Plans for non-lapsable defence modernisation fund put on hold

Syllabus: GS-III, Subject: Economy, Topic: Fiscal policy and Budgeting, Issue: Non-lapsable Modernisation Fund for Defence

Context: Non-lapsable Defence Modernisation Fund off government agenda for now.

Non-lapsable Modernisation Fund for Defence:

  • The 15th Finance Commission had recommended the constitution of a dedicated non-lapsable Modernisation Fund for Defence and Internal Security (MFDIS).
  • The government in 2021 had said it has in-principle” accepted the creation of such a fund in the Public Account of India.
  • Reason for hold: Creating a non-lapsable pool has drawbacks as it affects parliamentary scrutiny and accountability.

Related Important Articles:

Articles 112-114 & 266 of the Constitution :

  • Provide that no money can be spent by the Government from Consolidated Fund of India without authorisation through an Annual Budget presented before the Parliament.
  • Such authorisation is limited to that particular financial year, and hence does not allow operationalization of a Public Fund which is non-lapsable in nature.
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