As a widening fiscal deficit stares at government finances, a small hope to get some savings has come from the finance ministry’s rule that no government department spend more than 33 per cent of the total amount allocated to it in a year’s Budget in the final quarter.
And, an analysis of the spending pattern shows that till December, most departments have not spent a sizable portion of the amounts allocated to them. Of 106 departments, about 80 have spent less than 67 per cent of the budgeted expenditure in the first nine months of the current financial year.
This means even if they spend all 33 per cent of the budgeted allocation in the last quarter, they will not be able to spend the entire allocated amount by March 31, when the financial year concludes.
For instance, the department of posts has spent only 18 per cent or Rs 147 crore of its total budget estimate of Rs 800 crore for 2011-12 on the Plan side.
| HOW THE STAGE WAS SET |
| * Government pegs fiscal deficit at 4.6 per cent of the gross domestic product |
| * 93 per cent of the estimates exhausted in the first nine months |
| * Government under pressure, particularly from direct tax collections and disinvestment |
| * On expenditure side, things under control till December |
| * Non-plan expenditure may rise more than Budget estimates of Rs 8.16 lakh crore |
| * Finance ministry stipulates no ministry or departments can spend more than 33 per cent of Budget allocations in the past three months |
| * Some departments given relaxation; financial services department may be exempted |
If it spends 33 per cent in January-March, total spending will still be just half of what it was allowed to spend this year.
This would leave the finance ministry, struggling with rising subsidies and lower-than-expected tax revenue and disinvestment proceeds, some savings on the expenditure side.
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The government’s fiscal deficit is expected to exceed the year’s target of no more than 4.6 per cent of gross domestic product by about a percentage point due to these slippages. Lower spending by some ministries can provide a little cushion.
A ministry official said it was rare for any department to use 33 per cent of the Budget allocation in the final quarter.
“If they have not used the amount in the first nine months, there is little possibility they will use it in the last three months,” he added.
The 33 per cent rule was brought in to stop the rush of expenditure from ministries only towards the end of the year.
Overall, the various ministries this year have spent an average of 63 per cent of the allowed Plan expenditure in April-December, compared with 67 per cent in the year-ago period.
The actual Plan expenditure for some departments such as pharmaceuticals, financial services, home affairs and steel has remained below 25 per cent so far.
The total non-Plan expenditure is 76 per cent of the budget estimate, particularly due to increase in subsidies.
The 33 per cent rule would be relaxed for some departments. For instance, Plan expenditure of the department of financial services was only one per cent till December but since it has to infuse more capital into public sector banks by March, it would be allowed to spend more than the 33 per cent cap.
On the other hand, Plan expenditure of the department of chemicals and petrochemicals, economic affairs, mines and women and child development have already exceeded 90 per cent of the budget estimate.
And, the finance ministry may have to provide more to some of them under the third supplementary demand for grants. In November, the ministry had taken Parliament’s nod to spend an additional Rs 56,848 crore in 2011-12, over and above the budgeted expenditure of Rs 12.5 lakh crore.
An extra net spend of Rs 9,016 crore was approved in the first batch of supplementary spending.