Union finance minister Arun Jaitley is all set to announce the interim budget of the government on February 1.

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An interim budget is presented by a government in its last year in office when general elections are due after the start of a fiscal while a vote-on-account is an alternative to an interim budget and has only an estimate of expenses required during the transition period.

Arvind Datar, an advocate and a High Court lawyer, discussed the differences between an interim budget and a vote-on-account.

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Edited Excerpts:

Let me tell you the backdrop, there is a lot of confusion about what the government can do in the upcoming budget. On the one hand, we are told that the convention has been that the government going to the polls can only pass a vote-on-account, that just gets enough money to run four months before the next government comes but we are also told that there is nothing in the law to stop the government from presenting a full-fledged budget, can you please clarify the legal position?

The basic rule is that a vote-on-account under article 116 of the constitution is basically a short-term arrangement. What happens is if technically, it is not possible to present the finance bill – that is the annual financial statement – and get it passed before the elections then you make a vote-on-account because then you just get sanctions for expenditure, which is required for the next three months or four months.

So suppose the gap between the budget and the election is three months then you ask for one-fourth the expenses for different ministries are sanctioned by parliament. That is because, under the constitutional and the annual financial statement, you have to present demands from various ministries, these have to be voted on and approved by parliament.

Last year, the budget was presented on February 1 and the finance bill got approved on March 29, so technically speaking, this year there is nothing to prevent the finance minister from presenting a full-fledged budget on February 1 and get it passed by March 29 or March 31, which is well before the elections. So he can do that.

The only thing is there has been a convention and if you have an interim budget, typically in the election year, they don’t present the full-fledged budget, they present an interim budget.

The difference between an interim budget and a vote on account is that vote on account is only getting sanctioned for expenditure whereas an interim budget is like a mini-budget.

It has got all the ingredients of a budget but they don’t normally make major changes on taxation and so on and so forth. They just have a budget, which combines everything for a short-term period. So legally, there is nothing in the constitution that prevents a government from passing a full-fledged budget this time.

They can present it on February 1, like last year and get it passed by March 31. They must also pass the appropriation bills after that. However, otherwise conventionally -because I have just checked if they present an interim budget, it will be the 13th time. So every time the election year comes, there has been a convention of presenting only an interim budget or at least a vote-on-account.

If the current government present a full budget on February 1, it cannot be taken to court on grounds that it has broken the law?

No, there is one observation in the second judges’ case, which said that constitutional conventions are as important as constitutional provisions. So, there is an observation to that effect but if you ask my opinion, technically speaking, nothing prevents the government from presenting a full-fledged budget but if they want to follow convention, they should perhaps present an interim budget.

If they present a budget and they make some major policy changes and hypothetically if a new government comes, it can completely reverse the whole thing in the same year, which will lead to deep consequences. So that is why conventionally they say, just make a budget for the election, and don’t make major changes and when the government comes – whether the same government or a new government – then they get time to present the proper budget.

But that is convention, hypothetically this government can pass a large farm support programme by March 29 and come April 1, it can say raise farm bonds or get access to Reserve Bank of India’s (RBI) capital and transfer some of that money to marginal farmers, that legally is possible?

If you see the constitution, there is no such concept as an interim budget. Article 112 simply says annual financial statement. These are just conventions, which are being followed from time to time where you can present two budgets in a year where one is called the interim budget and one is called the proper budget.

So to answer your question, if they can pass a proper budget, they can do everything in pursuance of the budget. Technically, yes, constitutionally yes.

Let me pull in another legal angle, the code of conduct usually kicks in one month before the election starts, for instance in 2014, the code of conduct came in to force on March 5. If that happens, can the government pass the budget and further even spend part of the money for what is obviously a pro-poll programme?

That could be a possibility because on February 1, it is only a bill going to be presented. Suppose, there is a code of conduct is kicked in between the bill and the act then it is going to be a very interesting question as to whether parliament can still pass that law in violation of the code of conduct. That could be a possible problem.

What is your gut telling you, what may the government do on February 1?

I think if they follow convention, they will present an interim budget and if they give some farm-loan sops then I don’t think any party is going to oppose it. That is also a problem. My best guess is, if it has happened for 12 times, perhaps the 13th time the government should pass an interim budget and wait for the election and then pass a proper budget with all changes in the finance act and so on and so forth.

How sacred is the code of conduct and how sacred is the vote-on-account convention? Will a farm budget be passed? Is there legal space for that?

One of the things in the code of conduct is what is announced before it is normally not affected. So people start announcing various sops before the code of conduct. One more thing, these loan waivers will come as part of budget announcements and they would have come before the code of conduct. So they could also argue that it has been announced before the code of conduct. It has not taken place after the code of conduct and therefore it is perfectly valid, that also could be a possible argument.

First Published:Jan 15, 2019 6:47 PM IST