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Chapter 5

Public Order

5.1 Introduction
♦ Inextricable link between the public order and conict resolution since non-resolution of conicts
manifests itself in public disorder.

♦ Public order is largely a product of ecient general administration, eective policing and a robust
criminal justice system.

♦ Public order implies a harmonious state of society in which all events conform to the established
law and is synonymous with peace, tranquility and the rule of law.

♦ In most liberal democracies only serious disturbances which aect the even tenor of life would
constitute a breakdown of public order. In autocratic societies, however, even orderly and peaceful
protests and demonstrations against the State are often treated as breaches of public order.

5.1.1 Causes of public disorder.

1. Widely prevalent crime

2. political polarisation

3. divisive impulses based on ethnicity, religion, region, language and the sharing of natural resources

4. criminalisation of politics

5. indigenous and transnational criminal organisations

6. homegrown armed groups like Naxalites

7. foreign sponsored secessionist groups

5.1.2 Reasons to preserve public order.

♦ Peace and order are necessary pre-conditions for freedom of expression of individuals

♦ Violence and disorder necessarily undermine economic growth and development

♦ Urbanization, tends to promote impersonal lives, alienation, reducing peer pressure and social
control

♦ State's constitutional commitment to equitable growth and justice

♦ Rapid economic growth may sometimes aggravate disparities between individuals, groups and
regions

♦ Weak enforcement and failure of the criminal justice system create a culture of lawlessness

52
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♦ Organised crime, militancy and terrorism have devastating consequences on the morale of the
public

5.1.3 Police and internal security

♦ As police are the agency to enforce the will of the State, the capacity of the police agencies to
respond to a potential or real challenge to public order - rapidly, eciently and justly - is of
paramount importance

♦ this power is exercised in a democratic society within the bounds of the constitution and the law.

♦ the manner in which the police functions is an index of society's respect for civil liberty and the
rule of law

♦ Padmanabhaiah committee (2000)

∗ Meaningfully and eectively, the society and the country need a highly motivated, profes-
sionally skilled, infrastructurally self sucient and sophisticatedly trained police force

♦ However just and ecient policing may be, security agencies alone cannot enforce the rule of law
and maintain public order.

♦ An eective and impartial criminal justice system is a necessary precondition for order and
harmony in society

5.2 Public Order

♦ Lack of good governance and poor implementation of laws are the major factors for public
disorder.

♦ Public order implies the absence of disturbance, riot, revolt, unruliness and lawlessness.

♦ public order is universally recognised as the prime function of the State.

♦ the distinction between `established order' and `public order'.

♦ Established order may not always be as per the tenets of the rule of law.

♦ public order is strengthened by protecting the liberty and dignity of citizens and bringing about
social change.

♦ Justice Hidayatullah

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♦ Thus every situation in which the security of the State is threatened is a public order problem.

♦ All situations which lead to public disorder, are necessarily law and order problems also.

♦ All law and order problems are not public order problems.

5.2.0.1 Two ways to look at State's role in Public Order

1. The State should resist the temptation to over-legislate except in crucial areas which constitute
the essence of constitutional values or prevent signicant public loss or promote vital public good.

♦ Persuasion, public education and social movements are the desirable routes to social change
in such cases

2. If such laws do exist, eective enforcement on case-to-case basis through prosecution of oenders
is the better route and not the thoughtless precipitation of a public confrontation.

5.2.1 Some Grave Public Order Problems

communal Riots

♦ Communalism in a broad sense implies blind allegiance to one's own communal group rather
than to the larger society or to the nation as a whole.

♦ Ranganath Misra commission (Delhi riots, 1984), Justice b N Srikrishna commission (bombay
riots 1992-93) and also the NHRC have gone into the causes of these riots

♦ At times, the law enforcement machinery has been accused of gross dereliction of duty.

∗ The commission of Inquiry into the anti-Sikh riots in Delhi 1984, NHRC on the Gujarat
riots in 2002

♦ Common issues

∗ Systemic Problems

. conict resolution mechanisms are ineective;

. Intelligence gathered is not accurate, timely and actionable and

. bad personnel policies -

∗ Administrative Shortcomings

. The administration and the police fail to anticipate and read indicators which precipi-
tated violence earlier;

. The administration and police at times acted in a partisan manner

. At times there is failure of leadership

∗ Post-riot Management Deciencies

. Rehabilitation is often neglected

. Ocials are not held to account for their failures

Terrorism

♦ Terrorism has been dened as the illegal use of force or violence against people to create a wave
of terror with the intention of achieving certain political or sectarian objectives.

♦ To tackle the menace of terrorism, a multi-pronged approach is needed.

∗ Socio- economic development needs to be taken up on a priority basis

∗ the administration and the service delivery mechanisms need to be geared up so that the
legitimate and long standing grievances.

∗ Strong measures are required to deal with criminal elements but with respect for human
rights.

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Militancy in the North East

♦ Another intractable problem has been created by migration from bangladesh.

♦ The redrawing of national boundaries following Partition provided an impetus to migrants from
East Pakistan.

♦ This migration has continued even after the emergence of bangladesh.

♦ The fear among the local populace that this immigrant population would reduce them to a
minority has fueled militancy in the region.

♦ Several major initiatives for the development of the North East Region have been launched:

∗ The North Eastern council (NEC) was established in 1972 through an Act of Parliament,

∗ for securing the balanced development of the North Eastern Region and for inter-state
coordination

∗ Ministry for the Development of North East Region deals with matters pertaining to the
development of the eight states.

∗ All union Ministries/Departments earmark at least 10% of their budget for specic pro-
gramme of development in the North Eastern Region

♦ The ethnicity, diversity, geography and history of the region demand a comprehensive nation
building approach for resolving the complex issues

Left-Wing Extremism

♦ Naxalites operate in the vacuum created by the inadequacy and ineectiveness of the adminis-
trative machinery.

