Government of India Volume I: Analysis and Recommendations

PUBLIC DEBT MANAGEMENT
fiscal consolidation an essential pre-condition” for creating such an agency. However,
the Commission is of the view that such a pre-condition is not stated as a requisite in
most of the expert committee reports that have recommended an independent public
debt management agency, with the REPORT OF THE INTERNAL WORKING GROUP ON DEBT
MANAGEMENT being a case in point.
The Commission believes that the main benefit of an independent public debt management
agency will come through the integration of public debt management functions
and various databases and information, which are currently dispersed. By unifying the
public debt management function, and efficiently linking it with the cash and the investment
management functions, there will be improved information, analysis and thus decision
making. With specialised human resources at its disposal, the public debt management
agency can contribute to a more effective interface with the market resulting in
cost-efficient management of Government borrowings. A specialised, unified and independent
agency will have significant comparative advantage over the existing structure
of a fractured and unco-ordinated Government borrowing programme spread across various
agencies.
The Commission’s views on public debt management and the creation of the public
debt management agency draws significantly from the deliberations of the Working
Group on Public Debt Management (see Annex 19.9).
12.2. Structure of the public debt management agency
The governance and operations of the public debt management agency would be handled
through a two-tiered arrangement. At the top, there would be an advisory council,
comprising of experts in finance, law, and public debt management. The advisory council
must advise and issue opinions on any matter related to the objectives and functions
of the public debt management agency that is referred to it by the agency or the Central
Government. It must also advise and provide its opinion on the financing plans submitted
by the public debt management agency to the Central Government, as well as the
agency’s annual report, whenever such opinion is sought. The council must meet periodically
to review and ratify the borrowing programme for the upcoming months.
The advisory council must issue its opinion by way of a consensus decision. Enforcing
a consensus requirement is also a way of ensuring that there is co-ordination between
the members of the council. Ideally, the chairperson of the council must be obliged to
seek consensus from all members. When no consensus is possible, the council would resort
to voting procedures. In such a scenario, opinions of individual dissenting members
should be documented and placed on record. The functioning of the advisory council
must follow standard governance practices as regards appointments, vacancies, meeting
procedures, terms and conditions of appointment, resignation and future employment.
As its title suggests, the advisory council would have no executive control over the
day to day management of the public debt management agency. The supervision and
control over daily operations and management would vest in the hands of a management
committee within the public debt management agency. The composition of the
management committee would be similar to that of the advisory council, except that advisory
council members would be senior in rank to those of the management committee.
This management committee must exercise general superintendence over, and manage
the administration and business of, the public debt management agency. The rules
and procedures followed by the committee must follow standard governance practices.
The appointment of the chief executive of the public debt management agency should
be open and transparent. The management committee should meet more frequently
than the advisory council, and take operational decisions, which affect the daily affairs
112 FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION