Finmin reimposes spending curbs on ministries, depts for Q2 of FY22

Move made keeping in mind cash position ahead of likely third wave; health, MSME and rural development spared restrictions

The finance ministry on Wednesday reimposed expenditure curbs on ministries and government departments for July-September quarter. There will be no spending restrictions on the ministries of health, rural development, agriculture, MSME (micro, small and medium enterprises) and railways as part of a two-pronged strategy.

“The existing guidelines for expenditure control have been reviewed. Keeping in view the evolving situation arising out of Covid-19 and anticipated cash position of the government, it is felt essential to regulate Quarterly Expenditure Plan (QEP)/Monthly Expenditure Plan (MEP) of specific ministries/departments for July-September, 2021,” the Department of Economic Affairs in the finance ministry said in a notification.

Spending curbs were imposed on ministries and departments last April following a nationwide lockdown to contain the first wave of the pandemic and the subsequent hit to the economy. These were relaxed later and then removed in December.

Earlier this month, the finance ministry had even asked all departments to cut “controllable expenditure” such as advertisement and publicity by a fifth. 

The latest measure to cut expenditure comes within days of the government announcing a Rs 6.29-trillion economic relief package to support the pandemic-hit economy. 

Finance Minister Nirmala  Sitharaman had on Monday announced Rs 1.5 trillion of additional credit for small and medium businesses, more funds for the healthcare sector, loans to tourism agencies and guides, and waiver of visa fee for foreign tourists.

The Centre has been facing higher expenditure on account of centralised procurement of Covid vaccines and the free food ration programme that’s been extended till November. 

Under the new notification, demands/appropriations related to various central ministries and departments have been grouped into two. In the first category, health and family welfare, pharmaceuticals, fertiliser, agriculture, railways, MSME and rural development can spend as per existing guidelines and no restrictions have been put on them. 

Expenditure heads in the second category include 81 demands/appropriations related to ministries and departments such as civil aviation, home, labour, mines, power, telecom and post, consumer affairs, fisheries and heavy industries among others. They will be required to “restrict the overall expenditure within 20 per cent of BE 2020-21 in Quarter 2 (July to September, 2021)”. 

Last year, ministries were divided into three categories based on demands/appropriations approved in the Budget. The first category was in line with the recent rule where there is no monthly or quarterly capping. However, every expenditure proposal had to adhere to the existing guidelines and vetted by the finance ministry. 

The second category had 31 demands/appropriations related to fertilizers, posts, defence pension, oil and road transport among others, with a quarterly limit of 20 per cent of the Budget estimate and different monthly limit. The third category had 52 items with 15 per cent limit for the quarter and 5 per cent for each of the three months. 

According to the 2017 guidelines, normally there is no monthly or quarterly capping for the first nine months. However, for the last quarter, there is a quarterly cap of 33 per cent and a monthly cap of 15 per cent.