# PAC examines ₹9,222 crore short-transfer of cess collections to designated reserve funds

*The Public Accounts Committee questioned Finance and Health Ministry officials over cess and levy collections not transferred to their earmarked reserve funds in 2024–25.*

**Polity and Economy · 10 Sep 2026 · GS: GS2, GS3, Essay · Exam yield: High**

## Why this matters

This is not merely an accounting delay: it tests whether a cess collected for a declared purpose actually reaches that purpose. The case links parliamentary control over taxation, fiscal transparency, education and health financing, and the credibility of earmarked public funds. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

## In plain words

The story sits at the intersection of taxation and Parliament’s control over public money. A cess or levy is collected from citizens for a stated purpose, such as school education, public health, investor awareness or oil-sector development. The money first enters the Consolidated Fund of India, the Union government’s main account. It should then be moved, after Parliament authorises the transfer, into a designated Reserve Fund within the Public Account, where it is available for the stated objective. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

The Comptroller and Auditor General of India found that, in financial year 2024–25, ₹82,321 crore was collected for four such funds but only ₹73,099 crore was transferred. The short-transfer was ₹9,222 crore: ₹1,105 crore for the Investor Education and Protection Fund, ₹1,270 crore for the Prarambhik Shiksha Kosh, ₹6,646 crore for the Pradhan Mantri Swasthya Suraksha Nidhi and ₹201 crore for the Oil Industry Development Fund. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

Think of it as collecting money for four labelled boxes but leaving part of it in the general cash drawer. The government may still spend through budgetary channels, but the accounting trail becomes less direct and Parliament’s stated link between collection and purpose becomes weaker. The Public Accounts Committee is therefore examining officials from the Finance and Health Ministries. The issue matters because delayed or incomplete transfers can obscure how much is available for the promised purpose, weaken legislative oversight and make a supposedly temporary cess behave like an ordinary revenue source. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

## Key facts

- CAG reported a ₹9,222 crore short-transfer to four designated Reserve Funds during FY 2024–25.
- The collections arose from cesses, levies and charges intended for specific purposes.
- The affected funds include the Prarambhik Shiksha Kosh, PM Swasthya Suraksha Nidhi and Investor Education and Protection Fund.
- Cess proceeds are initially credited to the Consolidated Fund of India before transfer to designated funds through parliamentary appropriation.
- The issue raises concerns about parliamentary financial control, fiscal transparency and the earmarking principle.

## How we got here

India’s Union accounts are maintained through the Consolidated Fund of India, the Contingency Fund of India and the Public Account. Government revenues normally enter the Consolidated Fund; money held by the government in a fiduciary capacity, including Reserve Funds, is recorded in the Public Account. The Comptroller and Auditor General’s Report No. 6 of 2026 examined the Union Government accounts for financial year 2024–25 and was prepared under Article 151 of the Constitution. The report states that cess, levy and charge collections are credited first to the Consolidated Fund and transferred to specified Reserve Funds after Parliament’s approval. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

The audit also recalls a wider concern: cesses impose a burden on the public but are often continued beyond the period needed to achieve their original objective. It recommended periodic review and regular crediting of proceeds to the relevant Reserve Funds. The present finding emerged from test checks of 2024–25 records. A particularly long-standing example concerns the oil cess: the government collected ₹3,12,782 crore between financial years 1974–75 and 2024–25, but only ₹902 crore was transferred to the Oil Industry Development Board during 1974–75 to 1991–92, with no transfer during 1992–93 to 2023–24. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

## The bigger picture

**Constitutional — Parliamentary control over the purse**

The core constitutional principle is that public money cannot be appropriated from the Consolidated Fund without parliamentary authorisation. Articles 112, 113 and 114 structure the Annual Financial Statement, Demands for Grants and the Appropriation Act; Article 151 provides for laying the Comptroller and Auditor General’s report before Parliament. When a cess is publicly justified by a specific purpose but the corresponding transfer is incomplete, the formal accounting process may remain legal while the substantive accountability chain becomes weaker. The Public Accounts Committee’s scrutiny is therefore an exercise in legislative financial control, not merely bookkeeping. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

→ The issue tests whether Parliament controls not only expenditure approval but also the faithful movement of earmarked receipts.

