The new system has three elements – a Treasury Single Account (TSA) system, a( ) for Centrally Sponsored Scheme (CSS) funds, and a Central Nodal Agency ( ) for the management of Central Sector (CS) Scheme funds. The core of these reforms is ‘Just-In-Time’ funds release.
The reforms kicked off with the rollout of the TSA system for Grant-in-Aid (GIA) to autonomous bodies (ABs), enabling direct spending by 206 ABs from the central government’s account with the
The parent ministry fixes an “Assignment Limit” for an autonomous body and within that limit, ABs can spend directly. This was followed by the SNA model for centrally sponsored schemes. It requires every state to designate an SNA for each CSS. All CSS funds are credited only to the bank account of the corresponding SNA.
Expenditure is incurred either from the SNA account or zero balance accounts of implementing agencies mapped with the SNA account. This has reduced the number of accounts containing CSS funds from 18 lakh to just 3,300. Integration of state treasuries and banking networks with the (PFMS) has enhanced visibility and enabled tracking of funds till the end beneficiary.
The CNA model rolled out on April 1, 2022, is the third leg of this initiative. It has twin objectives- enhance the efficiency of fund flow to the scheme-implementing agencies and improve the government’s cash management.
With an annual budget of over Rs 11 lakh crore, the potential for gain is immense. This requires notification of a Central Nodal Agency (CNA) for each scheme. There are two modes of implementation. Schemes with an annual outlay of over Rs 500 crore are implemented in the TSA mode and the rest in the non-TSA Mode.
In the TSA mode, a CNA and its Sub-Agencies (SAs) draw funds directly from RBI based on their “Assignment Limits”. So, the scheme funds move out of the government’s kitty “Just-In-Time” for making payments. In 2022-23, ₹2.75 lakh crore is allocated to schemes implemented in this mode. Till November 30, 2022, an assignment limit of only ₹57,299 crore was issued by ministries to CNAs. In the earlier system, the entire amount would have moved out of the government’s account in RBI instantly. However, in the new system, only ₹26,022 crore, that’s actually been spent, has been debited. Thus, the TSA mode has eliminated the float in bank accounts. As a proportion of the budget is financed by borrowings, the new system has reduced borrowing and attached interest burden. Moreover, unutilised assignments lapse at the close of the financial year bringing additional savings.
In the non-TSA mode, a CNA is required to open only one account for each scheme in a scheduled. Ministries can release funds only to the CNA account. SAs, if any, either use the CNA account or open a Zero Balance Account (ZBA) mapped with a CNA account. CNA assigns drawing limits to SAs who draw money “Just-In-Time” for making payments.
To minimise float, ministries have been directed not to release more than 25% of the amount earmarked for a scheme in a financial year in one installment. Subsequent installments can be released only after utilization of at least 75% of the fund released earlier. State government agencies can also be designated as CNAs. In the earlier system, funds were released to them through the state treasury and would often get parked at various levels. In the CNA model, the funds are released by ministries to such CNAs directly.
The CNA model did face teething troubles. Where required changes were made based on feedback, and a series of training were organized for scheme implementers to clear issues. The scheme money is now available only in 1,000 CNA accounts instead of 2.7 lakh agency accounts. Ministries can track the availability of funds with CNAs in real time. Although the full potential of the CNA model is yet to be harnessed, it has reduced float, curtailed borrowing cost, removed intermediaries, smoothened the flow of funds, enhanced fund utilisation efficiency, facilitated better cash management, and improved value realisation for every rupee spent.