∗ Naxalites continue to hold Jan-Adalats, a mechanism to dispense crude and instant justice.

∗ The problems of poverty and alienation, the demand of territorial rights and displacement
from traditional forest habitats have aggravated the problem.

∗ Besides, unequal sharing of benets of exploitation of resources has also helped create a
fertile breeding ground for the growth of this menace.

♦ It started as an ideological movt with `romantic sacricialism', has now become militarised and
criminalised.

♦ They are backed by a chain of `couriers' and sympathisers and some civil society organisations.

♦ Government has adopted a multi-pronged strategy

∗ Apart from countering violence, it is addressing the political issues involved,

∗ Attending to the development needs of the aected areas and managing public perception.

∗ Strengthening of intelligence structures, nancial assistance to the aected states,

∗ Modernisation of the state police, long-term deployment of central Police Forces

∗ Improved coordination mechanism,

∗ Backward District Initiatives and backward Regions Grant Fund are some of the concrete
measures taken by the Government of India.

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5.2.2 Causes of Public Order problems

♦ three broad categories of public violence can be discerned:

∗ violence of remonstrance, violence of confrontation, and violence of frustration

♦ Five broad causes of the types of violence

∗ Social, Economic, Administrative, Communal, Political.

5.2.3 Lessons from the Past

♦ Some of the major strengths of the existing legal framework are

∗ a clearly laid down democratic, constitutional and legal framework,

∗ an independent judiciary and an elaborate criminal justice system and judicial review of
executive action,

∗ representative institutions to debate issues of public importance,

∗ a vigilant media and

∗ emerging civil society responsiveness.

♦ The strong points of the administrative framework of the country:

∗ rmly established administrative traditions,

∗ a well-organised police machinery,

∗ systems of accountability, even if decient and

∗ the existence of a professional bureaucracy

♦ legal and administrative framework has certain weaknesses:

∗ delays, unresponsiveness.

∗ lack of functional autonomy for law enforcement and investigation agencies;

∗ lack of adequate and eective accountability mechanisms;

∗ outdated and unprofessional interrogation and investigation techniques;

∗ inadequate training and infrastructure for police;

∗ lack of coordination between prosecution and investigation;

∗ insuciency of laws dealing with terrorism and organised crime;

♦ Essentially there is a need for Rule of law, and it would entail:

∗ a legal framework, which is fair and just and provides equal opportunities

∗ an eective, fair and just civil administration

∗ an eective, ecient, accountable and well equipped police system

∗ a strong, autonomous and eective crime investigation machinery

∗ a civil society which is vigilant about its rights and duties

∗ an alert and responsible media.

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5.3 The Existing Police System

5.3.1 The Police Organisation
♦ `Public order' and `Police' gure as Entry 1 and 2 respectively, in list II (State list) in the VII
schedule of our constitution

♦ Article 355 of the constitution enjoins upon the union to protect every state against external
aggression and internal disturbance

♦ The Police Act, 1861 is still the basic instrument governing the functioning of the Indian police.

♦ The Director General and Inspector General of Police) is the head of a state police.

♦ States are divided into districts and a Superintendent of Police heads the district police.

5.3.2 People's Perception of the Police

♦ Max Weber dened `State' as an organisation that has a  monopoly on the legitimate use of
physical force .

∗ The police are the instrument of physical force of the State.

∗ They have to bear the burden of failure of other instruments of governance as well.

♦ National Police commission (NPC)

♦ police-public relations were in a very unsatisfactory state due to police partiality, corruption,
brutality and failure to register oences, etc.

♦ Many factors responsible for the present situation.

∗ Problems related to general administration and police

∗ organisation, infrastructure and environment;

∗ organisational behaviour;

∗ stress due to overburdening,

∗ Ethical functioning, prosecution

∗ judicial process/criminal justice administration

5.3.3 Review of Police Reforms in the Past

Pre-Independence

♦ To reform the then existing system, the rst step taken by the british was to relieve the zamindars
of their liability for police service and their place was taken over by the Magistrates in the district.

♦ the rst major step was the constitution of the Police commission of 1860

♦ The commission recommended the abolition of the military police as a separate organisation and
the constitution of a single homogenous force of civil constabulary.

♦ The general management of the force in each province was to be entrusted to an Inspector General

♦ The supervision and the general management of the police by the District Magistrate was con-
tinued

♦ The police in each district were to be under a District Superintendent.

♦ The Indian Police commission was constituted in 1902. It found concrete evidence of rampant
corruption in the police department.

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Post independence period

♦ Gore committee on Police Training (1971-73)

∗ was set up to review the training of the police from the constabulary level to IPS ocers

♦ Government of India appointed the National Police commission in 1977.

∗ eight Reports covering dierent aspects of police administration

♦ Ribeiro committee was set up in 1998 on the orders of the Supreme court

∗ It recommended the setting up of Police Performance and Accountability commissions at

the State level,

∗ constitution of a District complaints Authority, replacement of the Police Act, 1861 with a
new Act

♦ In 2000, the Padmanabhaiah committee on Police Reforms

♦ was constituted to study recruitment procedures for the police force, training, duties and respon-
sibilities, police investigations and prosecution.

♦ September 2005 a Police Act Drafting committee (PADc) with Shri Soli Sorabjee as chairman,

∗ Superintendence of State police to vest in the State Government;

∗ Appointment of the Director General of Police by the State Government from amongst three
senior most ocers, empanelled for the rank.

∗ Security of tenure for key police functionaries.

∗ District Magistrate to have a coordinating role.

∗ constitution of a village police system.

∗ creation of Special Security Zones.

∗ constitution of a State Police Accountability commission

∗ The constitution of the State Police board as recommended by the PADc would give police
the required degree of autonomy

♦ A separate mechanism should be put in place to insulate crime investigation, evidence gathering
and prosecution from the vagaries of partisan politics.

