The Centre has directed all its Ministries and Departments to cut ‘wasteful expenditure’ by at least 20 per cent. This is second key measure to rationalise expenditure in order to divert more resources for fight against Covid-19 pandemic.

Talking to BusinessLine , a senior Government official confirmed the move. “A dashboard is also to be prepared in order to show expenditure rationalisation,” he said. It is believed that ways to conserve more and more resources was approved during last meeting of Union Cabinet. Accordingly, instructions were sent to Central Ministries and Departments. There are 100 Central Government units clubbed into 53 Ministries and Departments.

Though the official did not explain wasteful expenditure, but in technically wasteful expenditure refers to expenses on food, conferences, stationary, decoration, travel etc.

Union Budget for 2020-21 provided ₹ 30.42 lakh crore for expenditure during current fiscal. It comprises of ₹ 26.30 lakh crore of Revenue Expenditure while ₹ 4.12 lakh crore has been categorised as Capital Expenditure. After considering estimated revenue generation of over ₹ 20.20 lakh crore and recovery of loans, fiscal deficit is estimated at ₹ 7.96 lakh crore.

Augmenting revenue

Now, problem is that the lockdown has almost brought two thirds of economic activities to a standstill. This means tax receipt will be affected severely. At the same time, action on disinvestment proposals is unlikely to take place and hence non-tax receipts too will take a hit. However, the government needs to spend much more than what is estimated in the Budget. Especially, expenditure on health-related activities and relief to vulnerable sections of society need additional revenue. That is why the government is working on all possible measures to augment revenue.

Earlier on April 8, for the first time in recent history, the Finance Ministry had decided to cap expenditure for various Ministries and Departments barring Health, Agriculture, Railway and 14 others. It was said that keeping in view the present situation arising out of Covid-19 and the consequent lockdown, it is expected that the cash position of the government may be stressed in Q1 (April to June) of 2020-21. Accordingly, it was thought essential to regulate the government expenditure and fix the Quarterly Expenditure Plan (QEP) and Monthly Expenditure Plan (MEP) of various Ministries and Departments.

For this mechanism, all the Central Government Ministries and Departments divided into three categories based on demands/appropriations approved in the Budget. The first 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.

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 31 demands/appropriations related to Fertilizers, Posts, Defence Pension, Transfer to Union Territories, Oil and Road Transport and Highways, besides 18 other Ministries and Departments. For them, the quarterly limit would be 20 per cent of the Budget Estimates. Also, the monthly limit for April would be 8 per cent and 6 per cent each for May and June.

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, Telecom, Coal, Environment, Mines, MSMEs and others.

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