Rajesh Kumar is a senior public servant, with a reputation of honesty and forthrightness, currently posted in the Finance Ministry as Head of the Budget Division. His department is presently busy in organising the budgetary support to the states, four of which are due to go to the polls within the financial year. This year’s annual budget had allotted 78300 crores for the National Housing Scheme (NHS), a centrally sponsored social housing scheme for the weaker sections of society. 775 crores have been drawn for NHS till June. The Ministry of Commerce had long been pursuing a case for setting up a Special Economic Zone (SEZ) in a southern state to boost exports. After two years of detailed discussions between the centre and state, the Union Cabinet approved the project in August. The process was initiated to acquire the necessary land. Eighteen months ago, a leading Public Sector Unit (PSU) had projected the need for setting up a large natural gas processing plant in a northern state for the regional gas grid. The required land is already in possession of the PSU. The gas grid is an essential component of the national energy security strategy. After three rounds of global bidding, the project was allotted to an MNC, M/s XYZ Hydrocarbons. The first tranche of payment to the MNC is scheduled to be made in December. Finance Ministry was asked for a timely allocation of an additional 6000 crores for these two developmental projects. It was decided to recommend the re-appropriation of this entire amount from the NHS allocation. The file was forwarded to Budget Department for their comments and further processing. On studying the case file, Rajesh Kumar realized that this re-appropriation may cause inordinate delay in the execution of NHS, a project much publicized in the rallies of senior politicians. Correspondingly, the non-availability of finances would cause a financial loss in the SEZ and national embarrassment due to delayed payment in an international project. Rajesh Kumar discussed the matter with his seniors. He was conveyed that this politically sensitive situation needs to be processed immediately. Rajesh Kumar realized that diversion of funds. from NHS could raise difficult questions for the government in the Parliament.

Discuss the following with reference to this case: (250 words)

(a) Ethical issues involved in re-appropriation of funds from a welfare project to the developmental projects.

(b) Given the need for proper utilization of public funds, discuss the options available to Rajesh Kumar. Is resigning a worthy option?

(a) Ethical issues involved in re-appropriation of funds from a welfare project to the developmental projects

  • Diversion of funds from a welfare project like the National Housing Scheme (NHS) to other developmental projects can be seen as a violation of the government’s commitment to provide housing for the weaker sections of society.
  • It also raises questions about the government’s prioritization of different social welfare programs and whether the needs of the most vulnerable are being adequately addressed.
  • Additionally, re-appropriation of funds from a welfare project to other projects can be seen as a failure to ensure that public funds are being used in the most effective and efficient way, which goes against the principle of good governance and accountability.
  • Furthermore, it raises questions about the transparency and fairness in the allocation of funds and whether the decision-making process is influenced by political considerations.

(b) Options available to Rajesh Kumar and if resigning is a worthy option

  • Rajesh Kumar can report the matter to his seniors, or to the relevant oversight bodies, such as the Comptroller and Auditor General of India, to bring attention to the ethical issues involved in the re-appropriation of funds from the NHS.
  • He can also communicate his concerns to the relevant political leaders or members of the Parliament, in order to raise awareness of the potential negative impacts of re-appropriating funds from the NHS.
  • Another option for Rajesh Kumar would be to try to find alternative sources of funding for the SEZ and natural gas processing plant, such as public-private partnerships or international funding.
  • Resigning might be a worthy option if Rajesh Kumar feels that he cannot in good conscience participate in a process that he believes is unethical or violative of the government’s responsibilities towards the welfare of the citizens.
Mind map notes for UPSC
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