∗ there will have to be a separate police service to deal with investigation of crimes exclusively

5.3.4 Reforms in Other Countries

South Africa

♦ an Ombudsman was appointed to investigate allegations of police misconduct

♦ the restructuring of SAP into a three-tiered force started -

∗ a national police, primarily responsible for internal security and for serious crime;

∗ autonomous regional forces, responsible for crime prevention and for matters of general
law and order; and

∗ municipal police, responsible for local law enforcement and for minor criminal matters.

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5.3.5 Core Principles of Police Reform

♦ Responsibility of the Elected Government

∗ The coercive power of the police can easily extinguish liberty unless it is tempered by
responsible political direction.

♦ Authority, Autonomy and Accountability

∗ At the same time, the various wings of police should have the authority and resources to
fulll their responsibilities.

∗ Although no one disputes that the police has to be accountable, there are diering views as
to whom the police should be accountable to.

∗ It has often been argued that the police are answerable and accountable to too many au-
thorities and institutions.

∗ There is another view that the existing accountability mechanisms especially outside the
police hierarchy are in fact too weak to extract any kind of accountability.

∗ There is a school of thought that the police should be accountable to the law and law alone.

∗ The mode and manner of accountability of police personnel has to be laid down by law itself
with accountability mechanisms.

♦ Disaggregation and Deconcentration

∗ A single, monolithic force now discharges several functions

∗ This is dysfunctional for four reasons:

. the core functions are often neglected

. accountability is greatly diluted

. the skills and resources required for each function are unique

. each function requires a dierent system of control and level of accountability.

. mere mechanical and uniform application of law in all situations will do irreparable
damage to public interest.

♦ disaggregation and deconcentration cannot be pushed to the extreme.

∗ There is need to strike a balance between authority and accountability,

∗ And between autonomy and coordination.

. Excessive fragmentation of the police force is as detrimental to public good as over-

concentration.

♦ Three broad categories of functions of police functions

∗ Crime investigation, Law and order, Local policing

♦ Independence of Crime Investigation

∗ The use of third degree methods to extract a confession, over reliance on oral testimony
along with witness turning hostile shows the weakness of the present investigation and
crime control issues.

∗ ARC says elite crime investigation agency of police should be created in each state.

♦ Self-esteem of Policemen

∗ Nearly 87% of all police personnel are constables

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∗ An average constable has little hope of becoming a Station House Ocer (SHO).

∗ The police force is top heavy.

. over-crowding at the top with no real strength at middle-management levels.

∗ ARC states police recruitment needs to be restructured signicantly in order to enhance

motivation and morale, professionalism and competence of the personnel.

♦ Attendant Criminal Law Reform

∗ the criminal justice system are also made eective and ecient.

∗ The number of courts is India is inadequate to meet the requirement of justice.

∗ The resultant inaccessibility, coupled with archaic and complex procedures has made our
justice system slow, inaccessible and in reality unaordable.

♦ Police to be a Service

∗ UNs basic Principles on the use of Force and Firearms recognises that  the work of law
enforcement ocials is a social service

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5.4 Police Reforms

♦ The police station (a part of the law and order police), would be the rst point of contact for
citizens.

♦ eective mechanisms for coordination between local police, crime investigation agency, and riot
control (law and order) police.

♦ An independent prosecution wing, staed by serving trial judges on deputation

♦ The police station (a part of the law and order police), would be the rst point of contact for
citizens.

♦ eective mechanisms for coordination between local police, crime investigation agency, and riot
control (law and order) police

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♦ local police (under local authorities), would attend to other local police functions including trac
management and minor local law and order maintenance.

♦ There would be a strong forensic division, with well-equipped laboratories in each district

♦ The rest of the police (excluding crime investigation and local police) would constitute the law
and order agency.

♦ Investigation of crimes (except oences entailing a prescribed punishment of, say, three years
prison term or less) would be entrusted to a separate, fully autonomous, elite, professional,
investigation agency in each state.

5.4.1 Police Accountability Mechanism - Balancing Autonomy and Control

5.4.1.1 State Government and the Police

♦ Relation between the State Government and the Police

♦ The National Police commission (NPc)

∗ stated that the arrangement that existed between the police and the foreign power before
Independence was allowed to continue with the only change that the foreign power was
substituted by the political party in power.

♦ The NPc also suggested the constitution of a statutory commission in each state to be called the
State Security commission.

∗ broad policy guidelines, evaluate performance of state police and function as a forum for
appeal from police ocers and also review the functioning of the police in the state.

♦ ARC Recommendations :

∗ the power of superintendence of the police service shall vest in and be exercised by the State
Government in accordance with the provisions of law.

∗ The State Government shall exercise its superintendence over the police in such manner and
to such an extent as to promote the professional eciency of the police and ensure that its
performance is at all times in accordance with the law.

∗ Obstruction of justice' should also be dened as an oence

5.4.1.2 Separation of Investigation from other Functions

♦ Police tasks can be categorised as follows:

∗ (a) Prevention; deployment of police force as a preventive measure when breach of peace is
threatened

∗ (b)Investigation; all actions taken by the police in the course of investigating a case

∗ (c) Service provision; rendering service of a general nature during fairs and festivals, rescuing
children lost in crowds, providing relief,etc.

♦ The Padmanabhaiah committee (2000) also recommended separation of the investigation work
from law and order and other duties.

♦ The law commission in its 154th Report (1996) also recommended the separation

∗ Result in speedier investigation

∗ Will increase the expertise of investigating police.

