What is a vote-on-account?

With the elections around the corner, the government will not be presenting a full Budget this year. Instead, acting Finance Minister Pranab Mukherjee will present an interim Budget on February 16. He will then present a 'vote-on-account,' which will allow the country's financial business to be transacted until the next government is in place.
So what is a vote-on-account?
In a nutshell, it is a finance minister's statement to seek Parliament's approval of the obligatory expenditure that the government has to incur for the first three or four months of a financial year.
Apart from this, there are also the revised estimates of the expenditure incurred by the government during the financial year that is coming to an end. These estimates provide an assessment of how efficiently the government has spent its resources. There are also the revised estimates of government revenue from different sources.
If I wanted a more detailed explanation?
Here goes. . . The Indian Constitution says that all revenues received by the Union government and the loans raised by it are to be put into the Consolidated Fund of India. This does not include anything that is put into a Contingency Fund.
Since Parliament is not able to vote the entire budget before the beginning of the new financial year (like now, with elections round the corner), it is necessary to keep enough money at the government's disposal to allow it to run the administration of the country.
When the government needs to withdraw any money from the Consolidated Fund of India to cover its expenditure (especially when elections are underway and a caretaker government is in place), it has to seek first approval from Parliament.
A special provision is, therefore, made for a vote-on-account by which the government obtains the vote of Parliament for a sum sufficient to incur expenditure on various items for a part of the year.
This sanction of Parliament for withdrawal of money from the Consolidated Fund of India to meet the government's expenses is generally known as a vote-on-account.
Without passage of the vote-on-account before March 31 (the end of the financial year) in Parliament, the government will not have been able to draw money from the Consolidated Fund of India for government expenditure from April 1.
If there are no external reasons, like an election or a caretaker government in the saddle, does a vote-on-account take place?
Yes, it does. Actually, a vote-on-account takes place very year.
While the Budget is presented on the last day of February every year, it takes a couple of months before the Budget is actually passed by both houses of Parliament. Once of the reasons for this is that Parliament adjourns the winter session before meeting again during the summer session, when the Budget is passed after modifications, if necessary.
Parliamentary scrutiny of the financial proposals and the passage of the Budget is normally not completed until the second week of May, well after the commencement of the new fiscal year.
So, the government presents a vote-on-account, estimating the expenditure for the first few months of the fiscal year, which is approved by Parliament. These expenses are then debited to the Consolidated Fund of India
That's clear enough. But what is the Consolidated Fund of India?
Well, the government of India collects funds by way of taxation like income tax, central excise, custom, land revenue (tax revenues). It also receives money from other sources (these are basically non-tax revenues that include businesses and facilities run by the government) like the railways, posts, transport, etc.
All this money is credited into the Consolidated Fund.
Similarly, all loans raised by government by issue of public notifications, treasury bills (internal debt) and loans obtained from foreign governments and international monetary institutions (external debt) and all money received by government by way of interest repayment of loans it has made are also credited into this fund.
All expenditure incurred by the government for the conduct of its business, including repayment of internal and external debt and release of loans to the state/ union territory governments for various purposes is debited against this fund.
Money can be spent through this fund only if authorised by Parliament.
The Consolidated Fund was set up under Article 266 (1) of the Constitution of India.
And the Contingency Fund?
This is in the nature of an imprest. Put simply, this means if you start the month with Rs 100 in the fund and spend Rs 90 during the month, that Rs 90 will be replaced to bring the amount in the fund back to Rs 100. In this example, the maximum amount of money that can be spent Rs 100. You can only spend what you have and you are only given back what you spend, in this case Rs 90.
The Contingency Fund is kept at the disposal of the President of India to enable the government to meet unforeseen expenditure, which cannot wait for approval from Parliament.
The money is to be used to provide immediate relief to victims of natural calamities and also to implement any new policy decision taken by the Government pending its approval by Parliament.
