FinMin says no to automatic transfer of unspent money by Ministry/Department into next month

Shishir Sinha New Delhi | Updated on June 24, 2020

No monthly/quarterly capping on expenditure for health, pharma, agriculture for three more months

With income still under severe strain, the Finance Ministry has decided not to permit automatic carry forward of unspent money by various Central Ministries/Departments into the next month or next quarter. Also, it plans to carry out Expenditure Management Measures, as announced in April, for three more months but with some additional guidelines.

According to an Office Memorandum (OM), issued by Expenditure Department, all Grants/Appropriations will continue to be classified as per categories ‘A’, ‘B’ and ‘C’ defined on April 8. Quarterly Expenditure Plan (QEP) for three months period starting July 1 of the Ministries/Departments will be governed by the previous order. This has been done as receipts from tax as well as non-tax sources are much below the target.

‘A’ category of Demands/Appropriation relates to Agriculture, Health & Family Welfare, Pharmaceuticals, Consumer Affairs, Food & Public Distribution, Civil Aviation, Transfer to State and Interest Payments, besides nine others. There will be no monthly or quarterly capping. ‘B’ category has 31 Demands/Appropriations related to Fertilizers, Posts, Pensions, Transfer to Union territories, Oil and Road Transport & Highways besides 18 other Ministries/Departments. Here, the quarterly limit would be 20 per cent of the Budget Estimate. ‘C’ category has 52 items (Telecom, Commerce, Coal, MSME, etc) and for these, there is limit of 15 per cent of Budget Estimate to be spent in three months and limit of 5 per cent in each of three months.

The new OM made it clear that Monthly Expenditure Plan for July, August and September will mirror the monthly stipulations that were spelt out for April, May and June. It also said that the amount remained unspent in a month or quarter will not be transferred automatcially into the next month or quarter. If any Ministry or Department intends to spend unutilised money, they will have to seek specific approval from Expenditure Secretary in the Finance Ministry. It has specifically mentioned that expenditure on ‘salary’ and ‘pension’ will be as per actual requirement and will be within the overall limits prescribed under cash management guidelines.

The new OM has cautioned the Ministries/Departments that while utilising their allocations utmost care must be taken not to bunch up expenditure releases in a bid to improve their pace of expenditure leading to parking of funds. “In this time of acute cash stress, utmost care may be taken to avoid releases that can contribute to idle parking of funds,” it said.

A senior Finance Ministry official said many a times not just States but Ministries/Departments and autonomous bodies park their unspent fund in banks and financial institutions and earn interest. “Such interest is less than the interest which the Centre pays for borrowing money to ensure allocation as provided in the Budget. Such tendency needs to be discouraged,” he said while adding that the Finance Ministry is keeping eye on the such interest earned and will try to collect it.

The Finance Ministry has already made it clear that there will not be provision for ‘cash supplementary’ when it will seek approval from Parliament during forthcoming monsoon session. It also said that re-appropriation of funds to any new scheme by any Ministry/Department will be prohibited. Earlier this month, the Expenditure Department had asked all the Ministries/Department to not to use their discretionary power to bring in a new scheme. Under such arrangement, a Ministry or Department can propose scheme with an outlay up to ₹500 crore.

Published on June 24, 2020

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