The National Assembly (NA) during the presentation of Budget Appropriation Bill in NA endorsed most of the recommendations of the Economic and Finance Committee including the recommendation for all SOEs to submit their annual budget proposals for review through the Ministry of Finance (MoF), to the Economic and Finance Committee of the NA.
This was passed despite objections from the Prime Minister and the Finance Minister by a narrow margin where the Speaker cast the deciding vote.
This was recommended after the committee observed that the mandates of SOEs are different from departmental budgetary bodies, such as ministries and constitutional bodies and that they undertake commercial activities for and on behalf of the State.
But nevertheless, the responsibility of their operations being on the government, substantial national resource allocations are involved in the forms of annual grants, subsidies and sovereign guarantees, owing to which many countries designate a separate standing committee of the Parliament to review their budget as well as accounts of all Public Undertakings.
The Bill was adopted on 14 June and then sent to the National Council (NC) for further deliberation.
The NC expressed its concern on the resolution requiring all SOEs to submit their annual budget proposals through MoF, for review by the Economic and Finance Committee of NA, by stating that the annual budget of SOEs under MoF and DHI for budget review by the economic and finance committee of NA will undermine and contravene the Royal Charter and the legal provision of various laws since existing legislation such as the Companies Act of Bhutan 2016 (Sections 152, 154 and 155), Public Finance (Amendment) Act 2012 (Sections 82,83,84,87,88,92and 94), Royal Charter for Druk Holding and Investments (Annex II, 4 and 5 ) and Corporate Governance Guidelines for SOE 2019 clearly state about the operation and management of SOEs, thereby ensuring proper accountability and performance.
Secondly, in the current context, SOEs under MoF go through three tiers of budgetary scrutiny, first at the board of the company state enterprise level, then at the Department of Macroeconomic Affairs and finally at the Department National Budget to get their operational budget or subsidies approved.
This is a clear evidence of existence of adequate budget review and robust checks and balances.
Moreover, Annex II of the Royal Charter for DHI clearly elucidates relationship between DHI and the government, and similarly for the SOEs.
Such concerns were sent back to NA which agreed to this recommendation by the NC and so such submission to the NA committee is not required now.
The approval of the NA to the NC’s recommendation is not widely known and so many people were still under the impression that SOE’s budgets will be scanned by the NA committee.
An unstated concern on the issue was also the danger of politicization of SOEs and especially DHI if its budget is decided by MPs.
This could have lead DHI to become like SOEs in other countries where appointments are made based on political loyalties and these companies are often milked or run aground to fulfill short-term political aims.