Context:

  • The Comptroller and Auditor General (CAG), in its report for the Union Government Accounts 2023–24, revealed that the Central Government failed to transfer ₹3.69 lakh crore of cess collections to the respective designated funds, defeating the purpose-specific nature of cesses.
  • The report was tabled in Parliament on August 12, 2025, and the issue pertains to multiple cesses collected over several decades, dating back to 1974

WHAT IS A CESS?

  • A cess is a tax-on-tax—an additional levy imposed over and above existing taxes.
  • It is meant to be used for a specific purpose, unlike general tax revenues.
  • Cesses are meant to be deposited into designated reserve funds in the Public Account of India, separate from the Consolidated Fund.

KEY FINDINGS OF THE CAG REPORT

Total Shortfall
  • As of March 31, 2024, the short transfer to designated funds amounted to ₹3,69,307 crore.
  • These include cesses for:
    • Oil Industry Development
    • Health and Education
    • Investor Protection
    • National Highway Monetisation

CASE STUDIES FROM THE REPORT

A. Oil Industry Development Cess
  • Act: Oil Industry (Development) Act, 1974.
  • Purpose: To fund the Oil Industry Development Board (OIDB).
  • CAG Finding:
    • Total cess collected (1974–2024): ₹2.94 lakh crore.
    • Amount transferred to OIDB: Only ₹902 crore (just 0.3% of total).
    • No transfers made since FY 1991–92.
  • Government Response:
    • An Oil Industry Development Fund was operationalised from 2024–25.
    • Transfers made:
      • FY 2024–25: ₹17,730 crore
      • FY 2025–26 (budgeted): ₹19,376 crore
B. Health and Education Cess
  • Timeline:
    • 2004: 2% Education Cess introduced.
    • 2007: 1% Secondary and Higher Education Cess added.
    • 2018: Replaced by 4% Health and Education Cess.
  • Intended Beneficiary Funds:
    • Prarambhik Shiksha Kosh (PSK) – est. 2005
    • Madhyamik and Uchchatar Shiksha Kosh (MUSK) – est. 2017
    • Pradhan Mantri Swasthya Suraksha Nidhi (PMSSN) – est. 2021
  • CAG Finding:
    • Shortfall in transfer from 2018–19 to 2023–24: ₹37,537 crore
  • Finance Ministry Claim:
    • It transferred ₹3.66 lakh crore to these funds.
  • CAG Response:
    • Government accounts show only ₹2.65 lakh crore
    • ₹1 lakh crore discrepancy remains unexplained and needs reconciliation.
C. Other Funds with Short Transfers
Fund Name Shortfall
Investor Education and Protection Fund ₹2,505.5 crore
Monetisation of National Highways Fund ₹5,968.1 crore

WHY IS THIS SIGNIFICANT?

  • Violation of Fiscal Transparency
    • Cess collections are meant for specific public welfare schemes.
    • Not transferring them to the intended funds violates Parliamentary authority, federal accountability, and citizen trust.
  • Breach of Financial Discipline
    • Funds collected under a legal provision (e.g., Oil Industry Act) but not used as mandated point to mismanagement of public finances.
    • Questions the credibility of budgetary allocations and financial governance.
  • Impact on Public Services
    • Non-transfer to education, health, and infrastructure funds could undermine service delivery, especially in sectors that rely on targeted, earmarked financing.
CONCLUSION The CAG report uncovers serious lapses in financial accountability by the Union Government, with large cess collections not being transferred to their legally designated funds. This not only raises governance concerns but also risks the underfunding of critical sectors like education, health, and infrastructure. Effective reform and transparency in fiscal transfers are essential for restoring public trust and upholding constitutional principles.