Expenditure Finance Committee (EFC) in India

The Expenditure Finance Committee (EFC) is a crucial body within the Government of India responsible for scrutinizing and appraising proposals for public expenditure, particularly those involving substantial financial outlays. It acts as a gatekeeper, ensuring that proposed projects are economically viable, financially sound, and aligned with national priorities before they are submitted for final approval by the Cabinet Committee on Economic Affairs (CCEA).

The primary objective of the EFC is to improve the quality of public spending by critically evaluating project proposals from various Ministries and Departments. Its role is to ensure that resources are allocated efficiently and effectively, maximizing the return on investment for the nation. The EFC examines the justification, cost-benefit analysis, and potential impact of proposed projects, seeking to identify areas for improvement and potential cost savings.

Typically, the EFC is chaired by the Secretary of the Ministry of Finance (Department of Expenditure). Its members include representatives from the Planning Commission (now NITI Aayog), concerned Ministries/Departments proposing the project, and other relevant government agencies. This diverse composition allows for a comprehensive assessment of the project from various perspectives, including financial, economic, technical, and social.

The EFC's review process involves a detailed examination of several key aspects of the project proposal, including:

• Justification and Need: Is the project necessary and aligned with national objectives and sectoral priorities? What are the anticipated benefits and outcomes?
• Financial Viability: Is the project financially sustainable? Are the funding sources secure and reliable? What are the potential risks and how will they be mitigated?
• Economic Appraisal: What is the cost-benefit ratio of the project? Are there alternative, more cost-effective solutions? How will the project contribute to economic growth and development?
• Technical Feasibility: Is the project technically sound and feasible? Are the required resources and expertise available?
• Environmental and Social Impact: What are the potential environmental and social impacts of the project? Are adequate measures in place to mitigate any negative consequences?

Based on its assessment, the EFC may recommend modifications to the project proposal, suggest alternative approaches, or even reject the project if it is deemed unviable or inconsistent with national priorities. The EFC's recommendations are then submitted to the CCEA for final approval. The CCEA is the ultimate decision-making body for major public expenditure proposals.

The EFC plays a vital role in promoting fiscal discipline and responsible public spending in India. By ensuring that projects are thoroughly vetted and appraised before they are approved, the EFC helps to prevent wasteful expenditure and ensures that public resources are used effectively to achieve national development goals. It is a critical institution for good governance and sustainable economic development.