The Hindu Business Line : Oil price rise: Govt goes into austerity drive

New Delhi, June 5 The upward revision in petrol and diesel prices has its first casualty in the form of Government having to adopt austerity steps. It has announced a slew of economy measures to be introduced in various Central Government ministries and departments to ensure fiscal discipline and avoid wasteful expenditure.

The Finance Ministry on Thursday issued guidelines for such steps. In the past years, such measures were usually taken in the third quarter of a financial year.

The Union Ministers have also not been spared. The Prime Minister, Dr Manmohan Singh, on Thursday kicked off an austerity campaign by writing to all Union Ministers to “severely cut expenditure on air travel, particularly foreign travel, except in cases where it is deemed to be absolutely necessary.” This economy measure has also been advised for all senior functionaries in each Ministry.

Need to explain

The Prime Minister said in his letter that there was a need to explain to the people the constraints and reasons that had compelled the Government to effect a hike in petroleum products.

Later in the day, the Expenditure Secretary, Ms Sushma Nath, told reporters that the austerity guidelines specify that no new schemes and programmes (on the Plan side), except those that are part of the Budget announcements 2008-09, could be implemented in the current financial year.

She said, additional expenditure over and above the prescribed approved ceiling for existing schemes would not be permitted and any amendment is to be accompanied with matching savings. On the non-Plan expenditure side, every ministry has to take mandatory 10 per cent cut in certain heads like domestic and foreign travel expense, overtime expense, advertising, POL, professional services and office expense. Mandatory 5 per cent cut has also been imposed on certain non-Plan expenditure heads.

Fiscal discipline

“The 5-10 per cent cut would all put together be applicable on expenditure of about Rs 60,000 crore on the non-plan side. This will be a small amount if one were to compare it with the size of the central government budget. So, it is not the money that will come from the mandatory cuts, but the fiscal discipline it brings that is important,” she said.

The Secretary of each administrative ministry will take a monthly review of the implementation of austerity guidelines.

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