Centre may ease expenditure limits for ministries in Jan-March quarter

Shishir Sinha New Delhi | Updated on October 20, 2020

Positive trend in GST collection makes room for provisions

The last three months (January-March) of 2020-21 may see some relaxation in expenditure curbs imposed due to the pandemic by the Finance Ministry.

“We are watching the revenue position on a monthly basis. There have been some encouraging signs. Based on the revenue position during the ongoing third quarter, some changes can be made,” a senior Finance Ministry official told BusinessLine. This confidence comes from the fact that GST collection in September has moved into a positive zone for the first time during the current fiscal and is expected to continue during October-November due to the festival season, the official said, adding that collections from direct tax is also encouraging.

The revised estimates will be finalised during pre-Budget consultations between the Finance Ministry and other Ministries/departments. The government first makes expenditure provisions for various ministries and departments in the General Budget — announced on February 1 —, and depending upon necessity, the Supplementary Demands for Grants is tabled in Parliament to seek additional expenditure. This is either through net cash outgo or through savings from Budget allocations.

Expenditure proposal

For the current fiscal, the government had presented a budget of ₹30.42-lakh crore. In September, Parliament approved additional expenditure of over ₹2.35-lakh crore,, which included net cash outgo of ₹1.66-lakh crore and savings of around ₹69,000 crore. This is the largest-ever Secondary Demands for Grants in a fiscal year.

With this, the actual size of Budget is over ₹32.09-lakh crore. The government has already announced additional borrowing of ₹4.2-lakh crore, which takes the total borrowing to ₹12 lakh crore.

Under the cash management system — which are the guidelines for expenditure management during the first three quarters of the current fiscal — all Central government ministries and departments have been clubbed into three categories to define expenditure management.

Quarterly limit

The first category includes agriculture, health and family welfare, pharmaceuticals, consumer affairs, food and public distribution, civil aviation, Transfer to States and Interest Payments, besides nine others. Defence and fertiliser added to this category later. There will be no monthly or quarterly capping. However, every expenditure proposal must adhere to the existing guidelines and vetted by the Finance Ministry. These items are critical to fight Covid-19 and have to be prioritised for resources.

The second category has 29 demands/appropriations related to posts, defence pension, transfer to Union Territories, oil and road transport and highways, besides 16 other ministries and departments. Here, the quarterly limit would be 20 per cent of the budget estimate. Additonally, the monthly limit for three months would be 8, 6 and 6 per cent each respectively.

The third category has 52 items. The revised guidelines stipulate 15 per cent limit for the quarter and 5 per cent for each of the three months. The key Ministries and Departments include Commerce, Telcom, Coal, Environment, Mines, and MSMEs.

The official said that depending upon revenue position, caps for the second and third category might be relaxed. The picture will clear at the time of announcement of guidelines for expenditure control in the fourth quarter, he said.

Published on October 20, 2020

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