In all such cases, after Parliament meets, a bill is presented indicating the total expenditure to be incurred on the scheme/ project during the current financial year. After Parliament votes on the bill, the money already spent out of the Contingency Fund is recouped by debiting the expenditure to the Consolidated Fund of India.
The Contingency Fund was set up under Article 267 of the Constitution of India. The corpus of this fund is Rs 50 crores (Rs 500 million).
Here's something I should have asked earlier.
What is the Budget?
The Budget is a statement of the financial position of an administration for a definite period of time based on the estimates of expenditures during the period and proposals for financing them. A full budget thus spells out both the manner in which the money is to be spent and how it is to be raised.
Are a vote-on-account and an interim Budget the same?
No. While a vote-on-account deals only with the expenditure side of the government's budget, an interim Budget is a complete set of accounts, including both expenditure and receipts.
Why is a vote-on-account sometimes presented instead of an interim Budget?
A government typically opts for a vote-on-account, as it is regarded improper for an outgoing government to impose on its successor changes that may or may not be acceptable to the incoming government.
Technically, it is not necessary for a government to present a vote-on-account in an election year. But a full Budget just before the elections makes a mockery of the whole exercise.
Also, when the new government comes into place, it will need a couple of months before it presents its Budget. Until then, one of the first orders of business for the new administration is to get a vote-on-account passed to keep the country's financial wheels running.
Can the finance minister make policy statements while presenting the vote-on-account?
Barring any announcement on taxation, the finance minister's speech before seeking Parliament's approval of the vote-on-account can contain his intentions on economic policy. He can give indications of what he would like to do if given an opportunity to return to Parliament as finance minister after the elections.
For example, when former finance minister Yashwant Sinha presented the vote-on account in 1991, he announced the Chandra Shekhar government's plan to divest government equity in public sector undertakings
For how long can a vote-on-account be in force?
Normally, the vote-on-account is taken for two months only. But during election year or when it is anticipated that the main Demands and Appropriation Bill will take longer time than two months, the vote-on-account may be for a period exceeding two months.
Typically this period does not exceed six months, as that is the maximum gap possible between two sittings of Parliament.
Normally a vote-on-account is in operation till the full Budget is passed.
What is the Demands and Appropriation Bill?
After a general discussion on the Budget, Parliament is adjourned for a fixed period. During this period, the demands for grants of various ministries/ departments are considered by concerned standing committees. The standing committee, consisting of 45 members (30 from Lok Sabha and 15 from Rajya Sabha), are required to make their reports within a specified period.
Then, Parliament meets to discuss and vote on these demands. The voting procedure is popularly known as 'guillotine.' The Lok Sabha has the power to assent to or refuse to give assent to any demand or even to reduce the amount of grant sought by the government.
After this, the government introduces the Appropriation Bill. The Appropriation Bill is intended to give authority to the government to incur expenditure from and out of the Consolidated Fund of India.
What were some of the unusual (election- or crisis-related) vote-on-accounts presented in the last few decades?
The defence scam (in a sting operation, BJP leader Bangaru Laxman was captured, on hidden camera accepting a bribe for a defence deal) that rocked India on March 13, 2001, shook Parliament. As Opposition parties demanded the resignation of the ruling NDA government, the passage of the Budget got stalled.
Finally, the Congress and other Opposition parties had agreed to co-operate in passing the vote-on-account and Parliament approved the vote-on-account (allowing the government to withdraw a fixed amount for payment of salaries and other government expenditure from the Consolidated Fund till July) on March 21. Otherwise, the government would have been financially paralyzed from April 1.
Here are some of the others:
The 1980s saw only one vote-on-account presented by R Venkataraman.
The 1990s wree witness to three votes-on-account, reflecting the politically turbulent times:
March 1991: Vote-on-account as Chandrashekhar government falls after Congress withdraws support.
February 1996: Vote-on-account as general elections are called.
February 1998: Vote-on-account as Gujral government falls.
In February 2004, after presenting an interim Budget, finance minister Jaswant Singh presented the vote-on-account, as general elections were called.
Source