The finance ministry has removed all restrictions and conditions on capital expenditure by ministries, under the centrally sponsored schemes (CSS) and grants-in-aid for the creation of capital assets, in the first quarter of the current financial year, in a move aimed at evenly spreading out capex during the year.
Usually, ministries and departments are allowed to spend 25% of their budget in each quarter. However, such spending is slower than the permitted limit in the first and second quarters due to various conditions.
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According to cash management guidelines, ministries have to attune bulk expenditure items to monthly Goods and Services Tax (GST) collections and quarterly advance tax payments for smooth exchequer control.
The guidelines mandate that the release of amounts between Rs 500 crore and Rs 2,000 crore are to be made during the 21st and 25th of a month to take advantage of GST collections. As far as Q1 is concerned, bulk expenditures in excess of Rs 2,000 crore are to be released from the 17th to the 25th of June to utilise direct advance tax receipts.
Also, prior permission from the budget division is required for any single payment under a scheme in excess of Rs 5,000 crore.
To provide a fillip to capital expenditure, including grants-in-aid, for the creation of capital assets and expenditure under CSS, it has been decided to relax the norms for releases of more than Rs 500 crore, the department of economic affairs said in an office memorandum.
Further, the relaxation will be subjected to strict adherence to the SNA (Single Nodal Agency for CSS) /CNA (the Central Nodal Agency for central sector schemes) guidelines issued by the department of expenditure.
“Financial advisers shall monitor the releases to ensure that there is no idle parking of funds at any level and the funds are released on just-in-time basis,” it added.
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With capital expenditure often taking more time than anticipated, the removal of restrictions with regard to the utilisation of budget allocation in the first quarter will help the departments to execute projects without fear of losing sanctioned budget.
The Centre has raised the capital expenditure target by 37% year-on- year to a whopping Rs 10 trillion for FY24 to continue the public investment-led economic recovery post-pandemic.
It reckons that as private capex cycle is still to decisively pick up, public capex pace needs to be maintained to contain a deceleration in the GDP growth in FY24, to be caused by global headwinds.