that all financial decisions across the government are centrally controlled and consistent, preventing individual departments from making rules that could impact the nation’s finances without proper oversight.
In-Depth Analysis of the Rule
Introduction
Rule 4 of the General Financial Rules, 2017, acts as a critical checkpoint for all government departments. Its primary purpose is to centralize financial authority with the Ministry of Finance, ensuring a unified and disciplined approach to public spending and financial management. This rule prevents financial fragmentation and ensures that any departmental action with a monetary effect aligns with the government’s overall fiscal policy.
Breakdown of the Rule
The rule can be broken down into three key components:
1. ‘All Departmental regulations…’: This is a broad term that covers any internal rule, order, circular, or instruction that a department issues to manage its affairs. It is not limited to formal, published regulations.
2. ‘…of a financial character or have important financial bearing…’: This is the core condition. The rule applies if the regulation directly involves money (e.g., sanctioning a new type of expense) or if it has a significant indirect effect on finances (e.g., changing a process that leads to higher costs or affects revenue collection). The term ‘important financial bearing’ gives the rule a wide scope.
3. ‘…must invariably be made by, or with the approval of the Ministry of Finance.’: This is the command. The word ‘invariably’ means there are no exceptions. The department must get a green signal from the Ministry of Finance. The Ministry can either create the rule itself for all departments to follow or approve a rule proposed by a specific department.
Practical Example
Imagine the Department of Science and Technology wants to create a special cash award for its scientists who publish papers in prestigious international journals. This award involves spending public money, so it has a ‘financial character’.
According to Rule 4, the Department cannot simply issue an order to start giving these awards. It must first prepare a detailed proposal explaining the scheme, its financial implications, and its benefits. This proposal must then be sent to the Ministry of Finance. The Ministry of Finance will review the proposal to see if it is financially viable and aligns with government policy. Only after receiving formal approval from the Ministry of Finance can the Department of Science and Technology implement the award scheme.
Conclusion
Rule 4 is a cornerstone of fiscal prudence in the Indian government. By mandating that the Ministry of Finance approve all departmental regulations with financial implications, it ensures that financial authority is not diluted. This centralized control helps maintain budgetary discipline, promotes uniformity in financial matters, and safeguards public funds from arbitrary or uncoordinated decisions by individual departments.
Related Provisions
Understanding Rule 4 is enhanced by looking at other related rules that build upon the principle of centralized financial authority and inter-departmental coordination:
- Rule 3: Interdepartmental consultations – While Rule 4 focuses specifically on financial matters requiring Ministry of Finance approval, Rule 3 covers the general principle that any case concerning more than one department requires consultation and concurrence among them.
- Rule 5: Removal of Doubts – This rule reinforces the central role of the Ministry of Finance by stating that any doubt in interpreting these rules must be referred to it for a final decision. This complements Rule 4 by establishing the Ministry as the ultimate authority on all financial rules.
- Rule 28: Powers in regard to certain special matters – This rule provides specific examples of actions with major financial implications (like granting land or revenue concessions) that require prior consent from the Ministry of Finance, illustrating the practical application of the principle laid out in Rule 4.
Learning Aids
Mnemonics
- FINANCE First: For any FINancial Action, Notify and Confirm Everything First with the Ministry of Finance.
- MoF’s OK: For any rule involving Money or Finance, you must get the OK from the Ministry of Finance.
Mindmap
Multiple Choice Questions (MCQs)
1. According to Rule 4, which authority must approve all departmental regulations that have a financial bearing?
- A) The President of India
- B) The concerned Departmental Secretary
- C) The Ministry of Finance
- D) The Comptroller and Auditor General
Show Answer
Correct Answer: C) The Ministry of Finance. The rule explicitly states that such regulations must be made by, or with the approval of, the Ministry of Finance.
2. What is the scope of the term ‘Departmental regulations’ as used in Rule 4?
- A) Only formal rules published in the official gazette
- B) Only orders related to capital expenditure
- C) All orders or instructions of a financial character or with a financial bearing
- D) Only instructions related to employee salaries and allowances
Show Answer
Correct Answer: C) All orders or instructions of a financial character or with a financial bearing. The rule is broadly worded to include any instruction that has a financial impact, not just formal regulations.
3. A department issues an internal order changing its procurement process, which does not alter the budget but is expected to make future purchases more expensive. Does this order require approval from the Ministry of Finance under Rule 4?
- A) No, because it does not change the current budget allocation.
- B) Yes, because it has an ‘important financial bearing’ on future expenditure.
- C) No, because procedural changes are exempt from Rule 4.
- D) Only if the expected cost increase is more than 10% of the department’s budget.
Show Answer
Correct Answer: B) Yes, because it has an ‘important financial bearing’ on future expenditure. The rule covers not just immediate spending but any regulation that has a significant financial impact, including those affecting future costs.
Frequently Asked Questions
What exactly is a ‘departmental regulation’?
It refers to any rule, order, instruction, or circular issued by a government department for its internal functioning. It’s a broad term and isn’t limited to just formal, legally binding rules.
Why is the Ministry of Finance’s approval so important?
This approval is crucial for maintaining central control over the country’s finances. It ensures that all government spending is consistent, planned, and aligns with the national budget and economic policies. It prevents individual departments from making financial decisions that could collectively destabilize the government’s fiscal position.
Does this rule apply to very small expenses as well?
The rule applies to regulations that have an ‘important financial bearing’. While day-to-day minor expenses are managed through delegated financial powers, any new rule or policy that establishes a new category of expenditure, even if the individual amounts are small, would likely be considered to have a financial bearing and would require approval.
Key Takeaways
- Any departmental rule involving money must get the Ministry of Finance’s approval before it can be implemented.
- This applies to both direct orders (like creating a new allowance) and indirect instructions that have a financial impact (like changing a process that increases costs).
- The Ministry of Finance has the final say on all financial regulations made by other government departments.
- This rule is a key tool for ensuring financial discipline and centralized control over public funds.