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∗ They would not provoke public anger and hatred which stand in the way of police-public
co-operation

♦ The ARC has carefully examined this issue and feels that a clear separation of investigation
from law and order duties is required

∗ two separate agencies - one dealing with `Investigations' and the other dealing with `law
and Order'

5.4.1.3 Accountability of law and Order Machinery

♦ A State Police Performance and Accountability Commission should be there

∗ consists of Home Minister (Chairman), Leader of Opposition in the State Assembly, etc

∗ Functions

. frame broad policy guidelines for promoting ecient, eective, responsive and account-
able policing, in accordance with law;

. prepare panels for the oce of Director General of Police against prescribed criteria;

. identify performance indicators

. review and evaluate organizational performance

♦ A State Police Establishment Committee should be constituted

∗ This Committee should deal with cases relating to ocers of the rank of Inspector General
of Police and above.

∗ These Committees should deal with all matters of postings and transfers, promotions and
also grievances relating to establishment matters.

♦ All cities with population above one million should have Metropolitan Police Authorities.

5.4.1.4 Reducing Burden on Police - Outsourcing Non Core Functions:

♦ Some of the functions that can be outsourced are the delivery of court summons, verication
of antecedents and addresses, which are required in the context of passport applications, job
verications etc.

5.4.1.5 Public Greivances

♦ The District Police Complaints Authority should have the powers to enquire into misconduct or
abuse of power against police ocers up to the rank of DySP.

♦ A State Police Complaints Authority should be constituted to look into cases of serious miscon-
duct by the police.

♦ The State level Authority should also look into complaints against ocers of the rank of Super-
intendent of Police and above.

♦ The State Police Complaints Authority should have a retired HC Judge as Chairperson and
nominees of the State Government, SHRC, other commissions, etc

♦ TheStatePoliceComplaintsAuthorityshouldalsomonitorthefunctioningof the District Police Com-

plaints Authority.

♦ A District Police Complaints Authority should be constituted to enquire into allegations against
the police within the district.

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5.4.2 Other Measures

♦ Improvement of Forensic Science Infrastructure - Professionalisation of Investigation

♦ Strengthening Intelligence Gathering

∗ intelligence gathering is done by the Special branch (Intelligence Wing) of the police and
the regular police stations.

∗ Human intelligence should be combined with information derived from diverse sources with
the focus on increased use of technology.

∗ Intelligence agencies should develop multi-disciplinary capability by utilising services of

experts in various disciplines for intelligence gathering and processing.

♦ Training

∗ There should also be common training programmes for police and executive magistrates.

∗ Training should focus on bringing in attitudinal change in police so that they become more
responsive and sensitive to citizens' needs.

5.4.3 Police and Human Rights

♦ D.K. Basu vs the State of West bengal [1997

∗ State terrorism is no answer to combat terrorism.

∗ The State, therefore, must ensure that various agencies deployed by it for combating ter-
rorism act within the bounds of law and not become law unto themselves

♦ Other matters related to policing and human rights are concerned with custodial deaths, en-
counter deaths and torture.

♦ NHRC

∗ with every passing year, the evidence before the Commission mounts that there must be
major police reforms in the country if the human rights situation is to be improved.

♦ The most important element, in its view, is insulating the investigation work of the police from
`extraneous inuences' and putting a stop to arbitrary transfers of police ocials

♦ The ARC Recommends;

∗ the emphasis on professional investigation, use of forensic science, proper training to bring
about an attitudinal change in police; the complaints authorities would provide an eective
grievance redressal mechanism against police high handedness.

5.4.4 Community Policing

♦ Community Policing is an area specic proactive process of working with the community for
prevention and detection of crime, maintenance of public order and resolving local conicts and
with the objective of providing a better quality of life and sense of security

♦ community policing has four elements:

1. community-based crime prevention;

2. Patrol deployment for non- emergency interaction with the public;

3. Active solicitation of requests for service not involving criminal matters; and

4. creation of mechanisms for grassroots feedback from the community.

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♦ The basic principle underlying community policing is that `a policeman is a citizen with uniform
and a citizen is a policeman without uniform'.

♦ `Maithri' in Andhra Pradesh, `Friends of Police' in Tamil Nadu, Mohalla committees in bhiwandi
(Maharashtra),

♦ Few principles of Community Policing

∗ community policing is a philosophy and not just a set of a few initiatives.

∗ The success of community policing lies in citizens developing a feeling that they have a say
in the policing of their locality and also making the community the rst line of defence.
community

∗ It should not become a mere `public relations' exercise

∗ Interaction with people should be organised through `community liaison groups' or citizen's
committees at dierent levels.

∗ convergence with activities of other government departments

♦ Gender Training

∗ Since the police is the primary agency of the criminal justice system which protects human
rights, it is essential to sensitise police personnel to gender issues. A well designed gender
training, which internalises responses

∗ The representation of women in police at all levels should be increased through armative
action so that they constitute about 33% of the police.

5.4.5 National Security Commission

♦ The Supreme court has directed that the union Government should set up a National Security
commission:

∗ Selection and placement of Chiefs of the Central Police Organisations (CPOs), who should
also be given a minimum tenure of two years.

∗ It could be headed by the Union Home Minister and comprise heads of the CPOs and 2
security experts and Home Secretary as its Secretary

♦ The central Police Organisations

∗ Border Security Force, Indo-Tibetan border Police:, Central Industrial Security Force, Cen-
tral Reserve Police Force:

♦ ARC: No need for it.

5.5 Constitutional Issues

5.5.1 Arguments for inclusion of `Public Order' in the concurrent list
1. A collapse of `public order' has wide ramications for national security, economic development
and even on the legitimacy of the State

2. union Government in such situations means that it is often powerless to intervene in major crisis
situations

3. Another reason often cited for bringing public order in the concurrent list is that inter-state crime
is on the increase.

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4. Due to the rapid growth in communication facilities and the use of modern technologies, organised
crime and terrorism often operate on a national or even international scale and can best be tackled
by providing for a unied legal, administrative and operational framework for police forces across
the country.

5.5.2 Arguments against bringing `Public Order' in the concurrent list

1. The principle of subsidiarity demands that these functions be exercised by State Governments.

2. In most of the large developed countries, the national government does not handle law and order
which is left to the provincial and even local governments.

