Govt seeks Parliament's approval to spend Rs 3.74 trillion more

The government on Friday sought Parliament’s nod to spend Rs 3.74 trillion extra but the hit on the exchequer will be Rs 2.99 trillion.

An extra expenditure of Rs 74,517.01 crore will be matched by equal savings on other heads, according to the second batch of supplementary demand for grants for the year, tabled in Parliament by Minister of State for Finance Pankaj Chaudhary.

The major portion of additional expenditure was needed for equity infusion into Air India Assets Holding Company (AIAHL), fertiliser subsidies, export incentives, food warehouses, and the rural job scheme. Additional expenditure on these five items constitutes 65 per cent of the supplementary demand and 81 per cent of the net cash outgo.

In the first batch, the government had got Parliament’s nod for an additional expenditure of Rs 1.87 trillion, which included a cash outgo of Rs 23,674.81 crore.

As such, the government will spend around Rs 3.23 trillion more than the Budget Estimates this fiscal year. This has prompted experts to say that the government is likely to breach the target of reining in the fiscal deficit at 6.8 per cent of GDP despite fiscal prudence in the first seven months.

At the end of October 2021, 52 per cent of the full-year expenditure target had been met, and a portion of the higher than expected net cash outgo of Rs 2.99 trillion in the second batch of supplementary demand for grants will need to be absorbed through savings on other demands, to curtail the impact on the fiscal deficit, ICRA Chief Economist Aditi Nayar said.
 

“There is near certainty that the fiscal deficit will exceed the budgeted Rs 15.1 trillion, despite our assessment that net tax revenues and the RBI surplus transfer will together surpass the BE by Rs 1.7 trillion,” she said.

She said as hopes of realising a substantial portion of the FY22 disinvestment target faded, and there might be eventual rate hikes by the monetary policy committee, G-sec yields were likely to witness an inevitable hardening.

Of the Rs 1.75 trillion target from disinvestment, only Rs 9,330 crore has been realised so far. The initial public offering of the Life Insurance Corporation holds the key to the government to meet the target.

According to the supplementary demand for grants, Rs 62,057 crore will be given to the civil aviation ministry for equity infusion into AIAHL for repaying past government-guaranteed borrowing and dues related to Air India.

In October, the government signed the share-purchase agreement with Tata Sons for the sale of Air India, along with low-cost carrier Air India Express and ground-handling arm AISATS, for Rs 18,000 crore. The amount includes Rs 2,700 crore in cash and Rs 15,300 crore of the carrier’s debt.

As of August 31, Air India had a debt of Rs 61,562 crore. Of this, Talace (a Tata Group company) will take over Rs 15,300 crore and the remaining Rs 46,262 crore will be transferred to AIAHL.

The extra spending by the government will include Rs 58,430 crore by way of additional fertiliser subsidies, Rs 53,123 crore for paying pending export incentives, Rs 49,805.25 crore for food storage schemes and warehousing, and Rs 22,039 crore for the National Rural Employment Guarantee Fund.

The additional fertiliser subsidies include Rs 43,430 crore on account of payment for indigenous and imported phosphatic and potassic (P&K) fertilisers and Rs 15,000 crore for the urea subsidy scheme.

The Budget Estimate for fertiliser subsidies for FY22 was Rs 79,529 crore, which was 40.6 per cent less than the Revised Estimate of FY21.

The supplementary seeks to allocate Rs 22,038.99 for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Demand under the MGNREGA has been robust despite easing economic restrictions after the second Covid wave and more than 20 million people have been demanding work per month for almost a year now. 

The Budget had allocated Rs 73,000 crore, which was found to be inadequate as almost Rs 17,500 crore of this was spent on clearing dues from the previous year. As a result, the funds were exhausted by the middle of the year and as of November 30, 2021, around Rs 79,000 crore was spent on the scheme while the BE was Rs 73,000 crore.

The government needs Rs 49,805.25 for food storage schemes and warehousing. Additional food subsidies are also required for allocating foodgrains under the Pradhan Mantri Garib Kalyan Anna Yojana.

A few days ago, the Centre extended the free food grains distribution scheme for four months starting from December 2021.

Under the scheme, the Centre gives for free an additional 5 kg of rice or wheat per month to the beneficiaries of the National Food Security Act (NFSA) over and above their usual monthly quota.