**Economic — Cess versus general revenue**

A cess is usually justified as a purpose-linked charge, unlike ordinary tax revenue that enters the general pool without a legally or politically narrow destination. In 2024–25, the Union collected ₹3,89,220 crore through cess, charges and levies, equal to 10.25 per cent of Gross Tax Revenue. The ₹9,222 crore short-transfer is therefore a small share of total cess receipts but significant for the principle of earmarking. If funds remain in the Consolidated Fund, the government gains flexibility, while beneficiaries and Parliament lose visibility over the resources tied to a stated objective. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

→ Fiscal flexibility for the executive must not erase the accountability attached to a purpose-specific collection.

**Social — Education and health delivery**

The largest short-transfer was ₹6,646 crore from collections intended for the Pradhan Mantri Swasthya Suraksha Nidhi, linked to National Health Mission schemes; the Prarambhik Shiksha Kosh had a ₹1,270 crore short-transfer, affecting schemes such as Samagra Shiksha and PM POSHAN. These figures do not automatically prove an equal reduction in actual spending, because expenditure may occur through voted budget allocations. However, incomplete transfers can reduce predictability, complicate fund tracking and make it harder to establish whether the public charge generated resources proportionate to the promised social service. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

→ Even when services continue, weak fund-tracking can undermine predictability and public trust in education and health cesses.

**Political — Executive discretion and legislative scrutiny**

The executive may argue that all receipts remain available for government priorities through the budget and that transfer timing can reflect administrative or cash-management considerations. The counterpoint is that Parliament approved a mechanism linking collection with a designated fund, and the Public Accounts Committee exists to examine whether accounts conform to legislative intent. The CAG report notes that the Health Ministry identified the Finance Ministry as the nodal ministry for collection and allocation of cess, while a specific reply on the short-transfer remained awaited in January 2026. This raises questions about responsibility across ministries. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

→ Clear ownership is essential because fragmented responsibility can turn an accountability gap into an administrative explanation.

**Historical — Persistence of dormant and underused funds**

The CAG found ten Reserve Funds and twenty-one Deposit Accounts dormant for at least three financial years, with an accumulated net credit balance of ₹844.93 crore; the oldest had been dormant since financial year 2002–03. This creates a two-sided problem. Some funds may receive less than the amount collected, while others continue to exist after their purpose has weakened or ended. Periodic sunset review, consolidation or formal closure can prevent a fragmented account structure from obscuring the real fiscal position. ([cag.gov.in](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf))

→ Earmarking needs both compliance for active funds and sunset review for obsolete ones.

## The big debate

**Should the government be required to transfer all cess collections promptly to their designated Reserve Funds?**

**For**
- Prompt transfer honours the stated purpose of the cess and preserves Parliament’s control over public finances.
- It improves transparency by allowing citizens and legislators to compare collections, transfers and utilisation fund by fund.
- Predictable transfers help ministries plan education, health, investor-protection and sector-development activities.

**Against**
- Rigid annual transfers may reduce cash-management flexibility when implementation capacity or expenditure needs are temporarily low.
- A separate fund can create idle balances and fragmented accounting if programmes are redesigned or the original purpose has ended.
- The government may still provide the intended service through regular budget allocations even when fund transfers are delayed.

**The balanced take:** Operational flexibility is legitimate, but it cannot justify indefinite retention or weak disclosure. The better position is prompt transfer by default, publicly recorded reasons for any timing difference, parliamentary reporting of balances and utilisation, and periodic review or closure of funds whose objectives have been achieved.

