Public Financial Management System

Public Financial Management System (PFMS) was previously known as Central Plan Scheme for Monitoring Scheme (CPSMS) rolled out by the Planning Commission in the fiscal year 2008-09. This project was initially implemented as a flagship scheme in the states of Bihar, Punjab, Mizoram and Madhya Pradesh. The initial phase had one aim of establishing a network amongst the different ministries, departments of the government. Finally, it was decided to link the financial networks of Central, State government and their various offices to implement the Public Financial Management System (PFMS) at a national level. This was done by including PFMS in the 12th plan initiative of the erstwhile Planning Commission.

What was the need of PFMS/CPSMS?

Under the Government of India, there are currently more than 1050 schemes which cater a very wide audience and are of very diverse nature. The government is implementing schemes in various social sectors which affect millions of Indians through its Ministries and Departments. Approximately Rs. 3 lakh crores is released into the system by the government under the Additional Central Assistance Program.

With such high diversity and enormous funding released through various channels, it was necessary to ensure that the money which is spent is reaching the intended project, purpose and also provide an accounting for the same.

Structure of PFMS

In the year 2013 it was decided to roll out PFMS for all the states and schemes till the year 2017 on the basis of following guidelines:

1. The total outlay cap set was set at Rs, 1080 crore through the O/O CGA.
2. The structure was decided to be as follows:

• Project Implementation Committee (PIC) at apex level
• The Central Project Management Unit (CPMU) at Centre
• State Project Management Unit (SPMU) at State level
• District Project Management Unit (DPMU) at district level to be manned through outsourcing

Role

PFMS/CPSMS is aimed at increasing the transparency as well as the accountability to the social sector which was previously non-existent.

1. It aims to create a management platform for all the financial activities of all plan schemes along with the integration with core banking solution of the banks which are handling plan funds. It also aims at integration with state treasuries. This is being done to initiate efficient and effective fund tracking even at the grassroots level where the scheme is being implemented.
2. It aims at providing information to all the agencies which are implementing schemes in the country on the fund availability and utilization for decision making, review, and implementation purpose.
3. As it provides real-time information of the resources regarding their availability, utilization it will result in better cash management and transparency in transactions.
4. It aims to ensure direct payment to the benefactors and increase the accountability of the public funds. All these efforts will result in good governance.

Working of PFMS:

Modules which are developed/under-development by PFMS as peer the provisions of Union Cabinet:

1. Fund Flow Monitoring:

• Monitoring of Externally Aided Projects (EAP)
• Mechanism for State governments to track state schemes
• A management system for expenditure for funds utilized via PFMS
• Treasury Interface
• Accounting module for all registered agencies

2. Direct Benefit Transfer (DBT module)
3. Interface for Banking
4. India Post
5. Reserve Bank of India
6. NABARD
7. Cooperative Banks

Using these modules, the government aims to create a seamless and efficient fund transfer, monitoring, utilization network for the multi-crore rupee value schemes.

Challenges

One of the main challenges in implementing this scheme is awareness and adaptability of the new system. Since there was no such centralized and one-stop system for the above-mentioned purposes, it has been initially difficult to collect data and establish the necessary network. With the large number of schemes, even larger implementing agencies and the ever-increasing benefits of these schemes the government agencies have faced some blockades when introducing this scheme at a national level.

Exam Topics

Prelims

A basic question on PFMS, its role and procedure can be asked.

Mains

How PFMS can increase the transparency as well as the accountability to the social sector?