Transformational IT Projects Series: Khajane – Treasury Network of the Government of Karnataka

By Prof. S Sadagopan & Dr Ravindran

Way back in 1999 Government of Karnataka initiated the “computerization” of the 200+ treasuries spread across the State, many of them in remote areas that are difficult to reach (in the hilly regions of Western Ghats, for example). Each and every State (of the 29 States) runs network of Treasuries that control the inflow and outflow of government monies, that often runs into billions of dollars which is several thousand crores of rupees. Being a “welfate state”, the State governments in India perform large development functions that include:

• Maintenance of large water bodies (dams and canals) by the Irrigation departments

• Construction by the PWD (Public Works Deparment)

• Health (several hundreds of primary health centers and dozens of hospitals)

• Education (several thousands of government schools and hundreds of Government colleges, including tertiary educational Institutes – engineering, medical, law colleges and State universities)

• Law & Order machinery (Police)

To meet such large budgets, the State Government collects a large number of taxes that include

• Commercial tax

• Urban and Municipal tax

• Property tax

Government of Karnataka also employs a large number of employees (nearly quarter million) mostly in Education, Police and Health departments. Salary disbursal, tax collection, payment to contractors and service providers happen through the hundreds of treasuries with payment authorization controlled by the concerned departments, whose budgets get approved by the legislature. A complex process of systems & processes control the authorization, budget control and the eventual disbursal by thousands of officers with powers to disburse the grant.

Till Khajane was in place, the system used post, telegraph and fax as the primary means of communicating the orders and cheque as the primary mechanism of disbursal with cash from Banks to supplement the disbursal. Obviously, it was impossible to get an accurate estimate of the money-flows in real-time basis, necessitating the development of treasury network Khajane.

In 1999, there was no mobile network; wide area networks were not widespread (State WAN came up only in 2004); most of the Government officials were not PC literate and LAN was not readily available in most places. Naturally, Khajane had to take such challenges into account; yet, Khajane was a pioneering effort and brought the management of treasury functions in a State government environment to a situation akin to the practices of any corporate sector.

In 2015, with mobile network and State WANs fully in place and with a decade of experience and much higher IT literacy of government staff, Khajane II was initiated with a far more ambitious goal.

Khajane II Overview

The Finance Department (Government of Karnataka) has embarked upon the ‘Project Khajane-II’ initiative that comes under the ambit of the Department of Treasuries, with a vision to integrate and automate all Financial Operations of the Government of Karnataka. Unlike Khajane 1, which focussed mainly on automation of Treasury Process, Khajane 2 forms a unified end-to-end electronic platform. This platform brings together all the stakeholders in the Financial System, starting from the field offices of the Government who will prepare bills online and submit to Treasuries to Finance Department within the Government that is responsible for budget release; the Banking System involving the Reserve Bank and other Banks through which monies are delivered directly to the intended beneficiaries; and the Accountant General who prepares the final accounts of the State.

Khajane-II has enabled the following:

• Complete online electronic management of the expenditure with online bill submission to Treasuries and processing by the Treasury and direct e-Payment to the accounts of the beneficiaries. About 24,000 field offices of Government have been enabled to use this feature.

• Electronic payment gateway with multiple payment options (net banking, credit card/debit card, over-the-counter challan payment) for remittance of taxes, non tax fees/cess by citizens, users to Government.

• Online database and direct e-disbursal of pensions to the old-aged, destitute, physically challenged to provide social security to them, through integration with Postal department and Banking System.

• Integrated with e-Kuber System of the Reserve Bank of India to achieve online, automated and daily reconciliation and settlement of the accounts of the Government.

• Online application and facility for direct remittance of the pensions of more than 5 lakh pensioners of State Government.

• Complete view of the budget release and expenditure of the Government, to enable the Government to do ‘Just In Time’ release of funds.

• Online and real time reports to the Departments to facilitate real time tracking on the progress of the development works of the Government and also revenue receipts to the Government.

• Mechanism to track failed e-payments and a unique and simple system to ensure necessary corrections and payments to the intended recipients.

• Implementation of FIFO in all activities.

Architecture of Khajane-II

Khajane-II application is based on three-tier architecture and it is hosted centrally at Khajane-II data centre. Khajane-II application is secured across all the levels physical, application and data layer. Khajane-II application is designed module-wise enabling smoother rollout and scalability.

