In the recent news, the Union Cabinet has accepted an ordinance to alter the Salaries, Allowances, and Pension of Members of Parliament Act, 1954. This significant change implies a 30% pay reduction for Members of Parliament (MPs), effective from April 1st, 2020. Furthermore, the Members of Parliament Local Area Development Scheme (MPLADS) funds will be suspended for the financial years of 2020-21 and 2021-22. The fund saved through these measures will be directed to the Consolidated Fund of India to combat the Covid-19 pandemic.
Details of the 30% Salary Cut
The salary reduction impacts all MPs, inclusive of the Prime Minister and the Council of Ministers, for the fiscal year 2020-2021. Other high-ranking officials, such as the President, Vice-President of India, and all State Governors, have independently decided to take a 30% pay cut as well. However, this amendment does not affect allowances or pensions of former MPs. Under the 2018 pay increase, every MP received a monthly salary of ₹1 lakh, ₹70,000 as a constituency allowance, and ₹60,000 for office expenses along with other benefits.
Suspension of MPLADS
The suspension of MPLADS is expected to save around ₹8,000 crore, to be redirected towards the Consolidation Fund. Many MPs had previously committed to utilizing their MPLADS funds to fight against the coronavirus pandemic. To date, 74 Rajya Sabha members have collectively contributed ₹100 crore, while 265 Lok Sabha members have given a total of ₹265 crore. This decision was made to emphasize the social responsibility of MPs in these challenging times.
Previous Measures Undertaken
Prior to this action, employees of the central government have generously given one day’s salary. Yet, it remains unclear whether they will experience a pay cut or not. The Telangana state government has already implemented salary cuts at all levels on 30th March. Additional measures include the introduction of the Pradhan Mantri Garib Kalyan Yojana.
While the salary reduction has been widely supported across the country, the suspension of MPLADS has drawn criticism as it potentially undermines the functions and roles of MPs and does a disservice to their constituents. Critics argue that centralization of funds is against federalism.
About Members of Parliament Local Area Development Scheme
The scheme was announced in December 1993 under the Ministry of Rural Development control. It was later transferred to the Ministry of Statistics and Programme Implementation in October 1994. The MPLADS enables MPs to recommend developmental works that emphasize the creation of lasting community assets based on local needs within their Constituencies. The annual MPLADS fund entitlement per MP constituency is ₹5 crore.
Understanding the Government Accounts Consolidated Fund
The Consolidated Fund, as stipulated under Article 266 (1) of the Constitution of India, comprises of all government revenue, including taxes and non-tax revenues. It also contains all loans raised by the Government via public notifications, treasury bills, and foreign governments. All government expenditures are sourced from this fund, and no withdrawal can be made without Parliament’s authorization. This fund is audited by the Comptroller and Auditor General of India, who reports their findings to the relevant legislatures.
The Contingency Fund and Public Account
The Contingency Fund was constituted under Article 267 (1) of the Indian Constitution, with a corpus of ₹500 crores and is utilized for unforeseen expenditure. Each state has its own Contingency Fund with identical provisions. On the other hand, the Public Account, constituted under Article 266 (2) of the Indian Constitution, comprises transactions related to debt not included in the Consolidated Fund of India. Parliamentary authorization for payments from the Public Account is not required. Each state maintains a similar Public Account.
