The Public Accounts Committee (PAC) of Parliament on Thursday (October 15, 2026) grilled the Union government and several State governments over their responses to gaps, including “fraud markers”, in the implementation of pre- and post- matric scholarships for Scheduled Caste students identified by the Comptroller and Auditor General of India.

The PAC, headed by Congress MP K.C. Venugopal, is likely to move privilege notices against the Chief Secretaries of six States who were supposed to appear before it on Thursday (October 15, 2026) to explain the gaps flagged in the 2025 CAG report but failed to do so, The Hindu has learnt. Further, with the Union government responding to the gaps by saying the implementation burden was on State and Union Territory administrations, the PAC has given the Union Social Justice and Empowerment Ministry one month’s time to submit a detailed action-taken report on each of the issues flagged by the CAG.

In its 2025 report, the CAG audit had flagged a plethora of issues related to the administration of the pre-matric and post-matric scholarships for SC students. These included 40.75 lakh beneficiaries from as many as 14 States receiving scholarships with delays ranging from one to 90 months; over 3.5 lakh beneficiaries not receiving their scholarships at all; over 5,700 cases of scholarships being disbursed without proper checks of income eligibility; over 6,000 cases of non-SC beneficiaries receiving the scholarships meant for SC students; and issues related to beneficiaries receiving double payments, short payments, and excess payments.

During the PAC hearing on Thursday (October 15, 2026), the Chief Secretaries of Uttar Pradesh, Karnataka, Punjab, Odisha, Bihar, and Madhya Pradesh were supposed to appear for briefing the Members; however, none of the States had deputed the respective officials, sources told The Hindu. Further, the committee Members questioned the Secretary, Social Justice and Empowerment, on why action-taken reports against each point highlighted in the CAG audit were not submitted.

The Social Justice Ministry is learnt to have told the committee that since the implementation of the scholarship schemes rests with the State governments, it was unable to file action-taken reports as the respective State governments had not shared them with the Union Ministry. Upon further questioning, the Union Ministry has assured that the reports will be submitted in a month’s time.

Both the pre-matric and post-matric scholarship schemes are Centrally sponsored schemes, with the Union government sharing the financial burden on a 60:40 ratio with State and UT governments (90:10 for northeastern States). From 2017-24, a total of 52,878 crore was spent on these two schemes, of which about ₹30,234.5 crore came as the Union government’s share.

The committee went on to ask the Union Ministry why the CAG audit had shown continuing instances of fraud markers (such as same caste certificates being used by multiple beneficiaries in Uttar Pradesh, students in Odisha receiving scholarships in seemingly common bank accounts, and over ₹13 crore being paid in Haryana to beneficiaries where Aadhaar and bank details were not matching) if Direct-Beneficiary Transfers alongside the Aadhaar Payment Bridge System were meant to weed out dummy beneficiaries, as stated by the Union government.

The committee also pointed out during the hearing that the shift to the DBT method had resulted in significant drops in the number of beneficiaries in both the pre-matric and post-matric scholarships for SC students. It noted that despite time for recovery, the 2025-26 figures for the post-matric scheme had reached only 36.07 lakh beneficiaries against a target of 76.55 lakh beneficiaries.

The Public Accounts Committee (PAC) on Tuesday (September 8, 2026) expressed concern over the reported failure to transfer cess and levy collections to designated reserve funds, with members questioning the Union Finance Ministry’s explanation on the issue and reiterating earlier recommendations that such collections be used only for the purposes for which they were raised.

According to an audit examination for 2024-25, ₹9,222 crore collected through various cesses and levies was not transferred to four designated reserve funds during the year. The findings form part of Paragraph 3.3.1 of the Comptroller and Auditor General’s (CAG’s) Report No. 6 of 2026.

According to sources, PAC chairperson and senior Congress leader K.C. Venugopal said the issue had already been flagged by the committee in its 69th Report, tabled in August 2023. The report had recommended scientific assessments of the amount and duration of cess collections, periodic reviews to evaluate whether intended objectives had been achieved, and regular crediting of cess proceeds to reserve funds. Ignoring the directions of the PAC, which is a parliamentary standing committee, constitutes an insult to Parliament, Mr. Venugopal said.

‘Collected from everyone’

He further argued that cess collections should be utilised for the purposes for which they are raised and not to finance the government’s budgetary deficit. He also noted that cess collections are not part of the divisible pool of taxes and are therefore not shared with States. This, he said, makes the problem further acute since the Central government must utilise this amount to renew the facilities available to citizens. It is an amount collected from everyone, whether they are income tax payees or not, from the middle-class to the poor, Mr. Venugopal pointed out. 

Reserve funds are constituted for specific purposes under statutory provisions or executive orders and are financed through budgetary support, grants, contributions, cesses and levies collected in the Consolidated Fund of India.

In 2024-25, the Union government collected ₹3,89,220 crore through cesses, charges and levies, accounting for 10.25% of its gross tax revenue. The CAG found that the largest shortfall that year was linked to the Pradhan Mantri Swasthya Suraksha Nidhi (PMSSN), where only ₹14,439 crore was transferred against collections of ₹21,085 crore, leaving a gap of ₹6,646 crore.

The audit also flagged the Oil Industry Development Fund (OIDF). While cumulative collections through the oil industry cess since 1974-75 amounted to ₹3,12,782 crore, only ₹902 crore was transferred to the Oil Industry Development Board up to 1991-92 and none thereafter until 2023-24. Though the OIDF was operationalised for the first time in 2024-25, auditors found a short transfer of ₹201 crore. As of March 31, 2025, ₹2,94,150 crore remained in the Consolidated Fund of India.

The audit further noted that 10 reserve funds and 21 deposit accounts with aggregate credit balances of ₹844.93 crore had remained dormant for three or more financial years.

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Finance Ministry’s argument

The Finance Ministry has contested some of the audit findings, arguing that the assessment of Health and Education Cess transfers excluded the Madhyamik and Uchchtar Shiksha Kosh (MUSK). It said that against collections of ₹84,339 crore in 2024-25, transfers to the three designated funds totalled ₹86,020 crore, resulting in a net excess transfer of ₹1,681 crore. According to the Ministry, the higher allocation to MUSK offset the PMSSN shortfall.

The Ministry also said that allocations made in the Revised Estimates for 2025-26 would address earlier shortfalls. It further argued that maintaining large idle balances in reserve funds was fiscally imprudent at a time when the government had borrowed about ₹15.74 lakh crore in 2024-25 to finance expenditure of ₹46.53 lakh crore, adding that such balances increased government liabilities.