3. Any move to bring public order into the concurrent list would also amount to duality of respon-
sibility which may be detrimental to the ecient handling of serious public order situations.

4. In an era of democratic decentralisation a move to bring public order into the concurrent list
would be a retrograde step

5. The size and diversity of our country is another reason why `Public Order' and `Police' have been
kept in the State list

ARC's View

♦ commission is of the view that the existing constitutional responsibilities between the states and
the union which have stood the test of time should not be disturbed.

5.5.3 Obligations of the Union and States

Articles

♦ 256: The executive power of every State shall be so exercised as to ensure compliance with the
laws made by Parliament

∗ Article 256 casts a responsibility on the union to uphold the rule of law.

♦ 352. Proclamation of Emergency.

♦ 355. Duty of the Union to protect States against external aggression and internal disturbance.

♦ 356. Provisions in case of failure of constitutional machinery in States

♦ 365. Eect of failure to comply with, or to give eect to, directions given by the Union.

5.5.4 Federal Crimes

♦ Committee on Reforms of criminal Justice System

∗ Federal Investigating Agency with an all-India Charter

∗ Organised crime, Terrorism, Acts threatening national security, Tracking in arms and
human being, Sedition, Major crimes with inter-state ramications, Assassination (including
attempts) of major public gures, Serious economic oences.

♦ ARC's view:

∗ agrees with Padmanabhaiah committee that such crimes should be investigated by a spe-
cialised wing in the central bureau of Investigation.

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5.5.5 Armed Forces (Special Powers) Act, 1958

♦ When deployment of the Army and the para-military forces in large numbers and for an indeter-
minate period to deal with the situation arising because of insurgency by the `Nagaland National
council' became necessary, a law on the lines of the 1947 enactments was also considered to be
indispensably required.

∗ The result was the Armed Forces (Assam and Manipur) Special Powers Act, 1958.

∗ The reorganization of the North-Eastern region in 1972 entailing, inter alia, a constriction
of the territory of the State of Assam, the Act was amended and renamed the Armed Forces
(Special Powers) Act (AFSPA).

♦ It comes into operation after a declaration is made under Section 2 that a particular area is
 disturbed .

∗ AFSPA now extends to all the states of the North East except Sikkim

♦ Earlier, only the Governor/Administrator was competent to issue such declaration; the 1972
amendment now vests a similar power with the union Government.

♦ Members of the Armed Forces discharging duties under the Act immunity from prosecution and
other legal proceedings except with the previous sanction of the union Government.

♦ The Act has been used in Manipur and Nagaland since 1958 and in Mizoram, Assam and Tripura
from later dates.

♦ The ve-judge bench of the Apex court arrived at, inter alia, the following conclusions after
taking into consideration various arguments:

1. Parliament was competent to enact AFSPA in exercise of the legislative power conferred on
it under Entry 2 of list I (pertaining to naval, military and air forces and also any other
armed forces of the union) and Article 248 of the constitution read with Entry 97 of list I
(pertaining to residuary powers of legislation)

2. It is not a law in respect of maintenance of public order

3. AFSPA is not a colourable legislation or a fraud on the constitution.

♦ In 2004, union Government appointed the committee to Review the Armed Forces (Special
Powers) Act, 1958

∗ It found that the powers conferred therein are not absolute and could only be invoked in
the disturbed area if there was already a prohibitory order in force.

♦ ARC's view

∗ It, after considering the views of various stakeholders, came to the conclusion that AFSPA
should be repealed.

∗ It recommend insertion of appropriate provisions in the unlawful Activities (Prevention)

Act, 1967 (ulPA) instead of suggesting a new legislation

5.5.6 The Role of the Media in Public Order

♦ The Administration must make facts available to the media at the earliest about any major
development, particularly activities aecting public order.

♦ increased interaction between the Administration and the media.

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Chapter 6

Financial Management

6.1 Public Finance Management

♦ Public nance management includes resource mobilization, prioritization of programmes, the
budgetary process, ecient management of resources and exercising controls.

6.1.1 Evolution of Budgeting

The line item Budget

♦ Budgeting is the process of estimating the availability of resources and then allocating them to
various activities of an organization according to a pre-determined priority.

♦ In the late nineteenth century, line-item budgeting was introduced in some countries

♦ The line item budget is dened as  the budget in which the individual nancial statement items
are grouped by cost centers or departments.

♦ In a line-item system, expenditures for the budgeted period are listed according to objects of
expenditure, or  line-items.

♦ The line item budget approach is easy to understand and implement

♦ Its major disadvantage is that it does not provide enough information to the top levels

Performance Budgeting

♦ a performance budget reects the goal/ objectives of the organization and spells out performance
targets

♦ A Performance Budget gives an indication of how the funds spent are expected to give outputs
and ultimately the outcomes.

♦ it is not easy to arrive at standard unit costs especially in social programmes which require a
multi-pronged approach.

Zero-based Budgeting (ZBB)

♦ under zero-based budgeting every activity is evaluated each time a budget is made and only if it
is established that the activity is necessary, are funds allocated to it.

♦ The basic purpose of ZBB is phasing out of programmes/ activities which do not have relevance
anymore.

♦ No government ever implemented a full zero-based budget, but in modied forms the basic
principles of ZBB are often used.

68
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∗ Decision units in ZBB

∗ A Decision unit is a distinct segment of an organization for which budget is prepared.

∗ It can also be a programme, scheme, project, or an operation.

∗ A decision package is a budget request which should contain the following :

. A description of the function or activity of the decision unit

. The goals and objectives of the various functions / activities of the unit

. Benets to be derived from nancing the activity / programme in the present context.

. The projected / estimated cost of the package

. The yearly phasing of the proposed expenditure / project cost

. Alternative ways of performing the same activity or achieving the same objectives.

