Rule 116 — GFR

Rule 116 Principles governing transactions in connection with the agency functions entrusted to State Government. The following procedure shall be followed in regard to transactions arising in connection with the agency functions entrusted to the State Governments under Article 258 of the Constitution:

(i) The expenditure on extra staff or contingencies which the State Government have to incur-The extra cost to the State Government arising mainly in respect of the additional staff employed or contingent and other expenditure, as in the case of work devolving on the State Governments in connection with the administration of the Census Act, is reimbursable under Article 258 (3) of the Constitution. Expenditure in this regard shall be provided in the State Budget in the first instance and adjusted in the accounts of the State Governments under the normal Heads of Accounts. These will be reimbursed in lumpsum to the State Governments, necessary provision being made under a distinct sub-head “Amounts paid to other Governments, Departments, etc.”, under the concerned Demand of the Ministry administratively concerned with the subject. In computing the extra cost, the element of leave and pensionary charges can also be included, provided the relevant service and financial rules of the State Governments provide for this.

(ii) The expenditure on work entrusted to the State Government, such as expenditure on construction and maintenance of National Highways, expenditure on Defence Works, Aviation Works, etc.-The expenditure directly connected with the execution of the scheme or work entrusted to the State Government such as expenditure on the construction or maintenance of National Highways etc., will be adjusted direct in the accounts of the Central Government under the relevant Head of Account. The question of including the estimates in this regard in the Budget of the State Governments and subjecting them to the vote of the State Legislature will not arise. The expenditure will be adjusted under the Head “8658 – Suspense Accounts –PAO Suspense” in the Remittance Section of the State Accounts in the first instance pending their eventual clearance in accordance with the prescribed procedure.

Note: In the converse case relating to the entrustment of a State function to the Central Government under Article258-A of the Constitution, a procedure similar to that indicated in the Rule 116 above shall be followed. The extra cost on staff and other contingent expenditure, etc., will accordingly have to be provided in the Budget of the Central Government in the usual manner and recovery made in lumpsum from the State Government concerned. The other expenditure on execution of the work proper should be debited to the State Government concerned directly and the question of obtaining a vote of the Parliament for the same will not arise.