Article 203

Article 203 of the Constitution of India establishes the procedure for the consideration of financial estimates (demands for grants) in the State Legislature. It forms a vital part of the financial governance framework of the states, ensuring that public expenditure is authorised, scrutinised, and controlled by the elected representatives. The provision reinforces the constitutional principle that the executive cannot spend public money without legislative approval, thereby ensuring transparency, accountability, and democratic oversight in financial administration.

Constitutional Purpose and Framework

The Article provides a systematic procedure for debating, approving, and authorising government expenditure in a financial year. It balances the executive’s responsibility to initiate expenditure proposals with the legislature’s authority to approve or reject them.
In essence, Article 203 is the constitutional foundation for the budgetary control exercised by the State Legislative Assembly, mirroring the procedure followed in Parliament under Article 113.

 Expenditure Charged on the Consolidated Fund of the State

Under Article 203, certain categories of expenditure are charged directly on the Consolidated Fund of the State, meaning that they are not subject to the vote of the Legislative Assembly.
However, even though these expenditures cannot be altered or rejected by the House, the Assembly retains the right to discuss them. This discussion ensures legislative transparency and scrutiny over all financial matters.
Examples of charged expenditures include:

• Emoluments and allowances of the Governor;
• Salaries and allowances of the Speaker and Deputy Speaker of the Legislative Assembly and, in bicameral states, of the Chairman and Deputy Chairman of the Legislative Council;
• Salaries and pensions of High Court judges;
• Debt charges of the State Government; and
• Administrative expenses of constitutional bodies such as the State Public Service Commission.

By excluding these items from legislative voting, the Constitution guarantees the independence and impartial functioning of key constitutional offices and institutions.

Expenditure Not Charged on the Consolidated Fund

Article 203, governs all other expenditures that are not automatically charged on the Consolidated Fund of the State. These expenditures form the core of the budget discussion and are presented to the Legislative Assembly as “Demands for Grants.”
Each demand represents a specific request for funds to finance a department or programme of the state government. The Legislature has the authority to:

• Approve the demand in full;
• Reject the demand entirely; or
• Approve the demand with a reduction in the amount requested.

This clause empowers the Assembly to exercise effective financial control over the executive, ensuring that expenditure reflects the will of the people as represented through their elected legislators.

Governor’s Recommendation for Demands for Grants

Article 203,stipulates that no demand for a grant shall be made except on the recommendation of the Governor. This provision ensures that the executive initiates all financial proposals, maintaining fiscal discipline and coordination within government departments.
However, while the Governor’s recommendation is mandatory for introducing financial proposals, the final authority to grant or refuse approval rests with the Legislative Assembly. This establishes a clear constitutional balance between the executive’s administrative responsibility and the legislature’s financial authority.

Key Terms and Concepts

• Consolidated Fund of the State:The principal account of the state government into which all revenues, loans, and money received in repayment of loans are credited. All government expenditures, except those specifically provided otherwise, are made from this fund.
• Demand for Grants:A formal proposal presented to the Legislature seeking approval for expenditure under specific heads for various departments, schemes, or projects. Each demand corresponds to the budgetary needs of a particular sector.
• Charged Expenditure:Expenditure that is not subject to a vote but is included in the annual financial statement for discussion. It generally relates to constitutional offices and debt obligations.

Legislative Procedure for Financial Estimates

The process under Article 203 follows a sequence of constitutionally structured stages:

1. Presentation of the Annual Financial Statement:Under Article 202, the Governor lays before the Legislature the estimated receipts and expenditure for the year.
2. Discussion of the Estimates:Members discuss the budgetary proposals and the overall fiscal policy of the government.
3. Voting on Demands for Grants:The Assembly votes on each demand that is not charged on the Consolidated Fund. The government can spend only the amounts approved by the House.
4. Passing of the Appropriation Bill:Once all demands are approved, the total authorised expenditure is incorporated into an Appropriation Bill under Article 204, allowing withdrawal of funds from the Consolidated Fund.

This stepwise process ensures transparency, accountability, and legislative control over the executive’s financial operations.

Judicial Interpretations and Important Case Laws

The judiciary has repeatedly emphasised that the budgetary and financial procedures outlined in the Constitution are binding and integral to the rule of law.

• State of West Bengal v. Union of India (1963): The Supreme Court affirmed that the financial autonomy of states operates within the constitutional structure, subject to procedural compliance with Articles 202–207.
• Keshavananda Bharati v. State of Kerala (1973): The basic structure doctrine established in this case indirectly reinforces the sanctity of legislative control over public finances as part of the democratic framework.
• Indira Gandhi v. Raj Narain (1975): Highlighted that constitutional provisions governing financial procedures uphold the principle of responsible government and the supremacy of the Legislature in financial matters.

These rulings reaffirm that fiscal governance under Article 203 is not merely procedural but a constitutional guarantee of democratic accountability.

Relationship with Related Articles

Article 203 must be read in conjunction with other provisions forming the financial code of state governance:

• Article 202: Requires the Governor to present the annual financial statement.
• Article 204: Provides for the passing of Appropriation Bills to authorise expenditure.
• Article 205: Allows for supplementary or additional grants when the sanctioned amount is insufficient.
• Article 206: Governs the procedure for voting on and withdrawal of funds.Together, these provisions ensure fiscal responsibility and systematic budget management at the state level.

Significance of Article 203

Article 203 serves as a vital instrument for maintaining financial accountability and balance of power between the executive and the legislature. Its key contributions include:

• Ensuring that public funds cannot be spent without legislative sanction.
• Providing the Legislative Assembly with oversight over government expenditure.
• Guaranteeing that constitutional authorities receive secure, non-votable funding, protecting their independence.
• Strengthening the principle of responsible government, where the executive is answerable to the legislature for financial administration.

Practical Implications in State Governance

In practical terms, Article 203 shapes the annual budget session of every State Legislature. The power of the purse lies with the Assembly, allowing it to influence policy, prioritise developmental spending, and ensure fiscal prudence.
By mandating the Governor’s recommendation for all demands for grants, the Constitution ensures that financial proposals are consistent with the government’s economic capacity and administrative policy. Simultaneously, by granting the legislature the authority to approve or modify these demands, Article 203 embodies the essence of legislative control over executive power.

Constitutional Significance

Article 203 is a cornerstone of parliamentary democracy at the state level, affirming the principle that no taxation or expenditure shall occur without legislative approval. It creates a system of checks and balances where the executive proposes, but the legislature disposes.