As of 2023-24, the Central Government has failed to transfer ₹3.69 lakh crore worth of cess collections to the relevant funds for which the cess was implemented, the Comptroller and Auditor General has found. A cess is a levy over and above a tax and has to be used for a particular purpose.
These short allocations date back to cesses imposed in 1974 and thus show lapses across governments.
In its report on the accounts of the Union Government for 2023-24 tabled in Parliament on Tuesday (August 12, 2025), the CAG found such shortfalls in transfers relating to funds created for investor education and protection, monetisation of national highways, development of the oil industry, and the development of health and education in the country.
“The aggregate impact of test checked funds till 31 March 2024 was short transfer of ₹3,69,307 crore to the designated reserve fund in the Public Accounts,” the CAG said in its report.
The single-largest source of this shortfall in transfers was to do with the Oil Industry Development Board (OIDB). The Oil Industry (Development) Act, 1974 had provided for the setting up of the OIDB for the development of the oil industry. For that purpose, a cess was imposed on crude oil and natural gas.
“We found that as per the Annual Report 2023-24 of OIDB, since FY 1974-75 to FY 2023-24, total cess on crude oil collected by the Government was ₹2,94,850.56 crore (including ₹18,845.98 crore during FY 2023-24),” the CAG report noted. “It is also significant that since FY 1974-75 to FY 1991-92, only ₹902.40 crore has been transferred to the OIDB and thereafter no funds have been transferred to the OIDB, out of the cess collected each year.”
In other words, the government collected ₹2.9 lakh crore as cess for the development of the oil industry since 1974-75, but had transferred only ₹902 crore or 0.3% to the relevant fund as of 2023-24.
In its reply to the CAG, the Ministry of Finance said that the government had decided to constitute an ‘Oil Industry Development Fund’ for the development of the oil sector, which was operationalised from 2024-25.
An analysis by The Hindu of the government’s budget documents shows it has transferred ₹17,730 crore in 2024-25 and has budgeted a transfer of ₹19,376 crore in 2025-26 to the fund.
The other large cess that has been collected, but not adequately transferred to the relevant fund is the Health and Education Cess.
The Government had imposed an Education Cess at 2% on all taxes collected by the Centre with effect from April 1, 2004. The government in 2007 levied an additional Secondary and Higher Education cess of 1% on income tax and surcharge. From April 1, 2018, the central government replaced these two cesses with a single 4% Health and Education Cess.
The proceeds from these cesses were to be transferred to the Prarambhik Shiksha Kosh (PSK) introduced in November 2005, the Madhyamik and Uchchatar Shiksha Kosh (MUSK) established in 2017, and the Pradhan Mantri Swasthya Suraksha Nidhi (PMSSN), set up in 2021.
The analysis by the CAG found that the Centre did not transfer a total of ₹37,537 crore that it collected as cess from 2018-19 to 2023-24 to the relevant education and health funds.
There does seem to be a discrepancy here, the CAG acknowledged. In its reply, the Finance Ministry said that between 2018-19 and 2023-24, it transferred ₹3.66 lakh crore to the designated funds, which was in excess of what it had collected from the relevant cesses during that time.
However, the CAG pointed out that the Union Government Finance Accounts showed that the transfer to these funds during this period was ₹2.65 lakh crore.
“This needs to be reconciled by the Ministry,” it added.
The other funds where the transfer was less than the cess collected were the Investor Education and Protection Fund (₹2,505.5 crore shortfall) and the Monetisation of National Highways Fund (₹5,968.1 crore shortfall).
Published – August 12, 2025 05:34 pm IST
