Ministries asked not to start new schemes this fiscal year

The aim is to use scarce resources prudently, according to a finance ministry order. A copy of the directive, issued on Thursday, was reviewed by Hindustan Times.

The government has directed ministries not to launch any new scheme that entails capital expenditure in this financial year, and suspended already approved projects, barring those under the Rs 20.97 lakh crore economic relief and stimulus package it unveiled in the aftermath of the coronavirus disease (Covid-19) pandemic.

The aim is to use scarce resources prudently, according to a finance ministry order. A copy of the directive, issued on Thursday, was reviewed by Hindustan Times.

“It may be appreciated that in the wake of the Covid-19 pandemic, there is an unprecedented demand on public financial resources, and a need to use resources prudently in accordance with emerging and changing priorities,” the department of expenditure, an arm of the finance ministry, said in the order.

The government has delegated financial powers to appraise and approve all public funded schemes and projects to the department of expenditure. The move comes against the backdrop of an expected fall in revenue and concerns that the economy may contract this financial year because of the Covid-19 pandemic and the subsequent lockdown.

“This was an expected step taken by the government because of the alarming trends coming from all sectors. With the possibility of India looking at a recession for the first time in recent memory, there is an overwhelming demand for funds from all sources; there is absolutely no scope for the government to be a spendthrift,” said SR Patnaik, head of taxation at the legal firm Cyril Amarchand Mangaldas:

The order, however, exempts schemes announced under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), the Aatmanirbhar Bharat Abhiyan (Self-Reliant India Initiative) and any other special package to be unveiled at a future date for alleviating the crisis caused by the outbreak of Covid-19.

After the government announced the nationwide lockdown on March 24 with effect from the following day to curb the spread of the viral disease, it announced a series of relief and economic stimulus packages.

The last in the five-part Aatmanirbhar Bharat Abhiyan package, aimed at relieving the distress caused to small businesses, farmers and migrant workers, was announced on May 17. The total package was worth Rs 20.97 lakh crore that included a Rs 1.7 lakh crore welfare package under PMGKY announced on March 26 and Rs 8.01 lakh crore of monetary measures put in place by the Reserve Bank of India (RBI).

PMGKY focused on additional food transfers at no cost to poor households, additional cash for vulnerable segments, concessions on government schemes aimed at helping households reduce their expenditure, and support to those in the frontline of the battle against the pandemic.

The department of expenditure said that the schemes that have been already approved for the current financial year would remain suspended until March 31, 2021 or further orders, whichever is earlier. Even schemes that have received in-principle approval from the department have been suspended.

“No funds may be released for schemes that are not in strict conformity to the instructions given above...,” the order said. Any exceptions to these guidelines will require approval of the department of expenditure, it added.

This is the latest set of austerity measures announced by the government to mobilise resources to fund Covid control measures and offset revenue losses caused by the 68-day nationwide lockdown starting from March 25. Although, the government has withheld the monthly Goods and Services Tax (GST) collection data for April and May, officials said on condition of anonymity that the total monthly revenue in these two months could to be only one-third of collection in normal times.

The GST collection in March was Rs 97,597 crore. Earlier, the revenue collection had exceeded Rs 1 lakh crore for four consecutive months since November 2019.

In April, the government held back payment of additional dearness allowance to all central government employees for 18 months and proposed a similar move for state government staff to collectively save about Rs 1.20 lakh crore that, it said, would be used in its fight against the Covid-19 pandemic. The President, vice president, prime minister, his council of ministers, and members of Parliaments have taken salary cuts.

In an interview with HT published on May 18, immediately after the last tranche of the economic stimulus package was announced, finance minister Nirmala Sitharaman said the government had plans to mobilise additional resources required to fund the fight against Covid-19.

“We took a comprehensive assessment (of what we would need) and then went with this number (Rs 20.97 lakh crore). At the time itself we were conscious that we were looking at this stimulus and also a fall in revenue. We have to see how it goes,” she said.