Programme Budgeting and Performance Budgeting

♦ Introduced in the US Federal Government in the mid-1960s

♦ The basic building block of the system was classication of expenditure into programmes, which
meant objective-oriented classication

♦ It aimed at an integrated expenditure management system, in which systematic policy and ex-
penditure planning would be developed and closely integrated with the budget.

♦ Many governments today use the  programme budgeting label for their performance budgeting
system.

6.1.2 Weaknesses in the Budgetary Process

♦ Government budgets generally have the following shortcoming

∗ Poor planning, Poor expenditure control;

∗ No links between policy making, planning and budgeting;

∗ Inadequate funding of operations and maintenance;

∗ Inadequate accounting systems, Poor cash management;

∗ Inadequate reporting of nancial performance;

∗ Almost exclusive focus on inputs, with performance judged largely in terms of spending no
more, or less, than appropriated in the budget

6.1.3 Core Principles of Reforms

1. Reforms in Financial Management System are part of overall governance reforms

2. Sound nancial management is the responsibility of all government departments/ agencies

3. Medium-term plan/budget frameworks and aligning plan budgets and accounts

4. Prudent economic assumptions:

5. Top-down budgeting techniques: Instead of bottoms up (oces telling departments how much
they want).

6. Transparency and simplicity:

7. Relaxing central input controls:

8. Focus on results:

9. Adopting modern nancial management practices

10. accrual accounting, information technology, nancial information systems

11. Budgeting to be realistic

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6.2 Existing Financial System Management in India

6.2.1 Financial Statements and Accounts
♦ Budget is also known as the,  Annual nancial statement of the concerned Government (Articles
112 & 202)

♦ The appropriations are required to be made in the manner provided in the constitution.

♦ Constitution of India necessitate the maintenance of government accounts in three parts with
regard to receipts 

1. Consolidated Fund of India /States

2. Public account of India/States

3. Contingency Fund of India/States.

6.2.2 Annual Financial Statement

♦ prepared according to General Financial Rules (GFR), General Accounting Rules (GAR), Budget
Manual (in the States).

♦ It is a statement of estimated annual receipts and expenditure is prepared by each Government

and presented to its legislature.

♦ The part of the estimates pertaining to expenditure charged upon the consolidated Fund is not
submitted to the vote of the legislature

♦ The part of the estimate which is concerned with other expenditures is submitted to the legislature
concerned in the form of Demands for Grants

♦ A separate demand is presented for each Department or the major services under the control of
a Ministry/Department

♦ The Finance Bill containing the annual taxation proposals is considered and passed by the leg-
islature only after the Demands for Grants have been voted and the total expenditure is known.

♦ After the Demands have been passed by the legislature, an Appropriation Bill is introduced to
provide for the appropriation out of the consolidated Fund of India

6.2.2.1 Fiscal Responsibility and Budget Management Act, 2003

♦ Three Statements are to be presented to the Parliament, which form a part of the budget docu-
ments

1. Macro-economic Framework Statement - contains an assessment of the growth prospects of

the economy

2. Medium term Fiscal Policy Statement

∗ three-year rolling targets for four specic scal indicators in relation to GDP at market
prices, namely, (i)Revenue Decit, (ii) Fiscal Decit, (iii)Tax to GDP Ratio, and (iv)
Total Out-Standing Debt

3. Fiscal Policy Strategy Statement

∗ seeks to outline the strategic priorities of the Government in the scal area for the
ensuing year.

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6.2.2.2 Division of Budget

♦ Within each of the divisions and Sections of the consolidated Fund as referred to above, the
transactions are grouped into Sectors such as,

∗  General Services ,  Social Services ,  Economic Services , under which specic functions
or services are placed

. These Sectors are further sub-divided into `Major Heads of Account'

∗ In some specic cases, the Sectors are sub-divided into sub-sectors before their division into
Major Heads of Account.

♦ The Sectors, Major heads, Sub-heads and Detailed heads together constitute a ve-tier arrange-
ment of the classication structure of Government Accounts.

♦ The Major Heads of Account falling within the consolidated Fund generally correspond to `Func-
tions' of Government

6.3 Flow of Funds Related to Union Government Programmes

1. The rst is by way of devolution as per the recommendations made by the Finance commission
(in terms of Articles 280 and 281 of the constitution)

2. The second is through the Planning commission.

♦ the States receive Plan funds from the Planning commission in the form of `central Assis-
tance' under the `Scheme of Financing of States' Annual Plan.

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`Centrally Sponsored Schemes' (CSS)

♦ The centrally Sponsored Schemes do not fall within the subjects allocated to union Government
in list I of the Seventh Schedule of the constitution.

♦ However, they are funded by the union Government to achieve certain national objectives

♦ Actual expenditure under the CSS is incurred only when payment is made either to a beneciary
of the scheme or to the supplier of goods and services.

6.3.1 Preparation of the Budget

♦ Preparation of the Annual Budget in the Government of India follows both the top-down and
bottom-up approaches.

♦ While guidelines and instructions are issued by the Ministry of Finance and Planning commission,
the spending Ministries/Departments make requests for budgetary allocations based on their own
estimates.

♦ The provisions which govern the preparatory process are contained in the General Financial
Rules.

6.3.2 Weaknesses in the Budgetary System and Implementatio

1. Unrealistic budget estimates:

2. Delay in implementation of projects:

3. Skewed expenditure pattern:

4. a major portion getting spent in the last quarter of the nancial year, especially in the last
month.

5. Inadequate adherence to the multi-year perspective and missing `line of sight' between plan and
budget:

6. No correlation between expenditure and actual implementation:

7. Parking of funds by implementing agencies, outside the government accounts portrays an incor-
rect picture of the nancial position of government.

8. Mis-stating of nancial position:

9. Ad hoc project announcements:

10. Irrational plan / non-plan distinction leads to ineciency in resource utilization.

Recommendations

♦ The assumptions made while formulating estimates must be realistic.

