Economy

FinMin eases curb on expenditure for Central ministries/departments

Shishir Sinha New Delhi | Updated on November 17, 2020 Published on November 17, 2020

Finance Ministry has relaxed quarterly expenditure caps for various Central ministries and departments, which were placed in April.

“Relaxation has been granted to several ministries and departments,” a senior Finance Ministry official told BusinessLine. This relaxation will be in line with normal expenditure system. It has been granted keeping in mind improvement in revenue collection, especially GST collection and higher borrowing planned. Also, to smoothen re-opening of the economy, more expenditure is being permitted.

GST collection in the month of October crossed ₹1 lakh crore, while borrowing for entire year is planned at ₹12 lakh crore, up from the ₹7.8 lakh crore proposed in the Budget. Though direct tax collection is still down by nearly 22 per cent, the situation is expected to improve on account of three factors — improvement in quarterly financial performance, various companies’ announcement about performance-based pay revision and bonus, and many companies’ move to restore pre-Covid pay. Keeping all these in mind, the Finance Ministry intends to loosen its purse, the official said.

Though revenue collection has been low, expenditure, too, was low in comparison to last fiscal. During the first six months (April-September) of the current fiscal, the total expenditure was ₹14.79 lakh crore. It is 49 per cent of budget estimate, while corresponding figure for last fiscal was 53 per cent. Revenue expenditure reached 50 per cent as against 53 per cent during first half of the last fiscal (FY 2019-20).

Similarly, capital expenditure was just 40 per cent of the budget estimate during the current fisca,l as against 55 per cent of the last fiscal. As the cut in revenue collection was much deeper than expenditure, fiscal deficit touched 115 per cent of the budget estimate as against 93 per cent of the last fiscal.

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Three categories

As a part of cash management in April this fiscal, the Finance Ministry decided to regulate the government expenditure and fix the quarterly expenditure plan/monthly expenditure plan for various Central ministries and departments. Accordingly, all ministries and departments are clubbed into three categories based on demands/appropriations approved in the Budget.

Initially, the ‘A’ category has demands/appropriations related to Agriculture, Health and Family Welfare, Pharmaceuticals, Consumer Affairs, Food and Public Distribution, Civil Aviation, Transfer to States and Interest Payments, beside nine others. Later, for the third quarter (October-December), Fertiliser and Defence was added to this category. There is no monthly or quarterly capping.

The ‘B’ category covers demands/appropriations for 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 along with monthly limits of 8,6 and 6 per cent of budget estimate respectively for three months period.

The ‘C’ 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, Telecom, Coal, Environment, Mines, and MSMEs.

Now, quarterly limit for ‘B’ and ‘C’ category has been relaxed. Also, it has been advised that ministries will not bunch up expenditure/release in a bid to improve their pace of expenditure.

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Published on November 17, 2020
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