Ministries with unspent funds may see cut in Budget allocation

Shishir Sinha New Delhi | Updated on January 14, 2020

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Proposed move seen as a fallout of the fiscal pressures facing the Centre

Many Central Ministries and Departments are likely to face a cut in Budget provision on account of unspent money provided as Demands for Grants. This exercise intends to bring in fiscal discipline.

Demands for Grants refers to expenditure by the Central Ministries and Departments. The estimates of expenditure from the Consolidated Fund included in the Budget Statements and required to be voted by the Lok Sabha are submitted in the form of Demands for Grants.

Normally a separate demand is required to be presented for each Department or the major services under the control of a Ministry/Department.

Each demand normally includes the total provisions required for a service — provisions on account of revenue expenditure, capital expenditure, grants to States and Union Territories and also loans and advances relating to that service.

Conventionally, one Demand for Grant is presented in respect of one Ministry or Department, though more than one Demand may also be presented according to the nature of expenditure. As on date, list of Demands for Grants has total of 100 demands under 53 Central Ministries and two Departments.

According to the Budget document for the current fiscal, total expenditure through the Budget is estimated at ₹27.86-lakh crore, comprising ₹24.77-lakh crore as revenue expenditure and ₹3.39-lakh crore as capital expenditure.

According to a senior government official, many of the Ministries and Departments have not fully utilised the money given. Considering the cap during last three months (January-March) and last month of the fiscal (March), they are unlikely to exhaust their funds.

“Considering the fiscal situation, there is a strong possibility of cutting the allocation in proportion to unspent money,” the official told BusinessLine.

This is critical at a time, when the government is facing challenges with less than expected revenue collection and pressure to push up public expenditure. The government has already exhausted fiscal deficit limit as prescribed in the Budget and now it is estimated that the deficit might breach 3.5 or even 3.7 per cent of the GDP during the current fiscal.

It is also expected that the government might keep the deficit at 3.5 per cent for next fiscal — 2020-21. It may be noted that Fiscal Responsibility and Budget Management (FRBM) Act stipulates 3 per cent fiscal deficit.

Ministries/Departments submit estimate of expenditure to the Budget Division of the Finance Ministry. This estimate is prepared after detailed deliberation with the Finance Ministry, prioritisation of expenditure, review of schemes, etc.

“While framing the estimates due note may also be taken of the past performance, the stages of formulation/implementation of the various schemes, the institutional capacity of the implementing agencies to implement the scheme as scheduled, the constraints on spending by the spending agencies, and most importantly the quantum of Government assistance lying with the recipients unutilised etc. with a view to minimise the scope for surrenders at a later stage,” the norms say.

There is also a provision of utilisation certificate to be submitted by the autonomous bodies to the concerned Ministries/Departments within 12 months of the closure of the financial year.

“Some Ministries/Departments do not take such a provision seriously. Also, as a part of recovery, these Ministries deposit interest earned on unspent money parked with banks,” the official said. However, when the same money is raised at a higher cost it creates a problem.

Published on January 14, 2020

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