Second Administrative Reforms Commission (ARC) Recommendations

At a Glance

• What it is Commission that recommended reforms in public administration (2005-2009)
• Chairman Veerappa Moily
• Reports 15 reports
• Earlier body First ARC (1966-70)
• Exam link UPSC Prelims, Polity: Governance

Where Does It Fit?

This is the fifth topic of the category on Governance. The Second Administrative Reforms Commission of India (2005-2009), headed by Veerappa Moily, examined the working of public administration and made recommendations on many aspects of governance. It followed the First ARC of 1966-70, whose recommendations included the Lokpal and Lokayukta.

First and Second ARC

The First ARC was a six-member body, and no action was taken on its Centre-state recommendations. The Second ARC is therefore best read as a continuation of the effort to modernise administration.

The Fifteen Reports

Observations on Groups of Ministers

In its report on the Organisational Structure of Government of India (2009), the Commission examined Groups of Ministers (GoMs), which are ad hoc bodies formed to give recommendations to the Cabinet on emergent issues, and some of them can take decisions on behalf of the Cabinet. It observed that the constitution of a large number of GoMs meant many could not meet regularly to complete their work, causing significant delay on major issues. It felt that more selective use would lead to more effective coordination, particularly if the GoMs were empowered to decide on behalf of the Cabinet with prescribed time limits, and recommended selective but effective use of GoMs with a clear mandate and time limits.

Observations on Audit and Financial Management

In its report on Strengthening Financial Management Systems (2009), the Commission listed the challenges before external audit by the CAG: only 15-20 of the 1,000 to 1,500 audit paras every year are examined in detail by the Public Accounts Committee; Action Taken Notes are largely formal; State PACs have a huge pendency; thousands of inspection reports lie unattended; audit is post facto and findings may come late; findings rely on files with little physical verification; reports are seen as negative; relations between auditor and auditee are not always harmonious; media coverage is poorly informed and inspection reports are not public; internal and external audit lack synergy; audit gives no assurance on the fair presentation of government financial statements; and grants and loans to NGOs are rarely audited.

Observations on Local Governance and Security

In its report on Local Governance (2007), the Commission noted that panchayats receive funds from Union grants based on the Finance Commission, devolution from the State Government based on the State Finance Commission, loans and grants from the state, programme-specific allocations under Centrally Sponsored Schemes and internal resources. It found that states have not given adequate attention to fiscal empowerment of panchayats, whose own resources are meagre; that internal resource generation is weak; that panchayats depend heavily on grants, much of which is scheme specific, leaving little discretion; and that states are not keen to devolve funds. It also found the performance of panchayats unsatisfactory because states did not devolve the 3Fs (functions, funds and functionaries), bureaucrats controlled panchayats and parallel bodies were created. In its report on Combating Terrorism (2008), it recommended an agency at the Centre to investigate terror offences with national ramifications, which preceded the National Investigation Agency. Its report on Ethics in Governance (2007) is listed among the committees that studied electoral and political reforms.

Why Administrative Reform Matters

The reports collectively move towards citizen-centric administration, technology-enabled delivery, transparency through the Right to Information, better financial management and stronger local governance. They influenced the Sevottam framework, e-governance policy and the debate on civil services reform. The repeated finding is that implementation, and not the design of institutions, is the main gap, since many recommendations require action by the states or by several ministries together.

Why Is This Topic Important?

• Frequent reference Used in many Mains answers on governance
• Report titles Prelims questions on specific reports
• Links Connects RTI, ethics, e-governance, local governance

What Came Next?

The next topic covers the civil services and the All-India Services under Article 312.

Key People and Terms

• ARC Administrative Reforms Commission
• GoM Group of Ministers
• 3Fs Functions, funds and functionaries
• SMART Simple, Moral, Accountable, Responsive, Transparent
• Action Taken Note Department reply on audit paras

Exam Corner

Mains Angle

Questions on this topic usually ask about administrative reform. Use these points to add depth.

• Citizen-centric administration Service delivery
• Coordination Selective Groups of Ministers
• Financial management Audit challenges
• Local governance Fiscal empowerment