Covid-19 crisis: Spending curbs on ministries

NEW DELHI: The Centre has tightened expenditure for the first quarter of FY21 and prioritised frontline spending to combat the Covid-19 pandemic as it seeks to cope with the strain of the economy coming to a near-standstill.
In new directions issued to all central government departments on April 8, the finance ministry has drawn up three categories of ministries/departments and restricted expenditure of several of these to within 15-20% of that budgeted for FY21 in the April-June quarter.

“Keeping in view the present situation arising out of Covid-19 and the consequential lockdown, it is expected that the cash position of government may be stressed in Q1 (April to June, 2020) of 2020-21,” according to the office memorandum from the budget division of the finance ministry. ET has seen a copy of the note.

The government has therefore “reviewed its existing guidelines for expenditure control”, said the communication.


Three Categories Drawn Up
While making an exception for “large expenditure”, the finance ministry has asked all ministries to observe the new norms “strictly” and to “regulate the expenditure accordingly in the current fiscal”. Any deviation will require prior approval from the finance ministry.

Three categories have been drawn up to determine the expenditure restriction.

Category-A ministries and departments will continue to operate under the existing guidelines with no restrictions. It includes ministries critical to combating the Covid-19 outbreak — health, pharmaceuticals, consumer affairs, AYUSH, textiles, rural development, railways and civil aviation. It also includes interest payments, transfers to states, the Supreme Court, the Central Vigilance Commission, the Union Public Service Commission (UPSC) and the staff, household and allowances of the President of India.

Category-B ministries will have to restrict overall expenditure to “within 20% of BE 2020-21” in the first quarter. It includes external affairs, home, cabinet, posts, fertilisers, road transport, defence pensions, the departments of revenue and financial services, the petroleum ministry, transfers to Union Territories, the Lok Sabha, the Rajya Sabha and the secretariat of the Vice President.

Category C has more than 50 departments and will have to restrict expenditure to within 15% of that budgeted. It includes telecom, commerce, electronics and information technology, environment, animal husbandry, food processing, human resources development, labour, drinking water & sanitation and law.

The unprecedented step will help the government shore up its finances, said officials with knowledge of the matter. It is estimated that several thousand crores of rupees will be made available to the Centre with the spending cut.