Finance Ministry bars ministries & departments from issuing ‘Letters of Consolation’

The finance ministry has stated ministries and departments can now not concern a ‘Letter of Consolation’ to any entity, a measure that’s aimed toward bringing additional transparency in fiscal issues and budgeting.

The ministry had permitted ministries and departments to concern such ‘Letters of Consolation’ in 2017.

A letter of consolation issued by a ministry basically offers an assurance to the celebration it’s issued saying that the underlying obligation can be met.

Many infrastructure ministries such because the Railways had been utilizing these letters despite the fact that the instrument itself doesn’t have authorized sanctity.


“As a measure of fiscal transparency and accountable debt administration it’s important to have one instrument and that instrument is authorities ensures,” a senior authorities official aware about the event, advised ET.

The federal government discloses authorities ensures in its fiscal assertion, whereas there isn’t a evaluation or accounting of ‘Letters of Consolation’ issued.

Whereas the doc doesn’t have authorized sanctity, a division or ministry not honouring a letter of consolation wouldn’t mirror effectively with the federal government, it’s felt.

Additionally, as a result of there isn’t a central document or accounting of such a letter of consolation, there could also be indiscriminate use of the instrument and critical devolution of legal responsibility on the federal government in some circumstances.

The finance ministry has issued an workplace memorandum to this impact.

“…the authority to concern letters of consolation by ministries/ departments/ any entity of GOI stands withdrawn with speedy impact. Henceforth, no letters of consolation might be issued by any entity throughout the authorities,” the OM acknowledged.

The finance ministry will now perform an in depth evaluation of such letters issued by varied ministries and departments to evaluate the scenario.

Underneath the provisions of the fiscal accountability legislation, the annual funds now gives particulars of the ensures given by the federal government. On the finish of FY21, such ensures added as much as about ₹5 lakh crore.
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