Figure 1: Khajane-II Overview

Figure 1 depicts an integrated representation of the Khajane-II solution.

Unique Things about Khajane-II

Some of the unique features of Khajane-II include

Real time integrations: Khajane-II has implemented real time integrations with HRMS, Banks, RBI and Department applications for sharing of status and to execute payments. Khajane-II has implemented 400+ integrations. Khajane-II HRMS integration enables real time sharing of bill, employee details, Bill status details. Khajane-II RBI integration enables real time sharing of E-payment files, MoE (memorandum of error) status. Khajane-II and department integration enables department to leverage Treasury unified gateway for accepting all inward remittance. Treasury unified payment gateway enables citizen to make online remittance without additional charges.

Failed e-payments: Khajane-II has implemented process for handling failed e-payments. Failed e-payment process ensures that real-time status is shared by Banks on payment status with reason of failures. Department users can make appropriate changes based on feedback shared by Banks and process failed e-payments. Khajane-II has also reduced failed e-payments percentage. Overall failed e-payment percentage has come down to 0.5 %.

SSP (Social Security Pensions) delivered: Khajane-II has automated Social Security Pensions payment process. This has enabled treasury to reduce time taken to make social security payments to end-users. Khajane-II has enabled department to make social security payments through Banks and EMO (electronic money order). Khajane-II has also enabled real time tracking of social security payments.

Beneficiary Management System: Khajane-II Beneficiary management system enables payments to be made to beneficiary for various state and central schemes. Khajane-II is also going to enable Aadhar-based payments through Beneficiary management system. This will enable departments to initiate direct benefit transfer to the end beneficiary.

Status of Khajane-II

The system went live on April 1, 2016 with 36 major departments fully covered. Khajane-II application is rolled out phase-wise. As part of phase 1 core treasury modules is designed and developed. As part of Phase 2, finance department module development is in progress and the deployment is scheduled to be through by December 2017. As of today, 91 departments use Khajane-II for all their financial transactions.

Key Benefits Delivered

Khajane-II application has brought process automation to treasury operations. Apart from ensuring better governance through transparency and accountability, Khajane-II has delivered efficiency and effective gains to Government, Citizens and other users. Some key benefits realised are as follow:

• Citizen can make payment for Government services online and money realization to government happens instantly. Within three minutes Citizen can make challan payments on Khajane-II. Khajane-II e-receipts module enables citizens to make government fees/charges payment online. Khajane-II has implemented treasury unified gateway which enables money realization to government account instantly.

• More than 72+ departments are using Khajane-II for revenue collection from users. In a quarter more than 3.5 lakh challans are paid on Khajane-II.

• Khajane 2 enables direct beneficiary payment of social security pensions and central/state schemes. Khajane 2 enables transparency and real time monitoring of e-payments done Through Khajane 2. Khajane 2 will enable identification of ghost accounts and users.

• Khajane-II application has implemented BPR (Business process re-engineering) which has brought in efficiency to entire bill preparation, submission, processing and payment process. Compared to 2-3 hours taken for manual bill preparation, online bill preparation on Khajane-II takes an average of 10 minutes per bill.

• The time for bills to be processed by Treasuries has been significantly brought down. Khajane-II e-payment platform delivers payment to end-users accounts within 2-3 hours post bill approval. Earlier end user had to wait longer for cheque clearance from banks for payments to reflect in user’s bank account. It used to take more than 3-5 days.

• Khajane-II enables real time budget release to drawing and disbursement officers online.

• Khajane-II provides real time reports to departments on revenue collection and expenditures done by the departments

• Khajane-II is used by 92 departments to release budget and bill processing.

Other key benefits envisaged on Khajane II

The envisaged benefits from the Khajane II project are wide reaching, and encompass all stakeholders.

The envisaged benefit for the stakeholders is listed out below.

(This column is fourth of the 15-part series on Transformational Projects making Digital India a reality. Prof. Sowmyanarayanan Sadagopan, Director, IIIT-Bangalore has co-authored this column with Dr Ravindran, Secretary, Government of Karnataka. Prof. Sadagopan can be reached at ss@iiitb.ac.in. and Dr Ravindran can be reached at secyk2-fd@karnataka.gov.in. Views expressed are personal.)