Public Account funds being managed by the Government is a perpetual source of distortion in our public finances. It is time to separate all Public Account funds from the cash balances of the Government and entrust their management to professional trusts free from Government control. Apart from making these funds self-sustaining, this will also enforce much greater discipline in the management of fiscal deficits and public debt.
It is to be understood that all these accounts stand merged in the cash balance of the Government - none of these accounts have separate funds maintained in their names anywhere; they lose their individual identities by being part of the cash balance which represents the combined balances in the Consolidated Fund, Contingency Fund and Public Account. Public Account balances, being part of the cash balances of the Government, thus inflate them and also make the cash management of the Government fraught with risks.
The interest liability of the Government of India during 2011-12 on its public account balances was Rs 40,912 crore, or 14% of its total interest liability. As regards the States, even a deeply indebted state like West Bengal had to dish out Rs 1100 crore,or 7% of its total interest liability in 2011-12 on Public Account. This interest constituted as much as 20% of the total interest liability for Assam, 22% for Odisha and 27% of another highly indebted state, Himachal Pradesh in that year. In all other countries, similar funds are managed by professional bodies that determine their investment in appropriate assets so as to earn commercial interests to make these funds self-sustainable, without forcing the taxpayers to foot their interest bills.