With the Centre expecting an extreme cash crunch due to the COVID-19 crisis , most Central government departments have been asked to cut their first quarter expenditure to 15-20% of the year’s budget estimates (BE).
Departments considered crucial to dealing with the pandemic and the resultant lockdown will not be affected by these restrictions, including Health, Pharma and Ayush, Agriculture, Rural Development and Textiles, Food and Consumer Affairs, as well as Civil Aviation and Railways. Transfers to States will also not be reduced.
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However, several development sector Ministries including those dealing with education, tribal welfare, women and children, social justice and labour have been asked to restrict expenditure to 15% of BE.
“Existing guidelines for expenditure control have been reviewed. Keeping in view the present situation arising out of the COVID-19 and the consequential lockdown, it is expected that the cash position of government may be stressed in Q1 (April to June 2020). Considering this, it is essential to regulate the government expenditure and to fix the Quarterly Expenditure Plan (QEP) / Monthly Expenditure Plan (MEP) of specific Ministries/Departments,” said the circular issued by the Finance Ministry on Wednesday.
“Any deviation from this guideline would require prior approval from Ministry of Finance,” it added. Large expenditures are already subject to the expenditure control guidelines of August 2017 which says prior permission is required for any single payment above ₹5,000 crore.
The economic slowdown had already spurred the Finance Ministry to cap spending in the last quarter of 2019-20 (January-March 2020) to 25% of BE, from the earlier 33%.
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The circular lists 17 key demands for grants and appropriations that will not be affected by the restrictions.
Apart from the key ministries related to health, agriculture and rural affairs, food and essential commodities and transport which were listed above, the Supreme Court and President can continue spending as usual. The Central Vigilance Commission and Union Public Service Commission also fall in this category.
Another 31 departments have been asked to restrict expenditure to 20% of BE, with 8% allowed in April and 6% each in May and June. This includes the Cabinet, the Houses of Parliament and Police. The Ministries of Home, External Affairs and some departments of Defence and Finance are also included in this category, as are transfers to union territories, including Delhi.
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The largest category of 52 departments have been told to restrict quarterly expenditure to 15% of BE, with 5% allowed each month. This includes Commerce and Industry, Housing and Urban Affairs, School and Higher Education, Social Justice and Empowerment, Tribal Affairs, Fisheries and Animal Husbandry and a slew of others.
