Covid-19 impact: Ministries told to reduce Q1 spend by up to 40%

By: |
April 9, 2020 7:08 AM

Centre on Wednesday asked many ministries and departments to scale down their Q1FY21 expenditure plans by at least 5-10 percentage points (pps) (20-40%) from the business as usual level of 25% of the full-year spending.

 

income tax refund, gst refund, customs refund, msme, small businesses, ministry of financeIt could not be immediately estimated what would be the quantum of reduction in expenditure in Q1FY21 because of the rationalisation measures. (Representative image)

In what could be beginning of rationalisation of expenditure in view of the dwindling tax revenues in the aftermath of outbreak of Covid-19, the Centre on Wednesday asked many ministries and departments to scale down their Q1FY21 expenditure plans by at least 5-10 percentage points (pps) (20-40%) from the business as usual level of 25% of the full-year spending.

It could not be immediately estimated what would be the quantum of reduction in expenditure in Q1FY21 because of the rationalisation measures. The total Budget expenditure was estimated (BE) to be `30.4 lakh crore in FY21.

In the business-as-usual scenario, the departments are allowed to spend about 25% of their respective BEs in Q1 subject to quarterly and monthly plans approved by the finance ministry. Some departments were even allowed to spend more than 25% in a quarter subject to prior approvals.

Departments which will have to restrict the overall expenditure within 15% of BE include commerce, industry, telecom, defence (civil), housing & urban affairs, school & higher education, water resources, drinking water, labour, MSME and skill development. The monthly expenditure of these departments have been capped at 5% of BE.

Departments which will have to contain expenditure at 20% of BE in Q1FY21 include fertilisers, posts, pension, defence services (revenue, capital & pension), financial services, revenue, roads and petroleum. Transfers to union territories such as Delhi and J&K will also face a similar cut. The monthly expenditure under these heads will be capped at 8% of BE in April and 6% each in May and June.

However, the finance ministry has spared some of the key ministries from expenditure compression measure which are crucial in the fight against coronavirus such as health, agriculture, food, consumer affairs, rural development, railways and textiles. Similarly expenditures towards interest payments and transfers to states will be unaffected, the finance ministry’s office memorandum noted.

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