## Answer it in Mains

**How do parliamentary financial committees strengthen legislative control over public expenditure in India? Discuss with reference to the Public Accounts Committee.** *(GS2)*

How to attack it: Begin with Parliament’s constitutional control over appropriation; explain CAG reporting and PAC examination; analyse transparency, executive accountability and fund-tracking; conclude with time-bound replies, reconciliation and public disclosure.

Quote this: CAG Report No. 6 of 2026: ₹9,222 crore short-transferred to four designated Reserve Funds in 2024–25.

**What are the advantages and limitations of earmarked taxation through cesses in India?** *(GS3)*

How to attack it: Define cess and earmarking; discuss predictable financing for education, health and sectoral development; examine opacity, fund fragmentation and executive flexibility; conclude with sunset clauses, outcome reporting and parliamentary review.

Quote this: CAG Report No. 6 of 2026 recorded ₹3,89,220 crore from cess, charges and levies in 2024–25, or 10.25% of Gross Tax Revenue.

**Fiscal transparency is essential for democratic accountability. Examine the statement in the context of Union Government accounts.** *(GS2)*

How to attack it: Use the Consolidated Fund–Public Account pathway as the introduction; assess short-transfers, dormant funds and responsibility gaps; distinguish accounting irregularity from service-delivery failure; recommend integrated disclosure and audit follow-up.

Quote this: CAG Report No. 6 of 2026 also identified ₹844.93 crore in dormant Reserve Funds and Deposit Accounts.

**Discuss how public finance management can improve the effectiveness of social-sector spending in India.** *(GS3)*

How to attack it: Open with the education and health Reserve Fund findings; connect predictable resource flows with implementation capacity; examine monitoring and inter-ministerial coordination; conclude with fund-level outcomes rather than mere expenditure reporting.

Quote this: The CAG identified a ₹6,646 crore short-transfer to PMSSN and a ₹1,270 crore short-transfer to PSK during 2024–25.

## Prelims quick-fire

- **[Report/Index]** CAG Report No. 6 of 2026 found ₹9,222 crore short-transferred to four Reserve Funds during financial year 2024–25. — *The figure is short-transfer, not necessarily proven misappropriation or equivalent underspending.*
- **[Data]** The four affected funds were IEPF, PSK, PMSSN and OIDF, with short-transfers of ₹1,105 crore, ₹1,270 crore, ₹6,646 crore and ₹201 crore. — *PMSSN had the largest short-transfer; IEPF relates to investors, not education or health.*
- **[Constitution]** Cess collections first enter the Consolidated Fund of India and move to designated Reserve Funds after Parliament approves appropriation. — *Do not confuse the Consolidated Fund with the Public Account where Reserve Funds are recorded.*
- **[Data]** CAG reported ₹3,89,220 crore collected through cess, charges and levies in 2024–25, equal to 10.25% of Gross Tax Revenue. — *This aggregate includes cess, charges and levies; it is broader than the ₹82,321 crore examined for four funds.*
- **[Act]** The Oil Industry Development Act, 1974 provides for a cess on crude oil and natural gas for oil-industry development. — *The Act establishes the Oil Industry Development Board; OIDF was operationalised in Union accounts in 2024–25.*
- **[Constitution]** The CAG report was prepared for submission to the President under Article 151 and tabled in Parliament on December 18, 2025. — *Article 151 concerns CAG reports; Articles 112–114 concern the Union budget and appropriation process.*
- **[Body/Institution]** The Public Accounts Committee examines public expenditure and CAG findings to assess conformity with parliamentary authorisation. — *PAC scrutiny is post-expenditure accountability; it does not itself impose a tax or execute a scheme.*
- **[Data]** CAG found ten dormant Reserve Funds and twenty-one dormant Deposit Accounts with a combined net credit balance of ₹844.93 crore. — *Dormant means inactive for at least three financial years in this finding, not automatically illegally maintained.*