♦ The gap between the `estimates' and `actuals' must be ascertained and eorts made to minimize
them

♦ The method of formulation of the annual budget by getting details from dierent organiza-
tions/units/agencies and tting them into a pre- determined aggregate amount leads to unreal-
istic budget estimates.

∗ This method should be given up along with the method of budgeting on the basis of `analysis
of trends'.

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∗ This should be replaced by a `top-down' method by indicating aggregate limits to expendi-

ture to each organization/agency.

♦ Internal capacity for making realistic estimates needs to be developed.

♦ The practice of announcing projects and schemes on an ad-hoc basis in budgets and on important
National Days, and during visits of dignitaries functionaries to States needs to be stopped.

6.3.3 Outcome Budget

♦ Announced in Budget speech of the Finance Minister (Budget 2005-06)

♦ The rst outcome budget was passed in the Parliament on August 25, 2005

♦ The guidelines have prescribed the following steps

1. Dening intermediate and nal outcomes specically in measurable and monitorable terms

2. Standardizing unit cost of delivery

3. Benchmarking the standards/quality of outcomes and services

4. capacity building for requisite eciency at all levels

5. Ensuring adequate ow of funds at the appropriate time to the appropriate level

6. eective monitoring and evaluation systems

7. Involving the community/target groups/recipients of the service, with easy access and feed-
back system

♦ `Outputs' have been dened as the `measure of the physical quantity of the goods or services
produced through an activity under a scheme or programme'

∗ They are identied as an intermediate stage between `outlays' and `outcomes'.

♦ `Outcomes' are the end product/results of various Government initiatives and interventions

∗ They cover the quality and eectiveness of the goods or services produced as a consequence
of an activity under a scheme or programme.

♦ For the year 2007-08, the Outcome Budget and Performance Budget were merged and placed in
one combined document.

♦ ARC's view

∗ Outcome budgeting is a complex process and a number of steps are involved before it can
be attempted with any degree of usefulness.

∗ A beginning may be made with proper preparation and training in case of the Flagship
Schemes and certain national priorities.

6.3.4 Distinction between Plan and Non-Plan

♦ The distinction has led to ever increasing tendency to start new schemes/projects to the utter
neglect of maintenance of existing capacity and service levels.

∗ leads to the misperception that non-plan expenditure is inherently wasteful and should be
avoided.

♦ Non-Plan expenditure covers expenditure on security, interest payments and subsidies etc

♦ ARC' view: The Plan versus non-Plan distinction needs to be done away with.

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6.3.4.1 Development of Financial Information System

♦ Advantages

∗ Providing timely and reliable information to the decision makers

∗ Providing inputs to control systems

∗ Monitoring nancial and physical progress

∗ Ensuring proper utilization of resources

♦ Presently, all Federal Government units (Executive, legislation and Judiciary) in Brazil including
all State/owned company units are required to use SIAFI.

♦ ARC: A robust nancial information system, on the lines of SIAFI of Brazil, needs to be created
in the government in a time bound manner.

6.3.5 Accrual System of Accounting

Principles of Government Accounting

♦ The accounting methods adopted for commercial concerns, and the preparation of Manufactur-
ing, Trading and Prot and Loss Accounts and a Balance Sheet, in the commercial sense, are,
therefore, unsuitable and unnecessary.

♦ On the basis of the budget and the accounts, Government determines

∗ (a) whether it will be justied in curtailing or expanding its activities

∗ (b) whether it can and should increase or decrease taxation accordingly.

Methods of Government Accounting

♦ The mass of the Government accounts being on cash basis is kept on Single Entry.

∗ a portion of the accounts which is kept on the Double Entry System for protable activi-
ties,etc.

6.3.6 Accrual Accounting

♦ In a loan given, the World Bank included the introduction of accrual accounting as a part of its
conditions

Issues with Cash based system

♦ The cash-based system of accounting lays emphasis on transactions vis-à-vis the budget.

♦ It does not record and report complete nancial information required for management of resources

♦ It does not provide a full picture of the government's nancial position at any given point and
the changes that take place over time as a result of government policy.

♦ The system fails to reect government's liabilities such as accrued liabilities arising due to un-
funded pensions and superannuation benets and current liabilities arising from a disconnect
between commitments and payments

♦ Similarly, the present system is unable to track current assets as well as non-nancial assets.

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Accrual System

♦ The system of accrual accounting recognizes nancial ows at the time economic value is created,
transformed, exchanged, transferred or extinguished, whether or not cash is exchanged at that
time

♦ Expenses are recorded when the resources (labour, goods and services and capital) are consumed,
and income when it is earned, i.e. when the goods are sold or the services rendered.

Twelfth Finance commission

♦ The change over to the accrual based system of accounting will place considerable demands on
the accounting personnel in various government organizations

♦ A Task Force should be set up to examine the costs and benets of introducing the accrual system
of accounting.

6.3.7 Internal Control and Audit

6.3.7.1 Weaknesses of the Present System of Internal Audit

♦ comptroller and Auditor General of India had constituted a task force at the request of the
Ministry of Finance in July 2006 for benchmarking the status of internal audit in the union
Government.

♦ Task Force observed the following:

1. Serious deciencies in the existing internal audit system making it inadequate and ineective

2. The internal audit guidelines are outdated and there are no manuals in many cases.

3. There are also no prescribed internal auditing standards.

4. Under-resourcing of the internal audit service and shortage of manpower

5. The limited sta of the internal audit is also sometimes diverted for accounting and budgeting
purposes.

6. There was no segregation of duties especially at supervisory levels between those who are re-
sponsible for internal audit and those responsible for pre-audit, disbursement and accounting
functions.

