Rule 106 — GFR 2017
Original Rule Text
Rule 106
Method of calculation of interest. The
interest shall be calculated on the direct
capital outlay at the end of the previous
year plus half the outlay of the year itself,
irrespective of whether such outlay has
been met from current revenues or from
other sources.
What This Means
This rule outlines a specific method for calculating interest on money spent on major government projects, known as 'capital outlay.' Capital outlay refers to significant investments in long-term assets like new buildings, roads, or large equipment. When you need to determine the interest cost associated with these investments, you don't simply use the total amount spent up to the current point.
Instead, the calculation involves two main parts: first, you take the total amount of capital invested in the project up to the end of the *previous* financial year. Second, you add *half* of the money spent on the project *during the current* financial year. This combined figure then becomes the base amount upon which the interest will be calculated. A crucial aspect of this rule is that this calculation method applies universally, regardless of whether the funds for the capital outlay came from the government's regular income (current revenues) or from other sources like loans, grants, or special funds.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Interest on government capital projects must be calculated using a specific, standardized formula.
- 2The base for interest calculation includes the total direct capital outlay accumulated by the end of the previous financial year.
- 3Additionally, half of the direct capital outlay incurred during the current financial year is added to this base.
- 4This method ensures a consistent approach to accounting for the cost of capital across all government departments.
- 5The source of funds for the capital outlay (e.g., current revenues, loans) does not influence this calculation methodology.
Practical Example
Consider the Ministry of Health and Family Welfare, under the guidance of Director Mr. Alok Singh, undertaking the construction of a new district hospital. By March 31st of the previous financial year (FY 2022-23), the Ministry had already spent ₹75 crores on the hospital project. In the current financial year (FY 2023-24), they anticipate spending an additional ₹30 crores to complete various phases of construction.
To calculate the interest for FY 2023-24 according to Rule 106, Mr. Singh's finance team would first take the previous year's accumulated outlay of ₹75 crores. They would then add half of the current year's anticipated outlay, which is ₹30 crores / 2 = ₹15 crores. Therefore, the total base amount for calculating interest for FY 2023-24 would be ₹75 crores + ₹15 crores = ₹90 crores. This ₹90 crores figure would then be used with the applicable interest rate to determine the annual interest cost, irrespective of whether the ₹30 crores came from the annual budget allocation or a special grant for healthcare infrastructure.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
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This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.