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COVID-19 effect | Finance Ministry brings expenditure curbs back for several ministries from July 1

The curbs imposed for July-September quarter are much more liberal than those imposed for most of 2020-21. It is believed that the expenditure curbs last year saved the centre anything between Rs 1-1.5 lakh crore, though it did not matter much in the end.

June 30, 2021 / 08:32 PM IST
Union Finance Minister Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman

In light of the economic slowdown due to the second wave of Covid-19 - and how it could affect the government's finances - the Finance Ministry has brought back expenditure curbs for a number of ministries, applicable in the July-September quarter.

The curbs, which come into force from July 1, puts curbs on a number of departments to spend only 20 percent of their yearly allocation in the July-September quarter, as opposed to 25 percent.

These curbs were notified through an office memorandum dated June 30.

The departments facing expenditure curbs include ministries of Civil Aviation, Coal, Commerce, DPIIT, Corporate Affairs, departments of Finance Ministry itself, Home Ministry, Defence Services (Revenue), Food Processing, Fisheries, Heavy Industries, and others.

The Ministry cited situations arising out of COVID-19 for taking this step to regulate quarterly expenditure of specific ministries and departments for July-September quarter of FY 2022-21. This is also seen as current cash deficit arising out of pandemic.

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However, for the ministries and departments seen as key in the fight against COVID-19, providing relief to citizens, and involved in infrastructure, no expenditure curbs have been imposed. These include Agriculture, Fertilizers, Health and Family Welfare, Pharmaceuticals, Food and Public Distribution, MSME, Railways, Road Transport, Rural Development and others.

Also, there are no curbs on defence capital expenditure, transfer to states, pensions and interest payments.

These curbs are much more liberal than those imposed in 2020-21, when the centre's revenues had taken a massive hit due to the nationwide lockdown and expenditure commitments had increased.

For most of last year, very few departments were placed in what was called 'category A' or departments without any spending limits.

Most ministries and departments were under categories B and C. Departments under category B could not spend more than 20 per cent of their year’s expenditure allocation in a quarter, while departments under Category C could not spend more than 15 per cent.

Unlike pre-pandemic times, the amounts that remained unspent in a month or a quarter were not available for automatic carry forward to the next month or quarter and specific approvals of the Expenditure Secretary were required for utilizing these unspent amounts.

The centre had deployed its expenditure primarily on welfare schemes and infrastructure, and had asked departments not to initiate any new public-funded schemes besides those announced in Atmanirbhar Bharat and Garib Kalyan packages. There were also curbs on travel, printing, and other administrative costs, which are said to continue this year as well.

It is believed that the expenditure curbs in 2020-21 saved the centre anything between Rs 1-1.5 lakh crore, though it did not matter much in the end.

Expenditure commitments in welfare schemes meant that the expenditure for 2020-21 shot up to Rs 34.5 lakh crore, compared with budget estimates of Rs 30.4 lakh crore.

Arup Roychoudhury