7. Independence is hampered in two ways.

(a) Internal audit vested with the chief controllers of Accounts, who were also responsible for
accounting and payment functions

(b) Financial Advisers are enjoined to `review the progress of internal audit'.

Recommendations

1. An Oce of the Chief Internal Auditor (CIA) should be established in select Ministries/departments
to carry out the functions related to internal audit.

2. CIAs should be directly responsible to the Secretary of the Department.

3. Standards for internal audit should be prescribed by the Oce of the C&AG

4. The Accounting functions should be completely separated from Internal Audit.

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6.3.8 Integrated Financial Adviser

The role of the chief Accounting Authority

♦ be responsible and accountable for nancial management of his Ministry or department;

♦ be responsible for the eective, ecient, economical and transparent use of resources of the
Ministry or Department

♦ be responsible for preparation of expenditures and other statements

♦ shall ensure that his Ministry of Department maintains full and proper records of nancial trans-
actions

6.3.9 Relationship between Auditor and Auditee

Recommendations

♦ There is need for better understanding and synergy between the audit and auditees for enhanced
public accountability and consequently better audit impact.

♦ There should be balanced reporting by the audit.

♦ There is need for increasing interaction as well as coordination between the executive and the
audit, including at senior levels.

♦ Timeliness of Audit and concurrent Audit

♦ concurrent performance audit of long-term on-going schemes should be undertaken at appropriate

intervals.

♦ External audit needs to be more timely in inspecting and reporting so that their reports can be
used for timely corrective action.

♦ All audits for the year under review should be completed by 30th of September of the following
year

♦ IT should be used increasingly and eectively for data collection and analysis.

♦ The pending audit paras should be monitored by having a database on them in each Min-
istry/Department.

6.4 External Audit and Parliamentary Control

♦ External audit has a very important role to play in nancial management

♦ provides assurance to Parliament/legislature that public money has been spent for the purpose
for which it was sanctioned by the Parliament/legislature

∗ is a crucial element of public accountability as it is an independent external scrutiny.

∗ is a deterrent against careless decision-making and irresponsible attitude towards public

expenditure and project management

∗ is expected to establish public condence that public money is being properly spent.

. External audit includes examination of the economy, eciency and eectiveness

∗ is expected to help in achieving full value for money

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6.4.1 The Comptroller and Auditor General of India

♦  To promote excellence in public sector audit and accounting services towards improving the
quality of governance .

6.4.1.1 Types of Audit

♦ Performance Audit, slowly developed as an attempt to measure the economy, eciency and
eectiveness of the Government expenditure.

∗ Performance Audit, Regularity (Financial) Audit, Regularity (compliance) Audit, IT Audit

Strengths of External Audit in India

1. The CAG has a high status enshrined in the constitution, upheld by long traditions of public
audit in India.

♦ The institution of audit under the CAG is often regarded as the fourth pillar in the demo-
cratic setup and an essential instrument of nancial control and accountability.

2. The constitution of India ensures independence and autonomy of the public audit.

3. The expression `Audit' or scope of the audit has not been dened either in the constitution or
the CAG's DPC Act, 1971

♦ The scope of external audit is, therefore, wide.

4. Audit can respond to changes, reforms, new initiatives, changing patterns of Government ac-
tivities, international developments in the profession and rising expectations of the stakeholders
regarding public accountability.

5. The CAG has the power to determine the nature and extent of audit and related access to records
and to relevant information.

6. The CAG has the inherent right to determine what should be included in the Audit Reports.

7. There is a requirement that Audit Reports should be tabled in the Parliament/ legislature and
thereafter these become public documents.

8. There are well documented Audit Manuals and audit guidelines for the Auditors to follow.

9. Auditing Standards framed on lines of INTOSAI (International Organization of Supreme Audit

Institutions) guidelines are available

Challenges before the External Audit

1. There is hardly any accountability for not taking timely action on audit observations.

2. There is a feeling that the CAG's reports are sometimes not timely because there is substantial
time gap between occurrence of an irregularity and its reporting by Audit.

♦ CAG's audit itself is post facto - its ndings and recommendations may be too late for
corrective action.

3. Audit ndings are based exclusively on documents and les

4. There is a feeling that external audit reports tend to be unduly negative and their focus is on
irregularities and fault nding.

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5. Audit does not always recognize the practical constraints under which the Government/Government
Agencies function.

♦ Audit often does not discriminate between errors arising out of bonade intentions/malade
intentions.

6. Audit Reports are not always presented in a suciently constructive manner

♦ Audit must therefore identify systemic problems.

7. Audit does not give due credit for good performance.

8. The relationship between the auditor and auditee is not always harmonious.

9. Audit is viewed as a system for policing Government Organisations.

10. There is inadequate synergy/coordination between external audit and internal audit.

11. There is rarely any audit of grants and loans to NGOs.

6.4.2 Accountability to Parliament

PAC

♦ In scrutinizing the Appropriation Accounts and the Report of the C&AG thereon, the committee
checks

∗ that the moneys shown in the accounts as having been disbursed were legally available for,
and applicable to, the service or purpose to which they have been applied or charged;

∗ that the expenditure conforms to the authority which governs it;

∗ that every re-appropriation has been made in accordance with the provisions made in this
behalf under rules framed by competent authorit

∗ to examine the statement of accounts showing the income and expenditure of autonomous
and semi-autonomous bodies,

∗ to consider the report of the comptroller and Auditor-General in cases where the President
may have required him to conduct an audit

Departmentally related Standing committees

♦ The general procedure relating to Demands for Grants

∗ after the general discussion on the Budget in the two Houses is over, the Houses shall be
adjourned for a xed period

∗ the committees shall consider the Demands for Grants of the concerned Ministries during
the aforesaid period;

∗ the committees shall make their report within the period and shall not ask for more time;

∗ the Demands for Grants shall be considered by the House in the light of the reports of the
committees

∗ there shall be a separate report on the Demands for Grants of each Ministry.

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