Finance Ministry allows govt departments to carry over quarterly spending

The FinMin's missive to various departments comes at a time when the Centre's fiscal balance for FY23 is under immense pressure

In a bid to streamline expenditure amidst pressure on the Centre's fiscal math, the Finance Ministry has allowed government departments to carry over their unspent amounts to subsequent quarters.

“Ministries and departments are permitted to utilise the unspent balances from quarter one to quarter two for cash management purposes. Unspent balances from quarters two and three may be used in quarters three and four respectively after the approval of the Expenditure Secretary has been obtained,” the Department of Economic Affairs said in an office memorandum dated May 25.

The memorandum stated that bulk expenses of more than Rs 2,000 crore should be aimed for the last month or a quarter to time them with direct tax receipt inflows in June, September, December, and March. It reiterated the existing practice that no more than 33 per cent and 15 per cent of the budgeted expenditure shall be permitted in the last quarter and month of the fiscal year, respectively.

This missive to various departments comes at a time when the Centre's fiscal balance for FY23 is under immense pressure.

The impact of recent excise duty cuts on petrol and diesel will be around Rs 85,000 crore for FY23, and all of it will be borne by the Centre.

Apart from the excise duty cuts, the government will bear an additional Rs 1.10 trillion in fertiliser subsidy burden as commodity prices have spiked due to Russia’s invasion of Ukraine.

Additionally, the decision to provide a subsidy of Rs 200 per gas cylinder (up to 12 cylinders) to over 90 million beneficiaries of Pradhan Mantri Ujjwala Yojana (PMUY), will lead to revenue foregone of Rs 6,100 crore a year for the exchequer.

Add to this, the Modi government’s decision to extend the PM Garib Kalyan Anna Yojana (PMGKAY) till September, which will increase the food subsidy outlay for FY23 to Rs 2.87 trillion from budget estimate of Rs 2.07 trillion.

Provided all other assumptions remain the same, all these hits on revenue and expenditure may widen the fiscal deficit budget estimate for the year to Rs 19.42 trillion from a budgeted Rs 16.6 trillion. As a percentage of nominal gross domestic product, this would be 7.5 per cent of GDP compared with the budgeted 6.4 per cent.

On the expenditure front, the Centre has been categorical that there will be no compromise on the Rs 7.5 trillion capital expenditure plan, as public investment in infrastructure remains the plank on which the Modi government is betting India’s economic revival. There are unlikely to be major cuttings of expenditure on flagship welfare schemes as well.

A top official made it clear this week that if required, money will be pulled out of the Consolidated Fund of India to pay for capex and added that there was no change in the Centre's Rs 14.32 trillion gross borrowing plans for now.

As reported earlier, the Finance Ministry has asked the various line ministries and entities responsible for implementing subsidy and welfare schemes to cut wasteful expenditure on an expedited basis.

On food subsidy front, Food Corporation of India and the Food and Public Distribution department have been asked to weed out efficiencies up and down the value chain.

Similarly, in flagship schemes like MGNREGA and PM Kisan, the relevant ministries have been told to speed up identifying ghost beneficiaries, fake accounts etc. Of particular concern to central policymakers is the fact that the number of MGNREGA beneficiaries was around 50 million before the Covid-19 pandemic, rose to around seventy million as the economy slumped, but has not come down to pre-pandemic levels.