## What should happen

1. **Create a monthly reconciliation dashboard linking each cess collection, Consolidated Fund credit, parliamentary appropriation, Reserve Fund transfer and expenditure.** A common digital trail would identify short-transfers early and assign responsibility between the nodal ministry, accounting authorities and Finance Ministry. *(CAG Report No. 6 of 2026)*
2. **Mandate an annual statement to Parliament showing collection, transfer, closing balance, utilisation and reasons for any short-transfer for every cess-funded Reserve Fund.** Standardised disclosure would convert a scattered accounting issue into a measurable parliamentary accountability process. *(CAG Report No. 6 of 2026)*
3. **Introduce sunset clauses or five-year effectiveness reviews for purpose-specific cesses and dormant Reserve Funds.** A cess should continue only while its objective, funding gap and institutional need remain demonstrable. *(CAG Report No. 6 of 2026)*
4. **Clarify nodal-ministry responsibility and require time-bound replies to audit observations before the Public Accounts Committee concludes examination.** The Health Ministry’s statement that the Finance Ministry handles collection and allocation illustrates the risk of diffused accountability. *(Public Accounts Committee)*
5. **Publish outcome indicators alongside fund balances, such as school-enrolment support, health-system capacity or investor-awareness outputs.** Tracking only money transferred cannot establish whether the earmarked charge produced the intended public benefit. *(Sustainable Development Goals)*

## Jargon, demystified

- **Public Accounts Committee (PAC)** — A parliamentary committee that examines government spending and CAG findings to see whether money was used as Parliament authorised. *(It is a major instrument of post-expenditure legislative accountability.)*
- **Comptroller and Auditor General of India (CAG)** — The constitutional audit authority that examines government receipts, spending and accounts and reports findings to the legislature. *(Its Union reports are submitted under Article 151.)*
- **Cess** — A charge collected for a stated purpose, usually in addition to an existing tax, rather than for the general revenue pool. *(A cess is generally purpose-linked; a surcharge is an additional charge for general Union purposes.)*
- **Levy** — A broad term for a compulsory government charge imposed under legal authority, including a tax, cess or fee. *(The CAG report uses cess, charges and levies in its aggregate figures.)*
- **Consolidated Fund of India (CFI)** — The Union government’s main account into which tax revenue, non-tax revenue and borrowings are credited and from which authorised expenditure is met. *(Parliamentary appropriation is required for withdrawals from it.)*
- **Public Account of India** — The account containing money held by the government in a fiduciary capacity, including Reserve Funds and deposits. *(Government is custodian of this money and is accountable for returning or applying it appropriately.)*
- **Appropriation** — Parliamentary authorisation allowing money to be withdrawn from the Consolidated Fund for specified government services. *(Articles 113 and 114 provide the key constitutional framework.)*

## Revise in 30 seconds

- CAG found ₹9,222 crore short-transferred to four Reserve Funds in financial year 2024–25.
- Largest short-transfer: PMSSN ₹6,646 crore; smallest: OIDF ₹201 crore.
- Cess money first enters the Consolidated Fund and then moves to designated Reserve Funds after parliamentary approval.
- The issue concerns legislative financial control, fiscal transparency and credibility of earmarking.
- CAG also found 31 dormant funds or accounts holding a combined net credit balance of ₹844.93 crore.
- Best reform: prompt transfer, monthly reconciliation, annual parliamentary disclosure and sunset review.

## Study next

**Static links:** Parliamentary control over public finance, Consolidated Fund, Public Account and appropriation, CAG and Public Accounts Committee, Budgeting, fiscal transparency and accountability

**Essay angle:** A government may collect money with a label, but democratic accountability requires that the label remain visible until the money serves its declared purpose.

**Interview probe:** Would you prioritise strict transfer of every cess to its designated fund or allow flexibility for efficient cash management? Explain safeguards for your position.

## Sources

- [Public Accounts Committee meeting details, Lok Sabha](https://sansad.in/ls/committee/committee-meetings)
- [CAG Report No. 6 of 2026: Union Government Accounts](https://cag.gov.in/uploads/media/Report-No-6-of-2026-Union-Government-English-069d63bc0543c78-66588002.pdf)

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