Announces slew of cost-cutting steps

In a bid to contain the fiscal deficit at the ‘redline’ of 4.8 per cent of GDP, the Finance Ministry today announced a slew of measures aimed to cut government spending in non-critical areas.

But analysts estimate savings of no more than Rs 10,000 crore from all these steps including cuts in non-Plan expenditure (barring a few items), banning creation of new posts and even barring holding of meetings and conferences in five-star hotels.

Interestingly, the measures are almost identical to the austerity programme announced last May. However, the Ministry has not given out details of the actual savings from last year’s measures.

Immediate effect

According to an office memorandum, signed by Finance Secretary R. S. Gujral, there will be a 10 per cent cut in the non-Plan expenditure.

However, this will not cover interest payment, repayment of debt, Defence capital, salaries, pensions and the Finance Commission grants to States. The new measures will come into effect immediately.

Total Non-Plan expenditure for 2013-14 has been fixed at Rs 11.09-lakh crore. Minus the excluded items, then it will be around Rs 2.70-lakh crore.

The balance of close to Rs 9-lakh crore includes Rs 2.31-lakh crore as subsidies on food, fuel, fertiliser and others.

With rising crude oil prices, it will be difficult to contain subsidies. So, analysts feel that a major move on fuel prices can come very soon.

Travel, seminars

In what can be seen as bad news for airlines, the memorandum places a lot of restrictions on travel, both domestic and international. All officers except those of the rank of Secretary will travel economy class on domestic routes.

In the case of trips abroad, only Secretary-level officers can travel business class (it was first class earlier). “In all cases, only the lowest fare air tickets of the entitled class are to be purchased,” the note said.

At the same time, proposal for participation in study tours, workshops, conferences, seminars and presentation of papers abroad at government cost will not be entertained except those that are fully funded by sponsoring agencies.

The Finance Ministry has cut budgetary allocation by 10 per cent for organising essential conferences, seminars, workshops, etc. Holding of exhibitions, seminars and conferences abroad is “strongly discouraged”, except for trade promotion.

Balanced pace

According to current instructions, no more than 33 per cent of the Budget estimate may be spent in the last quarter of the financial year.

Besides, the stipulation that during March, the expenditure should be limited to 15 per cent of the Budget Estimate has been reiterated.

The measures come at a time the fiscal deficit has reached 62 per cent of the Budget target in just four months (April-July) of 2013-14.

With revenue not picking up as targeted, the Government feels these measures will promote fiscal discipline without affecting efficiency.

(This article was published on September 18, 2013)
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